[This Iran War post launched incomplete because I left my phone in a cab and went through a lot of hair-tearing and then running around, with the great help of a local American friend. The first launch version is therefore thin. The final should be up at 8:00 AM EDT, so please return or refresh this page then]
Contrary to what many readers (and even yours truly) had wanted to believe, Iran appears to be doing an even less effective job of constraining oil and other traffic out of the Persian Gulf than it had earlier in the war. This stands in sharp contrast to repeated official claims that Iran controlled the Strait of Hormuz, as in both its and the Oman side.
Mind you, this does not amount to the relief to the global energy situation that many might think it does. There is still an oil shortfall relative to pre-war levels. An analogy: if you need 2000 calories a day to live and for a while were getting only 800, now getting 1200 does not mean you are not starving. It means you are starving less slowly.
Note further that experts are convinced no Iranian oil is leaving the Persian Gulf. Ship can be tracked by satellite had them managed to get past the US blockade.
An offset to the “more oil getting out than before” picture is that China has resumed buying oil. I have not seen great data on that regarding how that compares to the increase in volumes exiting the Strait of Hormuz, as in whether there is a net plus for the world ex China given the recent givens. In addition, the Saudis have shifted back to shipping out of the Gulf side in light of the Ansar Allah attacks on oil going to the Red Sea and look to have adequately compensated for now. The Saudis claim they will have their east-west pipeline operating in mere days. But most commentators seem unaware that there are two pipelines and one was expected to return to service very soon, while the second required much more time to restore. And of course, Ansar Allah may attack it again and other energy infrastructure, such a Aramco operations in Yanbu yesterday.
To add to the energy picture, this “oil not so bad” does not alleviate the diesel crunch. Rory Johnson, in a new talk with Mario Nawfal, says the Chinese have the only spare capacity globally. He says if Trump were to bar US diesel shipment, US inventories would rise in a mere two weeks, not just enough to lower US prices but even to lead to refiners to cut output. He argues the US would do better to limit rather than halt diesel exports.
From a lightly-edited machine transcript:
Rory: But over the past month and a half, we have seen a steady grind higher of transit volumes through uh through Hormuz. And my latest estimates as of Sunday, which is the latest kind of 7-day rolling estimate I used, and that was around ,just shy about it was 11.98 million barrels a day,
Mario: which is that about half is that about half of what it was before the war?
Rory: Yeah, about 60% numbers. Yeah, about 60%. And most and almost all of that’s crude. So the one of the other trends that we’ve seen is that crude is slowly kind of grudgingly recovering, but refined products aren’t….and then on top of that because we have you know more and more getting through Hormuz, the biggest piece of the biggest recent contributor to that growth has been Saudi Arabia which has been shifting even before this this east west pipeline attack last Thursday. We saw following the Houthi maritime ban declaration, we saw more and more Saudi barrels shifting from the Red Sea loadings into the Gulf. And that’s something that they’re doubling down on.
And I think you, you know, this is the most Saudi Arabia has been trying to load in the Gulf and get out of Hormu since the beginning of the war. Even during June and July at the peak of that kind of post-MOU breakout flow, Saudi only at their peak were loading on a again 10 day trailing basis as all these numbers will be, was out 2 million barrels a day. Now Saudi getting out three plus million barrels a day …So you’re getting a real flow there, but at the expense of what’s happening in the Red Sea.
To diesel:
Rory: I think crude is really really tight.
Diesel is even tighter. So on top of the backradation in the diesel curve, similarly kind of hyper backraided at its record levels, we now currently again $105 a barrel for prompt Brent futures contracts. The prompt diesel contract is currently sitting at around $220 a barrel equivalent with a crack spread right now on my screen still at record highs of just about $115 a barrel. So diesel is
Mario: What were these numbers before the war?
Rory: Okay. So in in normal in normal levels diesel crack spreads are around 20-30 bucks a barrel. So we are from 20-30 bucks we’re at 115. And that is diesel has been structurally elevated since refined product market started really becoming the tightest piece and particularly diesel in 2022 crisis. So I would say maybe since then they’ve averaged more like $40 a barrel. Higher than their historical levels but still well below where they are today. So we’re sitting at nearly triple those already elevated levels and on a normal basis we’re talking something like you know multiples like five-six times the normal…
Diesel has been tight structurally ever since 2022…
let’s say, half of the Russia supply shock has been offset by an increased draw on US supplies and and boost in US exports…depleting domestically available supplies in North America of diesel which has allowed basically the price spike that’s been felt everywhere to further grind into US consumers in particular…And now the question is what can the White House do about what can Trump do about this if he wants to kind of short-circuit a very predictable voter blowback from high fuel prices going into election? Well, you could end the war in Russia and Ukraine. He’s tried that….I would say that base assumption, Russian diesel’s out of the market primarily for the rest of the year at least. The next piece is China.
China in is the current holder of the only real holder of any spare refining capacity that could theoretically be marshaled to kind of come into this market right now….So the independent refining industry is only operating right now at 50% capacity. Because the Beijing doesn’t like independent refiners. Over the past decade, they’ve been trying to kind of push them out of the market, reduce their capacity to compete. Bt last time we saw Beijing loosen the reigs on these independent refineries was in the winter between 2022 and 2023. The last time we had a really, really tight diesel market… So, uh, Chinese clean product exports, so gasoline, diesel, jet fuel, doubled from around a million barrels a day to 2 million barrels a day in basically December of that year. Uh, diesel exports rose from two or 300,000 barrels a day to eight or 900,000 barrels a day… I think the best case scenario we have for global refined product markets right now is that China does this again. That they allow an extra million barrels a day of these products to exit Chinese refineries and to kind of satiate this market.
Mario: But they haven’t allowed for that to happen yet.
Rory: Not yet. They basically they initially had a restriction on exports very similar to what Russia was doing…So let’s say you add an extra 500,000 barrels a day of diesel to the market from China. I think quite plausibly again it’s impossible to know because we’ve never seen this market before but I think quite plausibly that could be enough. It doesn’t sound like a lot. It’s not a lot, but it could be enough to bring diesel crack spreads from their runaway levels at 115 right now back down to like 60 like that. It could be enough to to achieve like a havinging of crack spreads….
And this is where we get to this US export ban. US right now is exporting a million and a half barrels a day of diesel to the market. Is the only major available supplier working at full tilt. If the White House banned diesel exports, the global diesel market would just break. Like it would be very very easy.
Again, I have a I have an infamous history recently of saying big numbers for oil, but I think with diesel, you could hit $300 diesel. If the US banned exports of diesel and it was actually realized, I think you could hit $300 diesel pretty easily….
But even in normal markets, diesel is a, you know, the US Gulf Coast is a structural exporter of a million barrels a day of diesel. They actually produce more than they can consume domestically.
So if you ban exports, the first thing it does is it basically starts inflating domestic inventories by like a million barrels a day. Inventories are very low right now. So, there’s a little bit of room. They could keep that up for a couple weeks. As that keeps going, diesel prices sink lower and lower and lower and lower as it over supply domestically builds.
And they can’t get rid of it until eventually diesel prices basically fall to negative crack spread equivalent levels in the United States while we will likely have a$150 or $200 a barrel crack for diesel globally. and you would actually have a moment where US refineries would actually start cutting back refining runs in a moment when the market is really really tight.
So I think if if the White House was trying to be smart about this and I do not have a lot of faith in this but if they really wanted to be smart I think you would put some kind of restriction not a full ban. A full ban is going to be is going to be catastrophic but let’s say they capped diesel exports at like a million barrels a day versus 1.5.
Bloomberg’s energy reporter Javier Blas has a similar take:
Lots of very downbeat takes on Saudi oil.
Yet, Riyadh exported yesterday ~6m barrels via Hormuz dark transits — roughly half of what left the Persian Gulf on the day. Satellite data shows further tankers were loading yesterday at Ras Tanura and Juaymah.
If the kingdom wants,…
— Javier Blas (@JavierBlas) September 17, 2026
A very useful discussion between Sal Mercogliano and Mario Nawfal on the state of the shipping in the Middle East. Mario pointedly grills Mercogliano on how the US has been able to get more oil out of the Gulf (short version, they have gotten better) while Iran has not been effective in preventing transits. Mario (as do we) find it very puzzling given Iran’s ability to make pinpoint strikes at great distances (and to all, physical proximity and more specialized weaponry, such as fast boats and sea drones). Mercogliano points out that the US blockade of Iran has been successful, that no ships have gotten out since July. However, he does note that the US did not retaliate against the latest Iran attack on a loaded Saudi VLCC Traffic has been diminished since then (he explains why it was a missile hit and not a mine as Iran had maintained). Mercogliano also points out that there is an element of attrition, that Iran is taking out some vessels and deterring seamen, which could cut into the ability to maintain recent transit levels.
Note that the mainstream media has not caught up with the state of transits. From Aljzaeera’s live feed:
Only three vessels transit Strait of Hormuz on Wednesday
Preliminary ship-tracking data on Thursday has shown commodity vessel transits through the Strait of Hormuz drop to just three ships on Wednesday, down from 12 a day earlier and well below the 10-day average of about 17, Reuters reports.
The figures exclude any vessels that might have passed through the waterway with their Automatic Identification System transponders turned off to avoid detection.
However:
EXCLUSIVE: Based on our satellite imagery analysis conducted on 2026-09-14, we can see that the Strait of Hormuz now hosts bi-directional daytime traffic of VLCC supertankers. Furthermore, greater volumes of crude oil, LNG and LPG are being exchanged via STS transfer in the Gulf… pic.twitter.com/DOmhxOtIzI
— TankerTrackers.com, Inc. (@TankerTrackers) September 15, 2026
Mind you, that is not to say that the benchmark oil prices are not still being manipulated bigly:
Russian Urals oil is now trading at 121$ – meanwhile they want all of us to believe the price of WTI and Brent is ~100$
The day manipulation is forced to stop and WTI and Brent suddenly blow up they will blame market speculators mark my words https://t.co/JgfyAvTiLQ pic.twitter.com/JVwht4np6p
— JustDario (@DarioCpx) September 17, 2026
Keep in mind that all oil is not created equal, and not just by grade. Saudi oil from the Red Sea went significantly to Europe. At a minimum a longer transit means less immediate supply. But OilPrice reminds us that the Saudis warned Europeands of cancellation or loading delays for some cargoes in September, and cancelled loading out of Yamnbu.
The energy price rises have hit particularly hard in some lower-income economies, as anticipated. From the New York Times in Rising Fuel Prices Set Off Anger and Protests Around the World:
Since the latest surge pushed oil above $100 a barrel, protesters have burned tires and cars in Guatemala and Syria to express their rage.
Portugal’s roads have featured cars crawling in protest with honking horns after diesel reached a record high of more than $9 a gallon.
And especially in the developing countries of Asia, which are heavily reliant on Middle Eastern energy and deep in debt from earlier efforts to offset the war’s impacts, transport systems and governments are facing another round of enormous strain.
Fuel shortages and long lines at the pump are slowing economies along with strikes by taxi drivers and laborers who see no point in working when earnings barely cover energy costs.Many countries are confronting a difficult question: Is it riskier to pass on price increases to a combustible public, accelerating inflation, or bolster subsidies and aid that would drive up public debt and possibly threaten the stability of national currencies?
“How much fiscal capacity does Asia or the developing world have in general to manage this geopolitical crisis?” said Sana Jaffrey, a lecturer at the Australian National University who researches conflict and state-building in Asia. “What happens to global financial markets when that capacity starts to run out?”
Consistent with the reports of Johnson, other oil mavens over the last few week, and Mercogliano that Iran has had no success getting past the sea blockade, the Wall Street Journal reports Iran’s Attempts to Get Around the Hormuz Blockade Are Hitting a Wall is not having much luck over land either. We highlighted a report about two weeks ago that the six routes opened up by Pakistan had since been shuttered. From the Journal:
Iran vowed to respond to a U.S. blockade by pushing more trade overland. On the ground, it isn’t going according to plan.
Hundreds of Iranian truck drivers are currently stuck at Iran’s border with Pakistan, unable to send their goods into Tehran’s neighbor. They say they are facing worsening bureaucratic hurdles and costs, many caused by their own government. The same thing is happening at Iran’s land borders with Turkey, Turkmenistan and Afghanistan, dealing Tehran a self-inflicted blow and throttling trade through its few remaining economic release valves…
The economic war in the Persian Gulf is dictated as much by how much the countries in the region can move their exports over land rather than through the Strait of Hormuz…
Iran’s attempts are faltering. The U.S. is isolating its economy with new sanctions and launching strikes on Iranian tankers in reprisal for Tehran’s attacks on its Navy, collapsing seaborne exports.
In another setback for Iran’s plans to bypass Hormuz, the country’s Mahan Air, which is sanctioned by the U.S., said Wednesday that it was suspending flights to Oman and Turkey, state-affiliated media in Tehran said. Last week, the U.S. Treasury imposed new sanctions on companies it said were supporting Mahan, which operates cargo and passenger services.
The U.S. blockade has also hurt Iran’s imports of basic goods, 70% of which normally go through the blockaded ports. Though humanitarian goods and food are ostensibly exempt, the reality is that shippers are reluctant to service Iran…
Sources: Kpler; Buskool; International Transport Companies Association; Iran’s Truckers Union; Pakistan’s ministry of foreign affairs; Baloch Human Rights Documentation Network; Sheypoor; China Data Portal; EMID LLC; Shiraz Petrochemical Co.; Takitak; Torob and Zenokala; Ershad Rice; National Iranian Oil Products Distribution Co.; 52WMBIran has tried to compensate by pushing more trade through other routes. Transits across the Caspian Sea have grown by 70% in the past five months, according to Iranian officials. Iran imports large quantities of its wheat, corn and cooking oil from Russia, according to commodities data provider Kpler and Iranian trading websites….
A freight railroad from Tehran to Xi’an in eastern China has jumped from once-a-week journeys to every three or four days since the blockade started, according to the state-controlled Tehran Times. Iran imports industrial machinery, electronics and automotive spare parts from China.
But in a sign of how vulnerable the alternative routes are, Iraq over the weekend temporarily closed cargo terminals at the Iran border after alleging Iran had used its territory to attack Saudi Arabia. On Sunday, trucks carrying Iranian onions bound for Iraq were forced to turn back as a result, according to Tehran’s Central Fruit and Vegetable Market.
Iran’s land borders were a mess before these latest closures, though…
One driver told Iran’s official news agency IRNA he was stuck for days at the Pakistan side of the border with meat destined for Iran, where prices are spiraling higher. At the border with Afghanistan, truckers also complain they have to wait for days before being able to export Iranian iron ore, according to Iran’s Truckers’ Union.
Iranian truckers trying to get into Pakistan say they can be stuck for several days without access to water, food or sanitation as temperatures rise to 122 degrees Fahrenheit, according to footage, published by the Truckers’ Union on its social-media account….
The rising costs are now adding to Iran’s worsening inflation problem.
In some cases, the overland bottlenecks and diversions now contribute as much as a third of the price for common goods once they reach Tehran, Mohammad Reza Khodarahm, an import-sector expert, told Iranian economic daily Donya-e-Eqtesad last week. …
Much of these costs are being passed on to consumers, with unpredictable results for the Iranian leadership. Food inflation rose to 128% in August, according to Iran’s official statistics office.
On the kinetic front, from the Aljazeera landing page:
“Battling” would seem to translate into losing.
In case you missed it, Reuters, which is not the most reliable on Middle Eastern events, claimed that the US agreed with Ansar Allah to hang the Saudis out to dry if the US was left alone. Again from Aljazeera:
Even as Washington assists the Saudi campaign, American officials held direct talks with Houthi representatives in Oman last weekend, according to three sources who spoke to the Reuters news agency on condition of anonymity. The meeting took place at the US embassy in Muscat with the assistance of the Omani government, two of the sources said.
