Within 24 hours after the United States and Israel went to war with Iran, Tehran responded with a series of attacks on commercial ships in the Strait of Hormuz in a bid to cut off one of the world’s major sources of oil.
Iran’s operation was initially successful, with crude oil exports dropping by nearly 90% to 1.8 million barrels per day in March, compared to 16 million barrels per day in February, according to data provided by Kpler.
But oil flows have picked up in the past eight months as the U.S. military protects tankers sailing through Hormuz. The Iranian government has responded in recent weeks by escalating attacks.
More merchant ships were attacked in October than at any other time during the war. But in contrast to March, when exports plummeted, tankers continue to transport significant amounts of crude through Hormuz, showing the shipping industry is adapting to wartime times in the Persian Gulf.
As of October 27, at least 30 ships, mostly oil tankers, had been damaged and at least 16 sailors injured, according to data from the United Nations agency International Maritime Organization. Ship attacks doubled in October compared to 15 confirmed incidents in September.
“It’s a difficult situation. Ships are really being attacked on a daily basis,” said Jakob Larsen, head of safety and security at Denmark-based BIMCO, one of the major international shipping industry associations.
Ship attacks in the Strait of Hormuz spike in October
Kupler
Oil prices will rise, but oil flows are resilient
Oil prices have soared more than 13% this month as the security situation in the Persian Gulf worsens. international brent contract It traded above $117 per barrel on Friday. That’s just shy of the wartime high of $118.35, set during a wave of Iranian shipping attacks in March.
But actual crude oil exports through Hormuz averaged nearly 11.1 million barrels per day in October, down only about 2% from September despite the sharp escalation in violence, Kupler data show.
“In terms of oil spills, we haven’t seen a major impact,” said Mary Melton, senior tanker analyst at London-based shipbroker Braemar.
The flow of crude oil through Hormuz is highly variable from day to day, with exports sometimes close to pre-war levels and other days well below them. According to Kpler, flows fell to 7.3 million barrels per day in the week ending Wednesday, the last week of October, more than 40% below prewar baselines.
Larsen said oil flows are now more resilient as the shipping industry adjusts operations to the threat. Rising freight rates “make it more attractive for risk takers in the industry to actually do these voyages,” he said.
“And higher oil prices also mean more commercial incentives to extract oil and sell it on global markets,” Larsen said.
Adapting to more dangerous times
Shippers are adapting by installing shuttle systems to reduce the risk of attack. The tanker will load crude oil at a Persian Gulf port, turn off its transponder and sail through Hormuz to transfer the cargo to a waiting tanker in the Gulf of Oman, which will then deliver it to a refiner in Asia. This will reduce insurance costs for ships waiting outside the Channel, Melton said.
Kupler said the shuttle system has been effective in stemming oil spills, with flow through Hormuz surging by more than 70% since July. But Melton says the system is inefficient, logistically complex and expensive.
Analysts said more equipment, ships and experienced crews are needed. About 20% of the world’s supertanker fleet is involved in transporting oil from the Gulf, she said.
As a result, tanker rates have exploded. Melton said it cost $249,000 a day to hire a supertanker to sail from the Gulf of Oman to Asia in early September. By the first week of October, prices had soared to more than $900,000 per day. This equates to transportation costs of about $21 per barrel of crude oil, compared with $6.50 per barrel of oil in September, analysts said.
“If you’re an Asian importer, you’re used to paying very little freight,” Melton said. “Then 20% to 30% of the actual cost of shipping the crude oil will be in transportation costs.
“This really starts to impact your margins as a refiner,” the analyst said.
He said a growing number of Gulf oil producers are now shouldering the costs and risks of transit through Hormuz in order to win back market share in Asia from the United States and other Atlantic producers. And they are increasingly using their own tankers to breach the strait, she said.
Uncertainty increases as midterm elections approach
It is unclear how long the complex and expensive shuttle system will be able to sustain current export levels. Larsen said the safety of tankers sailing through Hormuz is entirely dependent on air support from the U.S. military.
“I don’t think many ship owners would be willing to take the risk without air support from American jets, helicopters and drones,” he said.
It’s also unclear how long U.S. forces will remain engaged, especially if Democrats regain control of Congress after Tuesday’s election and demand the president end the war.
The United States has told Gulf Arab states to prepare for brief but intense military operations after the Nov. 3 midterm elections, people briefed on the conversations told The Wall Street Journal. The US Navy, which is enforcing a blockade against Iran, has warned ships that do not need to transit the Persian Gulf, Hormuz and the Gulf of Oman to stay away from the region.
“Due to the current geopolitical situation, vessels that do not need to transit this area are advised to sufficiently avoid the voyage to avoid unnecessary delays in their voyages,” the U.S. military informed vessels through a Joint Maritime Information Center notice on Wednesday.
