U.S. Naval Blockade Halts Iranian Crude Oil Exports

A naval blockade reimposed by the United States on July 14 has effectively halted Iranian crude oil exports through the Strait of Hormuz. The blockade, positioned between the Gulf of Oman and the Arabian Sea, allows the United States Navy to vet ships, preventing fresh crude cargoes from reaching China, which was Iran's only remaining major oil customer.

Iranian exports collapsed from approximately 2 million barrels per day in March to between 220,000 and 255,000 barrels per day in August. While some shadow-fleet tankers remain active in Asia, they are unable to return to Iranian ports to replenish supplies, leaving dozens of vessels idle offshore. Iran is currently limited to selling existing floating storage in Asia.

This loss of foreign-currency earnings has increased pressure on government finances and heightened the risk of inflation. The International Monetary Fund estimates that Iran's inflation rate will reach nearly 70% this year.