Washington's Plan to Neutralize Iran’s Hormuz Leverage
Fear of an Oil Glut May Be Overblown, Top Consultancy Says UK government-backed ESG reporting platform… Simon Watkins is a former senior FX trader and salesman, financial journalist, and best-selling author.
He was Head of Forex Institutional Sales and Trading for… For decades, Iran has relied on the Strait of Hormuz as its most effective geopolitical weapon -- a crucial energy chokepoint through which up to a third of the world’s oil is transported and about a fifth of its liquefied natural gas (LNG).
Tehran’s immediate blockade of the transit route at the onset of the 28 February U.S./Israeli joint military operation against Iran prompted a cessation of maritime traffic through the chokepoint, catalysing a spike in oil prices of over 70%.
The prospect of such a blockade continuing into the U.S.’s 3 November Mid-Term Elections was the decisive factor behind President Donald Trump’s willingness to forge a peace deal, at least in the short term.
This is because there is a direct link between the oil price, the price of gasoline, U.S.
economic growth, and the success of incumbent presidents and their parties in elections, as fully analysed inmy latest book on the new global oil market order.
Understandably, according to several senior energy security sources in London, Brussels, and Washington, exclusively spoken to byOilPrice.comover the past few days, moves are afoot to reshape the regional energy map to ensure that Iran’s Hormuz threat becomes increasingly ineffective in the coming years.
So, what exactly is going on right now? Trump is fully in favour of medium- and long-term methods to circumvent the effectively Iran-controlled Strait of Hormuz, particularly given the relative ineffectiveness of the short-term measures available once Tehran’s blockade was in place.
The ‘Southern Highway’ corridor that hugged the coast of Oman and was actively backed by U.S.
and Gulf allies proved slightly more effective at reducing market panic than it was at restoring the number of oil tankers in transit.
During peak operations early in the blockade, the corridor allowed roughly a dozen vessels per weekend to transit, rising to around 119 ships by late June -- still a long way off the historical 700 weekly transits normal for the waterway.
Similarly taking the edge off market panic but still representing a fraction of what was required over the medium- and long-term to keep oil prices from spiralling, were the land-based routes for trucks carrying oil through Iraq and Syria.
| Product | Price | Change |
|---|---|---|
| Brent Crude | $102.14/bbl | +0.34% |
| WTI Crude | $96.90/bbl | +0.21% |
| EN590 Diesel | $846/MT | +0.18% |
| Jet Fuel A-1 | $1090/MT | +0.55% |
| Mazut M100 | $450/MT | -0.15% |
| Bitumen 60/70 | $470/MT | +0.08% |
| Sulphur Gran 99.5% | $470/MT | -0.44% |
| Urea 46% Gran | $650/MT | +1.12% |
| NPK 16-16-16 | $460/MT | -0.28% |
| Nat Gas TTF | $15.42/MMBtu | +0.92% |
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