Analysis by CNN colleague Hana Al-Zayadi.
Iran and the United States are escalating their mutual claims over control of the Strait of Hormuz, but the reality is more complex than either side is willing to acknowledge.
Navigation traffic through the Strait remains very limited, which indicates that many shipowners are unwilling to risk the possibility of their ships being exposed to an Iranian attack, and at the same time confirms Tehran's continued influence over Hormuz.
Ship crossings constitute a very small percentage of the approximately 130 daily crossings recorded before the war, often barely reaching double digits. As for crude oil tankers, an average of two to three VLCCs have crossed the strait daily since July 7, according to Kpler, which tracks ships using satellite transmitters and data. This compares to about eight supertankers that crossed the strait daily before the war.
But despite the decline in crossing numbers, increasing amounts of oil are avoiding the strait altogether, or relying on US protection and ship-to-ship transfers to secretly extract crude from the Gulf.
The passage of oil through Hormuz, albeit to a limited extent, limits the effectiveness of the new energy card that Tehran possesses, and also eases some pressure on crude prices, and thus on gasoline prices, which gives US President Donald Trump more time to prolong the current confrontation, in the hope that Iran will back down.
The United States is betting that economic pressure will achieve what military force has been unable to achieve so far: force the Iranian regime to submit.
But Iran shows no signs of giving up, despite increasing pressure on its economy and oil sales. It continues to attack ships in the region, disrupting energy supplies to global markets.
“It's now a matter of who will back down first, if anyone will back down at all,” said Jorge León, head of geopolitical analysis at Rystad, an energy consultancy. Speaking to CNN, he added: "There is a paradox... The economic suffering that Iran is suffering from is more severe than that which the United States is suffering from at the present time, but more importantly, the political pressure on Iran is much less."
Survival economy in Iran
The Iranian economy had already taken a major hit from the war. The International Monetary Fund expects the economy to contract by more than 5% this year, its worst contraction in nearly four decades. Inflation is approaching 80%, while the rial's exchange rate has fallen to record levels against the dollar, forcing many Iranians to buy even basic goods on credit.
But Trump may underestimate Iran's ability to withstand more suffering. Iranian citizens are already accustomed to economic hardship, and so far the country has not witnessed widespread protests against the regime, which appears to have been hardened by the war.
“For Iran, the leadership is prepared to endure a much greater amount of economic suffering,” said Gregory Brough, senior analyst specializing in Iran and the energy sector at Eurasia Group, which specializes in political risks. He added that Iran "has endured years of US sanctions, and now a long war, and has not backed down."
The United States is intensifying pressure by stifling Iranian oil exports by blockading Iranian ports. Oil loadings on Iranian tankers have fallen to a fraction of the levels recorded between February and April, according to Kpler data.
Iran already has about 80 million barrels of oil at sea outside the scope of the blockade, most of it allocated to China, which will earn it about $1.5 billion a month at current prices, according to Homayoun Falakshahi, head of the crude oil analysis department at Kpler.
But time is running out. At an unloading rate of 650,000 barrels per day, Tehran would have enough export revenues to last about four months, according to Falakshahi, who told CNN: “It's like a slow death rather than falling off the edge of the abyss.”
As for the US economy, it has remained relatively insulated from the repercussions of the war, but rising gasoline prices, which now average more than $4 per gallon, are hurting many Americans and testing Trump's popularity ahead of the midterm elections in November.
However, Trump is sticking to his guns. “The unpopular war and high gasoline prices are costing Trump, but a chaotic withdrawal from the Middle East would be worse,” said Dan Almario, chief geopolitical strategist at Alpine Macro, an affiliate of Oxford Economics.
“American voters don’t like presidents who lose wars,” he wrote in a memo last week.
The battle over the Strait of Hormuz
The Trump administration has touted its ability to escort ships through the strait, but several analysts who spoke to CNN said Iran still has significant influence over the waterway.
Dimitris Maniatis, CEO of Greece-based maritime risk consultancy Marisex, said: “Iran has almost complete control over the Strait of Hormuz,” and enforces it through “the threat of attack.”
Despite Tehran's influence, an average of 15 million barrels of oil flow out of the Gulf daily, including through the strait and through pipelines, according to US Energy Secretary Chris Wright. This quantity represents a large portion of the approximately 20 million barrels that the region exported daily before the war with Iran.
Ship tracking services, including Kpler, indicate much lower numbers, but analysts acknowledge that sailings are becoming more difficult to track. Many tankers attempt to carry out “covert” transits, by turning off their automatic identification systems (AIS) to avoid detection, and in some cases conducting ship-to-ship transfers outside the Strait of Hormuz to further conceal their movements.
Maniatis believes that Iran is turning a blind eye to these transit operations, which in many cases include tankers whose ultimate ownership belongs to Iranian, Russian, Chinese, or Turkish interests.
“A ship that turns off its AIS does not become invisible,” he told CNN. “This large metal block on the water emits a lot of other electronic signals other than the AIS transmitter.”
He added: "If the Iranians want to hit a ship, they do not rely on the automatic identification system to determine its location."
Even Wright acknowledged that Iran, which he said had “accumulated a huge arsenal,” was “causing difficulties in the region and the global economy.” But he said Tehran's ability to do so was declining.
“Our ability to accompany ships and remove products from that region is increasing,” he said in an interview with Fox News last week.
The Kepler data seem consistent with this; The company estimates that 72 out of 84 tankers carrying crude oil, or 86% of the tankers that have transited the strait since July 7, likely used a UN-authorized route through Omani waters. However, Falakshahi warns that the company does not know this “for sure.”
Currently, oil flows through Hormuz provide a necessary breathing space for the oil market. But it may, unexpectedly, prolong the war for a longer period.
