What happened and why it matters
Iran answered the war's opening salvo by hitting commercial traffic in the Strait of Hormuz, one of the world's biggest crude gateways. The U.S. military stepped in to shield tankers, and Tehran has upped the tempo of attacks in recent weeks as a counter.
By Oct. 27, the International Maritime Organization counted at least 30 vessels struck in October, mostly oil tankers, leaving at least 16 seafarers injured. October had more attacks than any month of the war and twice September's 15 confirmed incidents.
"It's a difficult situation. Ships are attacked really on a daily basis," Jakob Larsen, BIMCO's chief safety and security officer in Denmark, said.
Prices up, flows bend but do not break
The opening campaign worked. Kpler estimates show exports plunged nearly 90% in March to 1.8 million barrels a day from 16 million in February. Back then Brent crude notched a wartime closing high of $118.35.
Fast forward to this month and prices have jumped more than 13% as security worsened. Brent traded above $117 on Friday, just below that March peak. Yet Kpler's figures show October crude flows through Hormuz averaged nearly 11.1 million bpd, only about 2% under September.
Day to day, it is jumpy. For the week ended Wednesday late in the month, flows slid to 7.3 million bpd, more than 40% under the prewar baseline. Even so, Mary Melton, a senior tanker analyst at Braemar in London, said, "On balance in terms of oil coming out, there hasn't been a massive impact."
The workaround: shuttle runs and higher freight
Shippers have rejigged operations to cut risk. Tankers load at Persian Gulf ports, cross Hormuz with transponders off, then transfer cargo to vessels waiting in the Gulf of Oman for delivery to Asian refiners. Melton said this lowers insurance bills for ships waiting outside the strait.
The shuttle approach has moved the needle, with Kpler tracking flows up more than 70% since July. It is also costly and complex. Melton said it needs more gear, more ships and seasoned crews, with about 20% of the global supertanker fleet tied up shuttling barrels out of the Gulf.
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Freight has exploded. Melton said hiring a supertanker from the Gulf of Oman to Asia cost about $249,000 per day in early September, surging to $931,000 in the first week of October. That lifted transport to roughly $21 a barrel from $6.50 in September.
"If you're an importer in Asia, you're used to paying almost nothing for freight," she said, noting freight now eats 20% to 30% of delivered crude cost and squeezes refinery margins. To win back Asian market share from U.S. suppliers, more Gulf producers are footing the freight bill and sending their own tankers through Hormuz.
Larsen said higher freight makes it "more attractive for the risk takers in the industry to actually carry out these voyages." And with higher oil prices, "there's more commercial incentives to get the oil out and sell it in the global market."
Security watch and the investor angle
Tankers transiting Hormuz, Larsen said, rely entirely on U.S. air support. "I don't think there would be many shipowners willing to take the risk if they didn't have that air cover from U.S. fighter jets and helicopters and drones," he said.
How long that cover lasts is unclear, particularly in the event Democrats retake Congress after Tuesday's elections and push the president to end the war. People familiar with the talks told The Wall Street Journal that Washington has instructed multiple Gulf Arab nations to prepare for a brief yet fierce military operation after the Nov. 3 midterm elections. The U.S. Navy - now enforcing a blockade against Iran - has advised ships that do not need to enter the Persian Gulf, Hormuz and the Gulf of Oman to stay away. A notice from the Joint Maritime Information Center on Wednesday said, "Due to the current geopolitical situation, vessels which do not need to transit the area are advised to remain well clear to avoid unnecessary delays to their voyage."
The bottom line: oil is still moving, but at pricier freight and with more operational risk. That combination props delivered prices, narrows refinery margins, and keeps your portfolio's energy exposure tied to security around Hormuz.
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