Iran’s oil blockade leverage weakens as U.S. keeps Gulf crude flowing

Iran's strategy of restricting traffic through the Strait of Hormuz to pressure global oil markets is losing its effectiveness, according to the Wall Street Journal. Assistance from the United States has enabled Gulf producers to keep crude flowing despite Iranian missile and drone attacks. Approximately 5 million barrels of crude, primarily from non-Iranian sources, passed through the strait on average over the past 28 days, comprising over 40% of the region's prewar oil flows.

Global crude prices have remained below $100 per barrel, partly due to China using domestic reserves and reducing imports. The U.S. naval blockade, while effective in preventing Iran from shipping oil from the Persian Gulf since July, has not managed to force the government to reopen the waterway or alter its behavior. Iran's economic pressure is intensifying, with the rial's value falling, inflation rising, and gasoline shortages becoming common.

President Masoud Pezeshkian reported a 25% to 35% decline in the country's trade. Other Gulf economies are also suffering due to the constraints on liquefied natural gas, fertilizer, and other commodity shipments. Iran has continued attacking tankers and U.S. military facilities but has refrained from major strikes against Saudi Arabia and the UAE.

The U.S. has similarly avoided attacking major Iranian cities or its current leadership. Iran now faces a critical decision: negotiate or escalate militarily to increase pressure on Washington. The upcoming November U.S. midterm elections may complicate this calculation, as Iranian leaders may have little motivation to ease restrictions and lower energy prices before the polls.