Crude oil flows through the Strait of Hormuz are steadily increasing, reaching approximately 6 million to 8 million barrels per day, which is about two-thirds of the pre-war volumes. This recovery is largely attributed to Middle Eastern producers implementing shuttle runs, where tankers transport crude to just outside the Persian Gulf for collection by other waiting tankers, bypassing direct passage through the strait. The United Arab Emirates pioneered this method, followed by Saudi Arabia, with Qatar and Kuwait also adopting similar strategies.
This increase in shipments is contributing to the stabilization of global crude oil prices, with Brent futures trading around $88 a barrel on Thursday. This marks a potential significant weekly drop since late June, when a ceasefire had temporarily eased shipping risks. The resumption of US-Iran negotiations has also played a role in dampening price surges. Analysts note that if this increased flow is sustainable, crude prices are likely to remain around this level.
Recent satellite imagery and tracking data indicate a surge in loading activity across various Gulf producers. Saudi Arabia showed its highest number of tankers at export installations in weeks, and Iraq's loading activity briefly surpassed pre-war rates. Qatar and Kuwait, despite their heavy reliance on Hormuz and lack of bypass pipelines, have managed to restore their combined 2 million barrels a day of pre-conflict exports to about 70% of those levels through these shuttle operations. However, some data providers show discrepancies in tracking, with some estimates for flows on individual days as low as 3.7 million barrels per day.
Goldman Sachs analysts, including Yulia Zhestkova Grigsby, have previously suggested that Hormuz oil flows might only recover to about 70% of pre-war levels, indicating that 70% could become the new 100%. This is partly due to producers leaning on alternative routes, like the UAE's Fujairah pipeline and Saudi Arabia's East-West pipeline. The current recovery in exports is particularly important as approximately 1.6 million barrels a day of the region's refining capacity for fuels like diesel and jet fuel remains offline, a significant increase from a year ago.
Despite the operational successes, challenges persist, such as heightened war-risk insurance premiums reaching 40 times normal rates. Kuwait and Qatar, with their strong dependence on Hormuz-dependent hydrocarbon exports, face projected economic contractions of 2.9% and 5.9% respectively for 2026, the steepest among GCC states. The efforts to keep oil flowing are crucial, as highlighted by a Kuwait Petroleum Corp. supertanker being struck earlier in August while crossing the strait.
