Oil Flows Through Iran War Workarounds, but Costs Mount

When Iran shut down the Strait of Hormuz at the start of the war, oil prices were expected to skyrocket. However, nearly seven months on, oil is expensive but not exorbitant, and analysts say there's enough oil available to meet current global needs.

Saudi Arabia and other Gulf producers 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, the Saudis redirected Asia shipments northwest to the Mediterranean, either through the Suez Canal or a pipeline across Egypt.

The East-West pipeline was attacked earlier this month and forced to shut down, potentially for weeks. The Saudis have since shifted to the US-protected dark shuttle through Hormuz, with six supertankers loading 12 million barrels at Saudi terminals on the Persian Gulf.

Analysts estimate some 6 million barrels of oil per day or more have been passing through the Strait of Hormuz on the dark shuttle route on average, some 40% or more of prewar flows. The workarounds keep the economy supplied, for now, but are costly and may not be sustainable.