Rebounding oil exports through Strait of Hormuz are vulnerable to stepped-up Iranian tanker attacks

Crude oil shipments through the Strait of Hormuz have rebounded from earlier lows, but the increase comes at steep costs driven by Iranian tanker attacks and the U.S. military commitment required to maintain the route.

Nearly 20 commercial ships have been attacked over the past month while transiting the strait, Persian Gulf or waters off Oman, according to the Joint Maritime Information Center, which provides security updates to merchant vessels. Iran attacked roughly two ships for every 100 vessels crossing the strait in the third quarter, said Michelle Wiese Bockmann, senior maritime intelligence analyst at Windward.

Shipments averaged about 10.3 million barrels per day for the week ended Saturday, according to Kpler, which tracks tankers and global trade flows. That figure sits about 23 percent below a prewar baseline of 13.5 million barrels per day. Windward estimates crude through Hormuz is averaging 9-10 million barrels per day compared with a prewar baseline of 14.5 million barrels per day.

The recovery depends entirely on U.S. military protection of a southern route along Oman's coast. Tankers now shuttle crude through Hormuz and transfer oil onto additional ships in the Gulf of Oman bound for Asia, reducing exposure to Iranian attack but requiring more vessels to move the same volumes.

Bob McNally, president of Rapidan Energy and former energy advisor to President George W. Bush, stated that nobody in Washington considers this arrangement sustainable. "It's an inefficient way to move commodities, not just oil, out of Hormuz," McNally said. The cost of shipping crude from the Persian Gulf to China has skyrocketed to $1 million per day per tanker since July.

Human casualties reflect the danger. Since July, at least nine sailors died, 18 were injured and three remain missing, according to the International Maritime Organization.

Brent crude, the international benchmark, hovers near $100 per barrel despite the increased flows. McNally attributed the sustained high prices to delivery, insurance and landing costs. Richard Meade, editor in chief of Lloyd's List, said the oil market is "becoming more efficient at operating under sustained insecurity." Tehran continues asserting control over the strait. On Monday, Iran's Revolutionary Guard ordered a tanker to turn around or face attack, according to the United Kingdom Maritime Trade Operations Centre. The vessel complied.