Middle East Oil Exports Rebound, But Industry Remains on High Alert

Oil exports from the Middle East have nearly returned to pre-war levels, seven months after the US-Israel war with Iran led to the closure of the Strait of Hormuz. According to maritime intelligence firm Kpler, daily oil flow from the region reached 92% of its pre-war baseline in the final week of September.

This rebound is attributed to three key factors: ships being escorted by the US military, using shuttle tankers through the strait for transfer to different vessels, and bypassing the strait using pipelines. About 40% of total oil exported from the region in September bypassed the strait and exited via overland pipelines.

The use of pipelines is likely to become the 'new normal' due to the 'improbability' of the Gulf countries and Iran returning to a harmonious relationship, according to Naveen Das from Kpler. Oil exports from Iran have fallen almost to zero following the re-imposition of a US blockade in mid-July.

The market does not trust that this status quo will continue due to the risk of further Iranian escalation and the possible impact of the US midterm elections, said Martin Kelly, senior intelligence analyst at EOS Risk Group. The Strait of Hormuz remains vulnerable to attacks, with September seeing the highest number of successful Iranian attacks on commercial shipping since March.