Middle East Oil Exports Surpass Prewar Levels Despite Iranian Attacks

Middle East oil exports averaged over 24 million barrels a day in the week ending October 18, surpassing prewar levels. This resilience persists despite a surge in attacks by the Islamic Revolutionary Guard Corps, which has utilized drones, missiles, and guerrilla tactics to disrupt traffic in the Strait of Hormuz. On October 16, Iranian forces launched a rocket-propelled grenade attack on the supertanker Loyalty.

Flows remain steady due to an improvised shipping system protected by U.S. air cover and high profit margins that incentivize crews to risk the crossing. To mitigate danger, Saudi Arabia and the United Arab Emirates are utilizing pipelines to move oil via alternative routes, while other vessels use offshore transfers in the Gulf of Oman to bypass the most hazardous zones of the strait.

However, the conflict has significantly increased transport costs. War-risk insurance has climbed to 10% of a vessel's value, and freight rates for supertankers traveling to China have neared record highs. Simultaneously, a U.S. maritime blockade has successfully restricted Iranian oil exports, reducing Tehran's leverage over the region's primary energy chokepoint.