US Naval Blockade Tests Limits of Iran's Oil Export Model

The US naval blockade of Iran has put its oil export model to the test. Until recently, Tehran was able to sustain significant sales despite years of US financial pressure through 'shadow' tankers and ship-to-ship transfers in Chinese waters, which were ringfenced from sanctions.

However, since Washington renewed the naval blockade in mid-July, the problem has shifted from disguising and financing Iranian barrels to physically moving them. The constraint now is replenishing stocks beyond the blockade zone, which is shrinking, threatening export revenues, domestic fuel supply, and ultimately production.

Tehran still holds some leverage, with its incentive to share the disruption strengthened as exports from other Gulf producers increase while Iranian barrels remain trapped.