For the first time in nearly seven weeks, the export of significant quantities of Iranian crude oil through the Strait of Hormuz has come to a halt. A naval blockade has achieved what years of US sanctions could not: effectively cutting off one of Tehran’s primary sources of foreign currency revenue. This is according to a report by the news agency Reuters. The report notes that during previous US sanctions campaigns, Iranian crude oil managed to reach buyers despite the restrictions. However, due to the current naval blockade, no new shipments of Iranian crude oil are reaching China—currently Iran’s last major oil buyer. Consequently, pressure on the Iranian government’s finances and foreign currency reserves is mounting.
According to data from Kpler, Vortexa, and TankerTrackers.com, no shipment of crude oil from Tehran has successfully reached China via the Strait of Hormuz since the US reimposed a blockade on Iran on July 14 as part of an ongoing six-month conflict. As a result, Iran is currently able to sell crude oil to China only from existing floating stockpiles in Asia. However, with oil accumulating in tankers within the Strait of Hormuz, Tehran is unable to replenish these floating reserves.
Vortexa analyst Claire Jungman stated, “Even during the ‘maximum pressure’ sanctions of 2019–2020, some Iranian crude oil flowed through the Strait of Hormuz every month. We have never seen such a prolonged period—since mid-July—where outbound oil supplies have remained near zero.”
Estimates by Kpler and Vortexa indicate that in August, Iran loaded approximately 220,000 to 255,000 barrels of crude oil and condensate per day onto ships. In comparison, this figure stood at around 740,000 barrels in July and approximately 2 million barrels in March. This collapse in oil exports is drying up a key source of foreign currency revenue for Iran. Consequently, Tehran might have to print new money to cover government expenses, a move that could further drive up inflation, according to Kpler analyst Homayoun Falakshahi. International Monetary Fund (IMF) estimates suggest that Iran’s inflation rate could reach approximately 70 percent this year—the third-highest in the world, trailing only Venezuela and Sudan. Last week, Washington moved to increase pressure on countries continuing to trade with Tehran, though it refrained from taking immediate punitive measures.
According to Samir Madani, co-founder of TankerTrackers.com, there are currently 29 Iranian oil tankers within the Strait of Hormuz, carrying a combined total of 36.11 million barrels of crude oil.
Traders report that Iranian crude oil remains available for sale on the open market, with shipments being offered for delivery to China in September and October.
However, traders note that the volume of oil available for sale is lower now compared to July and August, as floating stockpiles outside the Gulf are dwindling and no new supplies are reaching those locations.
Data from Vortexa indicates that the volume of Iranian crude oil held in floating storage west of the blockade line rose to 41.7 million barrels by August 26, up from 35.5 million barrels at the end of July.
Conversely, the total volume of Iranian crude oil floating at sea dropped from 135 million barrels at the end of July to 107 million barrels by August 26. Samir Madani stated, “China can take whatever oil is floating in its vicinity, but for now, there is really no scope to do much more than that.” Once the oil is sold, the empty tankers cannot return to Iranian ports due to entry restrictions imposed by the blockade, leaving the vessels idling near the coast. Analyst Claire Jungman states that 27 tankers subject to sanctions related to Iran’s oil trade are currently waiting empty off the coast of Sri Lanka. These vessels are unable to return to Iran due to the sanctions.
