Iran’s Strait of Hormuz leverage is fading as global oil keeps flowing - opinion

The Strait of Hormuz, once a critical economic flashpoint in U.S. actions against Iran, is losing its dominance over the global energy market. Despite carrying roughly 20 million barrels of oil daily before recent conflicts, alternative routes and infrastructure developments have significantly offset its impact.

Saudi Arabia's East-West Pipeline now moves about 7 million barrels per day to the Red Sea, while the UAE's Habshan-Fujairah line operates near its capacity, with further expansion planned. These pipelines, along with protected tanker movements and other workarounds, allow for the transit of an estimated 15-16 million barrels daily, bypassing the strait. Public maritime tracking may even understate the true volume, as some tankers operate with transponders off.

The stability of oil prices serves as clear evidence of the market's resilience. Brent and WTI crude are trading between $85-$90 a barrel, far below the catastrophic $150-plus levels some analysts predicted. While prices briefly spiked above $110-$120 early in the conflict, they have since settled, indicating the market has absorbed the shock without widespread panic.

Several factors contribute to this stability. Chinese oil demand has softened, and Venezuelan production has increased to about 1.2 million barrels per day, largely for export. These developments, combined with alternative routes and protected shipping, have nearly covered the shortfall caused by reduced Hormuz traffic.

However, the conflict is far from over. The persistent threat of Iranian missile and drone strikes on oil infrastructure across Saudi Arabia, the UAE, Kuwait, and Bahrain remains a significant concern. A successful strike on a major processing plant or terminal could still cause sharp price increases, prompting caution from Washington and its partners in their approach to degrading Iran's capabilities.