Middle East Oil Exports Plummet as Iran Tightens Grip on Hormuz

Energy markets are facing an uncertain future as the conflict in the Middle East continues to escalate. The region's energy sector appears weaker and more vulnerable than at any point since the war began, with shipping routes constrained and energy infrastructure coming under attack.

More than five months after the US and Israel launched military strikes against Iran, the country's grip on the Strait of Hormuz has tightened. The conflict has expanded in recent weeks from the strait to the Red Sea, with Yemen's Iran-backed Houthi militia declaring an embargo on Saudi exports. Attacks on tankers and other energy assets have severely complicated shipments from Saudi Arabia's west coast.

The result is a dramatic decline in Middle East exports. Combined exports from the Gulf and Saudi Arabia's west coast slipped to around 6.2 million barrels per day, less than half the wartime peak of 13.4 million bpd hit in late June and far below the more than 20 million bpd that typically left the region before the conflict.

But what is perhaps most alarming for energy markets is not this short-term volatility but signs that the complex, opaque trading patterns created by this stop-and-start conflict might be here to stay. The US air strikes have failed to eliminate Tehran's ability to disrupt shipping, and President Donald Trump appears reluctant to embark on a deeper regional war.