Crude oil exports from the Strait of Hormuz have basically returned to levels normal before the Iran war, as U.S. military escorts have boosted shipments and pipelines have redirected flows.
Crude transiting Hormuz reached a seven-day average of 13.5 million barrels per day as of Monday, which matches a prewar baseline for shipments through the strait, according to data published Wednesday by Kpler, a firm that tracks tankers.
Iran has claimed throughout the war that it controls Hormuz and has declared the closure of the strait multiple times. But Tehran is losing its influence as strong volumes pass through Hormuz, said Matt Smith, director of commodity research at Kpler.
Crude oil shipments from the Middle East region, including the Persian Gulf and Red Sea, are sometimes higher than prewar levels. The region reached a seven-day average of 19.5 million bpd as of Monday, surpassing a prewar baseline of about 17 million bpd, the Kpler data showed.
But the recovery is uneven, said Natasha Kaneva, head of global commodities strategy at JPMorgan. The "crude market has largely normalized even as refined product supplies remain constrained," Kaneva said.
The world faces a global fuel crisis as supplies from the Middle East are constrained and Ukraine pounds Russian refneries. Refined products shipped through Hormuz are at a seven-day average of 677,000 bpd as of Monday compared to 3.6 million bpd before the war, according to Kpler.
Crude and product shipments together stood at seven-day average of 14.2 million bpd which is about 80% of the Hormuz prewar baseline of about 17 million bpd, the data showed.
The global supply shortfall has pushed diesel prices in the U.S. to record highs, which poses a major threat to health of the economy. President Donald Trump is considering an export ban as he faces political pressure from Republican lawmakers ahead of the midterm elections.
"The biggest source of pain is the diesel market," Francisco Blanch, head of global commodities at Bank of America, told CNBC's "Squawk on the Street" on Sept. 8.
Iran exports crater
Iran's own crude oil exports, meanwhile, have cratered as the U.S. Navy blockades the Islamic Republic, according to Kpler data. President Donald Trump is trying to force Tehran into a settlement by shutting down its main source of revenue. The U.S. has also ramped up its sanction campaign.
Treasury Secretary Scott Bessent told Fox News on Sunday that Iran will make its final crude deliveries to China in about two weeks, leaving them with "nothing left to trade for anything."
"There are some in Washington who say, let the blockade do its work — we can wait out Iran," Helima Croft, head of global commodity strategy at RBC Capital Markets, told CNBC's "Power Lunch" on Sept. 25.
But there is no hard evidence that U.S. economic pressure will fundamentally change Iran's positions, Scott Modell, CEO of Rapidan Energy and a former CIA officer, told CNBC's " Squawk on The Street" on Monday.
Iran last week offered to reopen Hormuz in seven days if the U.S. returns to the failed memorandum of understanding from June. The U.S. made major concessions under the MOU, agreeing to lift its blockade and allow Iran to negotiate with Oman a future system of administration for Hormuz.
The MOU collapsed over the summer into renewed fighting. Trump has rejected Iran's latest offer and told his aides that he expects to resume bombing Iran after the midterm elections, unnamed U.S. officials told The Wall Street Journal.
How the Gulf adapted
While the level of exports are at or near prewar levels, the security conditions in the strait are far from normal. Iran continues to fire on tankers in attacks that are sometimes lethal.
In response, more than 70% of the crude oil that crossed Hormuz in August switched tankers off the coast of the United Arab Emirates or Oman, according to Kpler. Shuttle tankers bring oil through Hormuz to the Gulf of Oman. The cargo is then loaded onto another tanker that delivers it to Asia.
This shuttle system is protected by the U.S. military and reduces the risk of exposure to attack from Iran. But it is unclear how long this system can be sustained given that it relies on U.S. military protection.
"It's very expensive and it's a huge U.S. military commitment," Croft said.
And the Gulf states don't view the "patchwork arrangement" of ship-to-ship transfers and military escorts as an acceptable substitute for Hormuz being open, she said.
Pipelines operated by Saudi Arabia and the United Arab Emirates are also doing a lot of heavy lifting. About 40% of Gulf crude oil now bypasses Hormuz through these pipelines compared to 17% before the war, per Kpler.
But pipelines are also vulnerable to attack. The Saudis shut down their East-West pipeline earlier this month after it sustained damage in a drone strike launched from Iraq. Loadings have picked up at Saudi's Red Sea port of Yanbu in a sign that the pipeline is running again.
Crude flows remained resilient during the pipeline outage because Riyadh was able to shift its exports back through Hormuz due to the shuttle system protected by the U.S. military.
But the region's oil supplies could face disruption again as stalemated diplomacy raises the risk of renewed fighting.
"The president I think is going to escalate after the midterms, we keep hearing that the Iranians are going to esclatate into the miderms," Rapidan's Modell said. "The direction of travel is toward escalation."
