Within 24 hours of the United States and Israel going to war with Iran, Tehran responded with a series of attacks on merchant vessels in the Strait of Hormuz, attempting to cut off one of the world's major sources of crude oil.
Iran's actions were initially quite successful. According to data provided by Kpler, crude oil exports plummeted by nearly 90% in March, dropping to 1.8 million barrels per day, from 16 million barrels per day in February.
However, in the past eight months, crude oil flows have rebounded since the U.S. military began providing protection for oil tankers passing through the Strait of Hormuz. Meanwhile, Tehran has intensified its attacks in recent weeks.
The number of merchant ships attacked in October exceeded that at any other time during the war. However, in contrast to the significant collapse in exports in March, oil tankers continue to transport large amounts of crude oil through the Strait of Hormuz, indicating that the shipping industry has adapted to the wartime environment in the Persian Gulf.
As of October 27th, at least 30 vessels have been attacked this month, most of which were oil tankers, and at least 16 seafarers have been injured. Data provided by the International Maritime Organization, a United Nations agency, shows that the number of vessel attacks in October has doubled compared to the 15 confirmed incidents in September.
Jacob Larsen, the BIMCO Chief Security and Protection Officer of the Danish headquarters, said: "The situation is very difficult. Ships are attacked almost every day." BIMCO is one of the large international shipping trade associations.
Oil prices are rising, but traffic remains resilient.
With the deterioration of security conditions in the Persian Gulf, crude oil prices have risen by more than 13% this month. On Friday, the trading price of international Brent crude oil contracts briefly exceeded $117 per barrel, just a step away from the wartime closing high of $118.35 set during Iran's large-scale attacks on ships in March.
However, Kpler data shows that in October, the actual crude oil exports through the Strait of Hormuz averaged nearly 11.1 million barrels per day. Despite a clear escalation in violent conflicts, it was only about 2% lower than in September.
Mary Melton, an analyst for advanced oil tankers based in London at Braemar, stated: "Looking at the overall situation of crude oil leakage, there has not been a significant impact."
Kpler data shows that the flow of crude oil through the Strait of Hormuz fluctuates greatly on a daily basis; sometimes exports approach pre-war levels, and at other times they are far below this level. In the last week of October, the flow had dropped to 7.3 million barrels per day as of Wednesday, which is more than 40% lower than the pre-war baseline.
Larson stated that today's crude oil flows are more resilient because the shipping industry has adjusted its operations to cope with the threats. The soaring freight rates give "those in the industry willing to take risks more motivation to actually carry out these voyages."
"And when oil prices rise, that also means there is a stronger commercial incentive to transport crude oil and sell it in the global market," said Larson.
Adapt to more dangerous times
To reduce the risk of attacks, shippers have developed a transfer system. Tankers first load crude oil at ports in the Persian Gulf, then shut off their transponders before crossing the Strait of Hormuz, and subsequently transfer the cargo to tankers parked in the Gulf of Oman, which then transport the crude oil to refineries in Asia. Melton said that this has reduced the insurance costs for ships waiting outside the strait.
Milton stated that this interconnection system is very effective in transporting crude oil, and since July, the flow through the Strait of Hormuz has increased by more than 70%. However, she also pointed out that this system is not very efficient, the logistics are complex, and the costs are high.
She said that this requires more equipment, ships, and experienced crew members. Approximately 20% of the global fleet of very large oil tankers is being used to assist in transporting crude oil out of the Gulf.
As a result, oil tanker freight rates soared significantly. Melton mentioned that in early September, the daily rent for an ultra-large oil tanker transporting goods from the Gulf of Oman to Asia was $249,000; by the first week of October, this price had skyrocketed to $931,000 per day. Based on this, the cost of crude oil transportation is approximately $21 per barrel, compared to only $6.50 per barrel in September.
“If you’re an importer from Asia, you’re already used to hardly having to pay for shipping costs at all,” Melton said. “Now, 20% to 30% of the actual cost of crude oil upon arrival will be for shipping.”
She said, "This is really starting to affect the profit margins of refiners."
She also stated that an increasing number of Gulf oil-producing countries are bearing the costs of shipping in order to compete for market share in Asia and snatch customers away from the United States; they are also increasingly using their own oil tankers to take the risk of crossing the Strait of Hormuz.
Midterm elections are approaching, and there is still uncertainty about the outlook.
It is still unclear how much longer this complex and expensive interconnection system will be able to maintain the current level of exports. Larson said that oil tankers passing through the Strait of Hormuz rely entirely on the aerial support of the US military for security.
He said, "Without the air cover provided by American fighter jets, helicopters, and drones, I don't think many shipowners would be willing to take that risk."
There is also uncertainty as to whether the U.S. military will continue to be involved, especially after the elections on Tuesday. If the Democratic Party regains control of Congress and demands that the president end the war, this uncertainty will only increase.
The Wall Street Journal, citing sources familiar with the matter, reported that the United States has informed several Gulf Arab countries to prepare for a short but intense military operation following the mid-term elections on November 3. The U.S. Navy, responsible for imposing sanctions on Iran, has warned that vessels that do not need to pass through the Persian Gulf, the Strait of Hormuz, and the Gulf of Oman should avoid those areas.
On Wednesday, the U.S. military issued a notice through the Joint Maritime Information Center stating: "Due to the current geopolitical situation, ships passing through this area are advised to stay as far away as possible to avoid unnecessary delays in their voyages."
