Hormuz Strait Crisis Threatens Global Oil Supply Stability

Key Highlights

• A temporary U.S.-Iran maritime agreement briefly supported crude oil shipments, pushing Gulf crude and condensate exports up 16% in early July compared with June, reaching the highest level during the conflict period.

• A dispute over waterway management led to the collapse of the agreement. Escalating military tensions have sharply reduced traffic through the Strait of Hormuz, with current exports still about 30% below the pre-conflict peak, raising the possibility of production cuts among oil producers.

• Saudi Arabia has shifted more crude exports through Red Sea ports, while Iran has reportedly instructed Houthi forces to prepare potential disruptions to Red Sea shipping, increasing risks across the global crude oil supply chain.

Gulf Oil Exports Hit Short-Term Peak During Temporary Calm

Shipping data showed that Gulf countries' crude oil and condensate exports increased in early July, reaching the highest level since the U.S.-Iran conflict began in late February.

According to Kpler data, Saudi Arabia, the United Arab Emirates, Iraq, Kuwait, and Iran exported an average of 12 million barrels per day of crude oil and condensate in early July, approximately 16% higher than the June daily average.

Another shipping analytics company, Vortexa, estimated an even higher export volume during the same period, reaching 13.06 million barrels per day.

Kpler said Saudi Arabia, Iran, and Iraq were the main contributors to the increase in crude exports in early July. Meanwhile, Vortexa data showed that Iraq recorded the largest month-on-month increase, while the UAE's exports declined after reaching a record high in June.

However, as military tensions between the two sides intensified again, crude oil traffic through the Strait of Hormuz has gradually declined.

Temporary Maritime Agreement Collapses As Hormuz Traffic Falls

In mid-June, the U.S. and Iran reached a temporary agreement to reopen the Strait of Hormuz, one of the world's most important oil and gas shipping routes, while negotiating a framework to end the conflict.

The agreement temporarily eased market concerns over supply disruptions, helped restore Gulf crude exports, and put pressure on international oil prices.

However, in early July, the temporary arrangement collapsed due to disputes over control and management of the waterway.

Shipping data showed that as military strikes between the U.S. and Iran resumed and intensified, traffic through the Strait of Hormuz continued to decline. On July 16, only three refined product tankers passed through the strait, marking the lowest daily traffic level since May.

A Kpler analyst said: "Shipping activity has already cooled significantly, meaning oil-producing countries may be forced to reduce crude output, resulting in a decline in available export volumes."

Despite the temporary rebound in early July exports, current Gulf crude exports remain approximately 32% below the pre-conflict peak of 17.6 million barrels per day recorded in February.

Saudi Arabia Shifts Crude Exports Toward Red Sea Routes As New Supply Risks Emerge

Kpler data showed that since July, Saudi Arabia has exported an average of 5.29 million barrels per day of crude oil and condensate, with 75% transported through the Red Sea port of Yanbu.

The shift indicates that Saudi Arabia has redirected most of its energy exports toward the Red Sea route.

However, according to Reuters on July 16, Iran has instructed Yemen's Houthi forces to prepare potential disruptions to Red Sea shipping if U.S. military forces strike Iranian energy facilities.

The potential impact on Red Sea shipping could create additional pressure on global crude supply chains, adding another layer of risk to international energy markets.