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As the war in Iran continues to escalate, shipping through the Strait of Hormuz has slowed down significantly since the end of the Memorandum of Understanding (MoU).
Despite attempts from Trump and the U.S. Navy to ensure traffic through the valuable waterway, Iran continues to attack ships that travel along the coast of Oman, away from IRGC-approved shipping lanes.
Control over the Strait is the highest priority for both sides.
As traffic stalls, however, global oil prices are once again rising, with economists fearing that prices will continue to rise as long as the vital trade route remains closed.
The Strait is Still Closed
Since Iran and the U.S. reimposed their respective blockades on the Strait, traffic through Hormuz has slowed down significantly.
According to maritime data company Lloyd’s List Intelligence, just 53 vessels were recorded transiting through the strait last week through July 20, down 66% compared to 157 vessels recorded the previous week.
According to the company, tanker and gas carriers, which comprise the majority of traffic through the waterway, dropped from 90 crossings to only 30.
This data is further corroborated by a report from Kpler, which showed that daily crossings fell from an average of 20 vessels before July 15 to only single-digit numbers this past week.
Traffic currently remains low, with only a few brave vessels occasionally attempting to cross.
The main reason for this decrease in traffic is obviously due to reignited hostilities between the United States and Iran.
“Things have slowed down significantly since tensions reignited,” said Bridget Diakun, a senior risk and compliance analyst at Lloyd’s List. “That’s not surprising - people pull back and reassess, as you’d expect.”
While there is still traffic through the Strait, Diakun adds that the heightened level of risk has deterred many tankers from making the journey through the waterway. Instead of a low but steady level of traffic, crossings usually happen in sporadic bursts as shipowners exploit perceived windows of safety.
Oil Prices Once Again on the Rise
S&P Global came to a similar conclusion. Between July 17 and July 19, the company recorded only 40 vessels crossing the Strait, averaging around 13 crossings per day, while overall weekly traffic fell by around 50%.
“The latest escalation shows how expectations of a rapid opening of the Strait were premature,” said Saul Kavonic, the head of energy research at MST Marquee.
“The hostilities and reimposed blockade set the conflict back on an escalatory trajectory,” he added, noting that transit had dropped to around 15% of prewar levels.
He also added that the price of oil could rise to over $100 per barrel if the hostilities continue at their current level or if more Gulf oil infrastructure comes under attack.
Speaking of oil prices, the oil market is on the rise as hostilities in the Middle East continue to escalate. Brent Crude, the standard for oil prices worldwide, reached $90 per barrel this week and is on an upward trajectory.
Despite some occasional dips, economists expect prices to continue their climb. According to Amrita Sen, founder and director of research at Energy Aspects, the longer the Iranian blockade persists, the more prices will continue to rise as the flow of oil across the world slows to a crawl.
“The market is still quite complacent despite the price increase we have seen,” Sen said to CNBC, adding that oil prices could very well see triple digits in the near future.
Meanwhile, gasoline prices across the U.S. surged again after a brief dip during the ceasefire. The average price for a gallon of gas now sits at around $4 per gallon.
On the Brink of a Wider War
Meanwhile, Iran continues to strike shipping vessels that travel outside of the IRGC’s preferred route. Between July 17 and July 21, the UK Maritime Trade Operations Center reported three separate attacks on shipping vessels attempting to travel along the U.S. recommended route route near the coast of Oman.
Last week, Iran attacked three other tankers, which it claims “ran into accidents” while transiting via the Omani route.
In addition to civilian tankers, Iran has been increasing its attacks on American bases throughout the Middle East, focusing primarily on U.S. installations in Kuwait, Bahrain, and Jordon.
One such attack reportedly killed three American soldiers and injured several more, according to the Pentagon.
The war in the Middle East appears to be on the verge of escalation following the strike that killed three U.S. servicemembers.
President Trump vowed to make Iran pay for killing American soldiers, while Iran has declared itself to be waging a total war against the United States.
Analysts and experts are worried that the conflict could quickly spiral beyond the manageable threshold unless a diplomatic solution is reached.
“This is the wake-up moment for both sides,” said Ellie Geranmayeh, an Iran expert at the European Council on Foreign Relations. “They either take the diplomatic off-ramp now or risk allowing the war to spiral beyond managed escalation.”
About the Author: Isaac Seitz
Isaac Seitz, a Defense Columnist, graduated from Patrick Henry College’s Strategic Intelligence and National Security program. He has also studied Russian at Middlebury Language Schools and has worked as an intelligence Analyst in the private sector.
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