US Naval Blockade Halts Iranian Oil Exports via Strait of Hormuz

A U.S. naval blockade has brought Iran's crude oil exports through the Strait of Hormuz to a virtual standstill for the past seven weeks, a development that is succeeding where years of sanctions failed in cutting off a critical source of revenue for Tehran. Data from multiple tanker-tracking firms shows an unprecedented halt in shipments to China, Iran's last major oil customer.

Exports Collapse to Record Lows

Since the U.S. reinstated its blockade on July 14, no Iranian crude cargoes have successfully passed through the strategic waterway to China, according to data from Kpler, Vortexa, and TankerTrackers.com. This has caused a dramatic fall in the country's oil and condensate loadings.

• August loadings were estimated at 220,000 to 255,000 barrels per day (bpd).
• This is a sharp decline from approximately 740,000 bpd in July and 2 million bpd in March, per Vortexa and Kpler estimates.

"Even at the height of maximum-pressure sanctions in 2019-20, some Iranian crude cleared Hormuz every single month; at no point did outbound flows fall to near-zero for a sustained stretch as they have since mid-July," said Claire Jungman, an analyst at Vortexa.

Squeezing Tehran's Finances

Ad

The collapse in oil sales is draining one of Iran's primary sources of foreign-currency income, intensifying pressure on its government finances. The situation could force Tehran to finance its spending by printing money, which would risk exacerbating already high inflation, according to Kpler analyst Homayoun Falakshahi.

The International Monetary Fund (IMF) has estimated Iran's inflation rate will reach nearly 70% this year, which would be the third-highest in the world.

Trapped Tankers and Dwindling Stockpiles

The U.S. naval operation is concentrated south of the Strait of Hormuz, between the Gulf of Oman and the Arabian Sea, effectively trapping Iranian tankers in the Gulf. According to TankerTrackers.com, 29 tankers are currently inside the strait, holding 36.11 million barrels of crude.

While Iran can still sell oil to China from its existing floating storage in Asia, it cannot replenish these stockpiles. Vortexa data shows total Iranian crude afloat has fallen to 107 million barrels from 135 million at the end of July. Consequently, empty tankers are unable to return to Iranian ports, with Vortexa noting 27 sanctioned tankers are idle in ballast off the coast of Sri Lanka.