Brent falls, but Strait of Hormuz exports remain restricted — NRG-IA

Brent crude, the benchmark for the European market, fell to $86.89 per barrel on Tuesday morning, down 1.66%, after losing approximately 8% in the previous session. Meanwhile, net exports of crude oil and petroleum products through the Strait of Hormuz were estimated at just 2.9 million barrels per day (bpd) in the week ending July 24, down from 5.9 million bpd a week earlier. These two developments describe different phases of the same crisis. Prices react immediately to the likelihood of future de-escalation. Physical flows, however, depend on tanker availability, insurance, terminals, crews, and shipping conditions that cannot normalize in a matter of hours. The market anticipates an exit from the conflict The drop in oil prices was triggered by the suspension of the US airstrike campaign against Iran and statements regarding ongoing talks between Washington and Tehran. The possibility of a deal reduced the probability investors assigned to a fresh, immediate escalation of the conflict. However, de-escalation has not been confirmed by an agreement. The United States warned that strikes could resume if negotiations fail, while Iran issued its own threats of further retaliation. Consequently, prices do not reflect the disappearance of risk, but rather its recalculation. Oil contracts are traded based on what market participants believe will happen to supply and demand in the coming weeks and months. If the market believes negotiations could allow for a gradual resumption of shipping, prices begin to fall before the first additional volumes actually transit the strait. This anticipation explains part of the gap between market pricing and the situation on the ground. Oil can become cheaper in a single morning, even as maritime statistics for the previous week continue to show severe disruption. Exports fell by approximately 51% in one week The estimate of 2.9 million barrels per day comes from a Barclays analysis cited by Reuters and refers to net exports of crude oil and petroleum products through Hormuz in the week ending July 24. Compared to the 5.9 million bpd of the previous week, this represents a reduction of approximately 51%. This figure does not represent the strait's entire historical traffic, nor all energy flows transiting it. It does not automatically include liquefied natural gas and cannot be directly compared to the total volume of oil that passed through Hormuz before the current crisis. The Barclays data measures net exports of two product categories over a specific period. Transit data measures observed vessels. Other estimates track loaded volumes, tanker sizes, or cargo destinations. While these indicators confirm the same disruption, they are not interchangeable. Tankers need more than a military pause Kpler data shows that the average number of daily transits through Hormuz dropped from approximately 45 during the temporary truce between June 7 and July 7, to about 13 after the conflict resumed—a reduction of nearly 70%. On July 21, only nine transits were recorded, followed by 15 the next day. The return of shipping depends on more factors than a temporary cessation of attacks. Shipowners must accept the risk, insurers must be able to assess the route, and war risk premiums must become manageable. Tankers must then be chartered, loaded at terminals, and guided through an area where navigation rules and effective route control are contested. These processes take time, even when the military situation improves. Kpler also notes a concentration of remaining traffic on the unilateral route established by Iran, to the detriment of the alternative route through Omani waters. The firm attributes the low utilization of the Omani route to the lack of a sufficient track record for insurers to assess and clearly differentiate its risk. The strait cannot be fully replaced The importance of Hormuz extends far beyond current weekly figures. In the first half of 2025, an average of 20.9 million barrels of oil per day passed through the strait. This volume was equivalent to roughly 20% of global liquid petroleum consumption and a quarter of global seaborne oil trade. The historical figure of 20.9 million bpd should not be directly compared to the Barclays estimate of 2.9 million. The former measures total oil flows during a normal period, while the latter refers to net exports of crude and refined products during a week of crisis. The difference between them does not automatically represent lost volume. Saudi Arabia and the United Arab Emirates can bypass the strait using pipelines that transport oil to the Red Sea and the port of Fujairah in the Gulf of Oman. The total technical capacity of these main alternatives is estimated at around 4.7 million bpd, well below the volume that typically transited Hormuz. Furthermore, a portion of this capacity is already utilized under normal conditions. While pipelines can mitigate the impact of a disruption, they cannot move the Gulf's entire oil trade…