MORE OIL is coming out of the Middle East Gulf than many expected possible only a few months ago. September is on track to be the busiest month for MEG exports since the conflict began. On the surface, that looks like evidence that Iran’s ability to disrupt flows through the Strait of Hormuz is fading.

The reality is more complicated.

The latest Lloyd’s List Intelligence data suggests the oil market is not becoming more secure. It is becoming more efficient at operating under sustained insecurity.

The emergence of direct VLCC deliveries to India illustrates the point. After months of relying on a sprawling ship-to-ship transfer network outside Hormuz, charterers and shipowners are starting to bypass increasingly congested transfer hubs in the Gulf of Oman. Some Saudi cargoes are now moving directly to Indian refiners or transferring off India’s west coast instead.

The significance extends beyond a handful of voyages. The shuttle-and-transfer system that enabled MEG exports to recover has become a victim of its own success. VLCCs are waiting longer for transfers, fleet capacity is tied up and logistical costs remain high. Direct deliveries offer a workaround. By reducing delays, they effectively increase vessel availability, ease pressure on the transfer network and support higher export volumes.

The market continues to adapt.

That adaptation helps explain why big banks now estimate MEG crude exports have recovered to something approaching pre-conflict levels despite continued attacks on shipping and repeated threats from Tehran. It also helps explain why Washington appears increasingly willing to let events play out.

The Trump administration’s economic strategy remains heavily focused on oil prices as a driver of inflation and broader economic stability. That has even revived discussion of diesel export restrictions, a policy widely opposed by industry and many policy makers but attractive because it creates the appearance of action. Markets have already reacted sharply to the possibility.

Yet the bigger story for shipping is that supply chains are demonstrating remarkable resilience. Tankers, traders and refiners continue to find ways around disruptions. New routes emerge. Cargoes are rerouted. Risk is priced in and absorbed.

The danger is assuming resilience equals security.

Oil flows have recovered because market participants have accepted greater operational complexity and higher costs. The underlying threat remains. Reports of renewed Iranian activity in and around Hormuz, alongside continued attacks on shipping, underline how fragile the current equilibrium remains.

Higher exports do not mean Hormuz has become safe. They simply show that the oil industry has become accustomed to working around danger. The distinction matters.

Markets are betting that adaptation can continue indefinitely. History suggests that assumption should be treated with caution.

Richard Meade
Editor-in-chief, Lloyd’s List

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