Commentary: For the oil market, the Strait of Hormuz isn’t closed
The Iran war has triggered what many say is the largest oil-supply shock in history but the market has defied expectations of high prices, says Bloomberg Opinion’s Javier Blas.
Vessels in the Strait of Hormuz, as seen from Musandam, Oman, August 3, 2026. REUTERS/Stringer
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LONDON: “In price, is knowledge,” is an old market saying. So what is the oil price telling us? At less than US$90 a barrel, it isn’t screaming shortage. How so amid the Iran war? The release of strategic reserves is helping, as are bypass pipelines around the Strait of Hormuz. China has slashed its oil imports, freeing barrels for everyone else. Commercial stockpiles are, for now, helping.
But that’s not the full story. Perhaps part of the tale is that more oil is flowing out of the Persian Gulf than is commonly acknowledged?
United States Energy Secretary Chris Wright claims that’s the case. On Tuesday (Aug 11), the oil executive-turned-politician said almost 9 million barrels a day had crossed Hormuz during the previous week. Added to the crude flowing via bypass pipelines, it would put total flows from the region not far below pre-war levels.
MARKET SCEPTICISM
The oil market was, to put it mildly, incredulous. His estimate is significantly higher than most tanker trackers, which peg recent Hormuz flows somewhere around 4 million to 5 million barrels a day. It’s higher, too, than my own estimate, which was above the consensus.
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Facing quite a backlash, Wright doubled down, saying on Wednesday the naysayers were all wrong. “Many private businesses undercount the number of ships leaving the Strait of Hormuz due to ships moving covertly through the waterway,” he said.
Assessing which estimate of Gulf crude flows is closest to the truth is crucial for understanding the oil market, and thus the outlook for inflation and interest rates.
The Iran war has triggered what many say is the largest oil-supply shock in history but the market has defied expectations of high prices. Rather than rising to US$200 a barrel, as some predicted, West Texas Intermediate crude has managed to close above US$100 on only 18 days out of the 115 trading sessions since the war started, or 6.4 per cent of the time.
The market skepticism about Wright’s optimism is understandable: The White House has been talking down oil prices since the war started. The jawboning, to the frustration of many long-only investors, has worked. Wright hasn’t done himself any favors with a series of missteps, before and after the war, that have undermined his credibility, including playing down the chances of rising prices and one of his staffers sending a wrong social media post from his official account. But, to my mind, the naysayers are a bit too sure of themselves.
Truth is the first casualty of war, another adage says.
THE PROBLEM OF COUNTING SHIPS
Before the conflict broke out, counting ships was relatively simple. Oil tankers broadcast their position via a gadget called an Automatic Identification System (AIS) – a transponder that provides, in real time, the name of the vessel and its latitude, longitude, heading and speed, among other information. Oil tankers would typically travel from loading port to destination without stops. Whenever a tanker turned off its AIS – “going dark” in the industry parlance – satellite pictures filled in most of the gaps, with multiple companies selling imagery showing the region almost in real time.
Today, tanker trackers have three problems. First, nearly all vessels have gone dark, switching off their AIS.
Second, most satellite-imagery vendors, under pressure from Washington, have stopped selling their pictures, particularly those created in high resolution.
Third, rather than travelling from origin to destination in a single voyage, most of the cargo flows involve one – or even several – ship-to-ship transfers on the high seas, further complicating tracking.
The market currently relies on just two satellites, both operated by the European Union. Rather than multiple pictures per day, the market is left with a single snapshot every three to five days of the Strait of Hormuz – and a lot can happen between each of those satellite overpasses.
Worse, their orbits are well known, allowing companies and traders to adjust when to load at any port to avoid being caught by the celestial candid cameras. From time to time, some AIS data comes along, too.
HOW MUCH OIL IS PASSING UNNOTICED?
So the question isn’t whether oil is flowing across the strait, because it is.
The debate is about how much is finding an exit and whether 3 million to 5 million barrels a day are leaving unnoticed by most of the market – the gap between what’s known using open-source intelligence and the US government’s claims.
Can so many in the market miss so much oil? We must acknowledge it’s a possibility.
Ultimately, Wright is in a better position to know what the US military – and countries including the United Arab Emirates, Kuwait, Qatar and Iraq, all involved in dark tanker crossings – are doing in secret. The available data contradicts him, but the emphasis there is on “available”, and what’s accessible is quite limited.
We must acknowledge, too, that back in May and June, when the dark transits started, many, including myself, were slow to appreciate the scale of the flows. Could we be repeating the same mistake? Again, maybe.
By counting identified tankers using available data, we can safely say that, at the very least, 5 million barrels a day are transiting Hormuz. Then I like to add an adjustment factor for known unknowns – because I’m quite certain that more is happening.
Say one supertanker a day is crossing in utmost secrecy; that pushes the count to 7 million barrels a day. If we’re missing two tankers rather than one, that raises it to 9 million barrels. It quickly adds up.
There’s also the question of the sustainability of the flows. Wright said his estimate was based on a seven-day average. The dark crossings typically happen in convoys, so several vessels exit the strait at the same time. Because of the on-off nature of those convoys, a week-long average may inflate the count if it covers two convoys, for example.
Obviously, the Trump administration would cherry pick whatever moving average best fits the narrative it wants to spin. That’s fair game.
Conspiracy theories abound to fill the information gap. One claims that Hormuz is closed, but that the US Treasury is artificially suppressing oil prices by secretly intervening in the market.
In the Middle East, the whispers are very different; tales of tankers crossings the strait at night; of convoys under attack despite American protection; of daring ship-to-ship transfers on the ocean waves, far away from prying eyes. From time to time, Iran hits a tanker; some of those attacks get reported, many don’t.
But there’s a tell of what’s going on: Oil spills in the Strait of Hormuz, quite visible on the available satellite imagery, are growing by the day. It’s a sign that Iran is attacking tankers to keep the waterway closed, but also an indication that many are battling equally to keep it open – perhaps more successfully than we think.
Source: Bloomberg/sk
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