Reopening Hormuz Would Start the Recovery, Not Finish It

Washington is claiming that oil is getting through Hormuz again even as fighting flares. In remarks reported September 2, Energy Secretary Chris Wright cited 17 million barrels leaving in a single day, while putting average exports at about 8 million barrels daily. Those are government claims, not independently established normality, and the difference between a good day and a dependable flow is central to whether fuel becomes cheaper. (rigzone.com¹)

The Strait of Hormuz, the narrow passage connecting the Persian Gulf to the Gulf of Oman, carried roughly 20 million barrels of oil daily before the conflict. The International Energy Agency reports that June’s interim agreement helped revive flows, but renewed hostilities in July and August undermined recovery. The question now is what another reduction in fighting could actually deliver. (iea.org²)

I think a credible truce could produce substantial early relief. I would not promise a rapid return to normal fuel costs. The evidence points to a recovery with different speeds: financial prices can respond to expectations, ships need workable passage, and consumers need the right finished fuels delivered into their local markets. The last step is where an optimistic reopening story becomes least convincing. (iea.org)

There is a persuasive case for a quick start. In June, the shipping association BIMCO counted more than 100 loaded tankers inside the Gulf and nearly 100 empty tankers capable of taking fresh cargo. That meant a restart would not have to wait entirely for vessels arriving from elsewhere. BIMCO envisaged shipping services recovering within a couple of months once passage was safe, although cargo volumes could take longer because of damage. This was a conditional industry assessment, not an observed timetable. (bimco.org⁴)

Insurance also responded. After the June 18 agreement, additional war-risk premiums, which pay for coverage against specified conflict-related losses, fell from 4.5–6% of a ship’s hull value to 3–4%, according to insurance broker Marsh’s figures reported by S&P Global. Coverage remained available. That undercuts the idea that insurers had simply abandoned the route and would inevitably impose a separate, prolonged blockade after peace returned. (spglobal.com⁵)

But the same figures show how far commercial confidence remained from normal: the prewar premium was 0.25%. Insurers wanted mine clearance, functioning ports, emergency assistance and clarity about sanctions. A quoted premium does not establish that an owner has bought suitable coverage for the intended voyage. I would distinguish announcements of insurance capacity from contracts that actually make voyages possible. (spglobal.com⁵)

June also offers a warning about counting ships. S&P Global recorded 35 daily passages on June 22, against a February average of 135. Those were vessel counts, not measurements of loaded oil exports. Releasing stranded cargo can create an impressive burst without establishing that terminals are loading fresh cargo and tankers are returning for another trip. I would judge a reopening by repeated deliveries, rather than extrapolating from its busiest day. (spglobal.com⁵)

The backup routes have already done considerable work. Saudi exports through Yanbu on the Red Sea rose from 2 million barrels daily before the war to more than 5 million in early June. The United Arab Emirates’ bypass pipeline enabled exports of 1.8 million barrels daily through Fujairah. These are meaningful achievements, but barrels already flowing around Hormuz cannot also be counted as unused capacity available for the next disruption. (iea.org²)

Emergency stockpiles require the same accounting discipline. The coordinated international release supplied 2.5 million barrels daily in May. By July, the pace of emergency releases had slowed, according to the IEA’s August report, while total observed global oil inventories had fallen by 410 million barrels since the war began. That total includes more than government reserves; it is not a measure of how much emergency oil remains available. It does establish that the system has been consuming its buffers. (iea.org²)

The infrastructure question is more consequential than whether enough tankers can be found. The IEA reports nearly 3 million barrels daily of regional refining capacity shut because of attacks and unavailable export outlets. Those causes must be separated: reopening shipping can address an export blockage, while damaged equipment requires repair. The aggregate shutdown figure does not tell us how much capacity belongs in each category, so it cannot support a precise restart schedule. (iea.org)

Gas provides a concrete example of damage outlasting access. The IEA’s third-quarter gas report identifies damage at Qatar’s Ras Laffan liquefaction complex among the factors reducing expected supply growth into 2027. Liquefied natural gas exports depend on the facilities that cool gas for transport, not merely on ships being permitted to sail. Even that report’s reopening scenario envisaged a progressive restoration of deliveries rather than an instantaneous return. (iea.org⁷)

For road-fuel consumers, the crucial bottleneck is refining. Global refinery processing in July remained nearly 5 million barrels daily below its year-earlier level, the IEA reported. Available capacity elsewhere had not offset the product shortages. More crude leaving the Gulf would help, but it would not automatically replace all the missing diesel and jet fuel. (iea.org)

The United States illustrates the distinction. In its September 4 assessment, the Energy Information Administration reported that distillate inventories, including diesel, were 14% below their five-year average on August 28, compared with a 6% gasoline shortfall. Refiners had shifted production toward distillates and jet fuel, yet supplies remained tight. A refining margin here means the gap between a wholesale fuel price and its crude benchmark, not pure profit. If that gap stays elevated, cheaper crude produces less pump-price relief than consumers might expect. (eia.gov⁸)

Geography would further divide the gains. About 80% of the oil and products passing through Hormuz in 2025 went to Asia, according to the IEA, giving Asian buyers a large direct stake in restored deliveries. America is nevertheless exposed through globally traded fuels: the EIA says international shortages have raised import costs and demand for U.S. gasoline exports. Domestic oil production does not insulate drivers from competition for refined fuel. (iea.org)

Retail prices add another delay, but history does not justify a universal countdown. During the fourth quarter of 2014, U.S. benchmark crude fell 36.4% while retail gasoline fell 24.5%, the Bureau of Labor Statistics found. Substantial savings arrived alongside incomplete contemporaneous transmission. Britain’s competition regulator likewise found falling pump prices in spring 2025 alongside persistently high retail margins and signs of weak competition. Local markets can retain part of a wholesale improvement. Neither episode establishes a fixed lag after reopening Hormuz. (bls.gov⁹)

I would therefore welcome a credible agreement without treating the first tanker departures or oil-price drop as the consumer dividend secured. Diplomacy can start the recovery quickly; reliable loading, usable insurance, repaired facilities and competitive fuel markets determine whether it lasts and who benefits. Washington’s daily export claims address only the beginning of that chain. The economic achievement worth claiming is a repeatable supply of affordable finished fuel, not an exceptional day at sea.