Geopolitics

Gulf crude flows through Hormuz again with US escorts and pipeline redirection, LNG and refined fuels stay restricted, and the US–Iran bargain turns on the order of steps

The routes around the Strait of Hormuz did not reduce the Gulf's dependence on it in September. Iran has disrupted passage since the conflict began in February, and the United States escorts shipping while it blockades Iran's ports. Drones launched from Iraq struck Saudi Arabia's East-West pipeline, its route to the Red Sea that avoids Hormuz. The Houthis took Yemen's coast near the Bab el-Mandeb strait. Saudi Arabia sent part of its exports back towards the Gulf.

By the month's end the strait itself carried crude again, without a settlement. Crude moving through Hormuz returned to its pre-conflict level in the week to 28 September, about 13.5 million barrels a day according to Kpler data reported by CNBC. CNBC reports that US military escorts boosted shipments and pipelines redirected flows. Refined products ran at about a fifth of normal. Qatar's LNG traffic remains largely blocked, and its force majeure runs through November. Yanbu, Saudi Arabia's Red Sea port, resumed loadings on a partly repaired pipeline.

As a result, crude supply now rests on a naval arrangement that one successful attack could disrupt. Restored crude flows help Asia's crude buyers more than Europe: the supplies that have not recovered, LNG and refined fuels, set the price Europe pays for gas and diesel at the margin. Brent peaked at $108.75 on 15 September and ended at $103.53, about 5% below that peak and well above $90.49 on 31 August. The oil price did not fall with the recovery in crude volumes. Iran widened its threats from the strait to the region's energy infrastructure while keeping its claim over the strait.

The bargaining has moved from whether Hormuz reopens to the order of steps. President Trump rejected Iran's seven-day plan on 26 September. Within three days the United States sent its response through Qatari mediators, and the sequencing of steps is now the main sticking point. Iran wants sanctions relief first; a US official says there will be no deal unless the nuclear file is addressed. Iran's Revolutionary Guards wrote to US voters before the 3 November midterm elections, and President Trump is reported to expect renewed bombing after them. It remains unclear whether restored crude flows can last without a settlement.

Outside the Gulf, Europe's risks grew: Russia warned of a possible nuclear response if Kaliningrad is cut off, and China said it must respond firmly to any EU trade restrictions.