Iran War Disrupts Oil Supplies, But Alternative Routes Keep Energy Flowing

When Iran shut down the Strait of Hormuz at the start of the war, oil prices skyrocketed to $140-$150 per barrel, threatening the world economy. However, nearly seven months on, oil is expensive but not exorbitant, and analysts say the supply is sufficient to meet current global needs.

The Gulf nations quickly found alternative routes and reached for unused pipeline capacity when Iran shut down the Strait of Hormuz. When Iranian-backed Houthi rebels in Yemen disrupted the Yanbu workaround in July by declaring a blockade of Saudi oil shipments, the Saudis redirected Asia shipments northwest to the Mediterranean. They sent oil through the U.S.-guided corridor in the Strait of Hormuz.

U.S. officials have touted the role of the southern corridor in keeping energy flowing while their blockade increases pressure on Iran. With 6 million or 7 million barrels per day now flowing through the southern route, plus 2 million barrels through the pipeline to Fujairah, fully 8 million or so of the blocked 15 million barrels per day from before the war have been restored.

Analysts estimate that some 3.5 million barrels per day are being drawn down from the globe's abundant oil inventories, while demand has fallen by perhaps another 5 million barrels per day due to the higher price and sluggish economic growth in key markets.