The rebound marks a break from the squeeze that followed the closure of the world’s most important energy chokepoint after the February 28 attack on Iran by the United States and Israel. Tanker movements remain far below normal, but the return of more product carriers and crude vessels through the narrow channel between Iran and Oman has helped cool panic among buyers across Asia and Europe.
Trade estimates show non-Iranian oil flows through Hormuz rising by about half in June from May levels, while total outbound volumes have recovered from March’s depths. The improvement has been driven partly by tankers sailing with transponders switched off, naval monitoring, ship-to-ship transfers in the Gulf of Oman and tighter scheduling by producers seeking to move cargoes without creating visible convoys.
Before the conflict, roughly a fifth of the world’s crude and refined products passed through Hormuz, with Asian buyers taking the bulk of Gulf cargoes. April loadings of crude, natural gas liquids and refined fuels through the strait fell to a fraction of pre-war levels, forcing refiners, airlines, petrochemical firms and power utilities to seek alternative supplies. The disruption hit refined fuels harder than crude in several markets because finished products cannot always be replaced by drawing down crude inventories.
Saudi Arabia, the United Arab Emirates and Kuwait are central to the product trade because their refineries supply diesel, jet fuel, fuel oil, naphtha and petrochemical feedstocks to Asia, Europe and Africa. Kuwait is especially exposed because its exports rely heavily on Hormuz, while Saudi Arabia and the UAE have limited options through Red Sea and Fujairah routes. Those alternatives have reduced the strain, but they cannot fully replace Persian Gulf loadings.
The increase in sailings has offered relief to importers facing tight summer fuel balances. Jet fuel supplies tightened as aviation demand rose, while diesel premiums stayed elevated because of limited spare refining capacity and shipping delays. Gasoline markets remain vulnerable as summer travel demand competes with efforts by refiners to maximise output of higher-margin distillates.
The partial recovery has not removed the risk premium. War-risk insurance remains expensive, tanker owners are demanding higher returns and many crews remain reluctant to enter contested waters. Freight rates on Gulf-to-Asia routes have fallen from extreme peaks but remain above pre-war levels, adding cost to every barrel that reaches end-users.
The rebound is fragile because it depends on a small pool of vessels willing to navigate under restricted visibility, altered routing and uncertain security guarantees. Several tankers have made passages without broadcasting positions, lowering immediate exposure but raising collision, liability and insurance risks. Such movements can relieve shortages but are not a substitute for a formally reopened waterway.
The market response has been mixed. Crude prices have retreated from the highs reached during the worst phase of the disruption, yet refined fuel margins remain strong because inventories were drawn down quickly. Diesel and jet fuel cracks are expected to stay elevated unless tanker traffic normalises and refineries in Asia, the Gulf and the Atlantic basin sustain high operating rates.
Asia remains the region most exposed to the uneven restart. China, Japan, South Korea, India, Pakistan and Southeast Asian economies built supply chains around Gulf crude and product flows, while China’s refined product exports dropped sharply as Beijing prioritised domestic security. South Korean refiners have raised jet fuel exports after crude imports improved, but the additional cargoes have only partly offset the shortfall.
Follow Arabian Post
Select Arabian Post as your preferred source on Google and MSN News for trusted business news and Arab politics and updates.
