Oil prices fly blind as the Hormuz enigma deepens

How much oil is flowing through the Strait of Hormuz? Traders, energy executives and government officials are all trying to figure it out – but are reaching wildly different conclusions. It is, however, increasingly clear that this mystery has introduced a residual risk premium into crude prices that could remain deeply entrenched for months.

Benchmark Brent crude futures breached $100 a barrel on Wednesday for the first time since July 24 as ​escalating attacks in the Middle East, including on tankers, stifled hopes of a normalisation of oil shipping in the region.

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The narrow waterway between Iran and Oman has become the focal point of the conflict amid competing US and Iranian blockades.

Before the war erupted in February, flows through the world’s most important energy artery were largely taken for granted. While never perfect, flow estimates were remarkably reliable, even after accounting for Iran’s longstanding practice of switching off tanker transponders to evade Western sanctions.

For years, the consensus barely changed: Hormuz transited roughly 20 million barrels per day, equivalent to about one-fifth of global oil consumption. That certainty has disappeared.

Today, ​armies of analysts, along with increasingly sophisticated AI systems, are sifting through vast streams of information to determine how much oil is actually moving through the strait. Satellite imagery is cross-checked against port records, tanker drafts, loading ​schedules, refinery receipts and vessel-tracking data to reconstruct movements previously monitored in near real time.

The challenge has become exponentially harder because of the surge in “dark crossings,” when tankers switch ​off navigation and identification systems while approaching, transiting or leaving the strait. A US request for commercial satellite firms to delay imagery from the Gulf has further clouded the picture.

As a result, nobody can say with confidence exactly how much ​oil is flowing through Hormuz on any given day.

There are growing signs that Iran’s grip on the strait may be weakening. Months of tit-for-tat military exchanges have degraded Tehran’s radar systems and strike capabilities near Hormuz. US demining operations and a ​growing US-protected shipping corridor along Oman’s coast have allowed more vessels to enter and leave the Gulf.

The multi-billion-dollar question is how many vessels?

This uncertainty was highlighted by conflicting estimates from the Trump administration.

US Energy Secretary Chris Wright said on September 2 that more than 17 million barrels transited the strait on August 31 under US Navy supervision, a figure that would represent the highest level recorded since the war began. The claim left traders and analysts scratching their heads.

More than a week later, ship-tracking firm Kpler, which uses satellite imagery, transponder ​signals, port logs and commercial shipping intelligence, suggested that perhaps only 6 million barrels crossed Hormuz that day.

Kpler estimates crude flows through Hormuz in August averaged only around 4.3 million barrels per day, rising to nearly 5 million bpd ​during the first six days of September. It also notes that transits appear to have fallen sharply in recent days.

One possible explanation is that the administration is including exports from the United Arab Emirates’ Fujairah terminal, located outside the strait and supplied by Abu Dhabi’s ​bypass pipeline. Moreover, ​a single day’s observation says little about broader trends.

Wright admitted as much, saying on Sunday that flows through Hormuz were averaging more than 9 million bpd, though he did not specify the period.

That would be in line with Kpler’s estimates when Hormuz flows are combined with exports moving through alternative routes that bypass the strait.

To complicate matters further, tankers can remain dark for days or even weeks before and after crossing the strait, so actual volumes could ultimately prove to be significantly higher than current estimates suggest.

The new Hormuz may therefore be carrying half its pre-war volumes, or it may be carrying considerably more. That caveat illustrates the broader problem.

For perhaps the first time in modern oil market history, ​participants cannot accurately measure flows through the world’s most important ​energy corridor. The consequences extend far beyond academic debates over ​tanker movements.

Oil prices are supposed to reflect fundamentals. Yet it is difficult to assess fundamentals when one of the world’s largest supply arteries has effectively disappeared from view. In effect, uncertainty itself has become a fundamental.

The result is a persistent risk premium that is likely to remain embedded in prices for months. Clarity is likely to improve only with a resolution ​to the US-Iran stand-off. But whether that resolution is closer or farther away remains an open question.

Iran’s economy has come under severe strain after months of war, especially ​since Washington imposed a blockade on ​Iranian exports on July 14 and ratcheted up sanctions. The Trump administration likely aims to use economic pain to bring Tehran back to the negotiating table. But Iran’s clerical leadership continues to demand sanctions relief and maintains hopes of eventually collecting fees from ships crossing the strait.

Moreover, Iran retains the capacity to disrupt maritime traffic. Iran-linked forces have targeted 27 vessels since early July, according to the United Kingdom Maritime Trade Operations (UKMTO). The Islamic Republic has also vowed to announce a new restricted zone in the ​Gulf in coming ​days.

In other words, more uncertainty.

Philosophers have long asked: If a tree falls in a forest and nobody hears it, does it make a ​sound? In today’s oil market, the equivalent question is whether a tanker crossing the Strait of Hormuz can influence global supplies if nobody can see it. The answer is far from obvious.