Hormuz is all Blocked Up with Ships - Week 11 | Iran and US Blockade Update
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Quick Read
Summary
Takeaways
- ❖The Strait of Hormuz blockage has persisted for 11 weeks, contrary to initial predictions, with continuous new developments.
- ❖CENTCOM reported 78 commercial ships redirected and four disabled as of May 16th due to the US blockade.
- ❖An oil spill near Kharg Island is cited as the likely cause for a halt in Iranian oil loadings, impacting Iran's export capacity.
- ❖The Joint Maritime Information Centre (JMIC) has reduced its reporting frequency, raising concerns about transparency on transit numbers.
- ❖Shipping traffic through the Strait of Hormuz has drastically dropped, with the Cape of Good Hope route benefiting significantly.
- ❖Qatar has resumed LNG shipments through Hormuz to Pakistan, indicating successful brokering of transit deals.
- ❖Russia is expanding its 'shadow fleet' of LNG carriers, seeking to increase its shipping footprint amid sanctions and global energy shifts.
- ❖Saudi Arabia's East-West pipeline to Yanbu has ramped up to 7 million barrels per day, partially offsetting Persian Gulf oil losses.
- ❖The Port of Los Angeles and Long Beach are experiencing increased transportation costs and cargo drops due to Hormuz instability.
- ❖The US is expanding pressure on Iran's oil network by targeting companies that might purchase Iranian oil already afloat.
- ❖The IEA forecasts a global oil demand contraction of 420,000 barrels per day in 2026, the first since the pandemic, directly linked to the Hormuz crisis.
- ❖The UAE plans to double its oil export pipeline capacity bypassing Hormuz by 2027, highlighting long-term strategic shifts.
- ❖Iran seized a Chinese-owned floating armory ship near Hormuz, a move that appears uncoordinated with broader diplomatic efforts.
Insights
1Global Oil Demand Contraction and Price Surge
The International Energy Agency (IEA) reported that world oil demand is forecast to contract by 420,000 barrels per day year-on-year in 2026, marking the first global oil demand contraction since the pandemic. This is primarily due to the supply shortages and disruptions caused by the Hormuz crisis, leading to an unparalleled $50 per barrel price range in April and an average price of $120.36 per barrel.
IEA monthly oil market report, May 13th, 2026, findings: world oil demand forecast to contract by 420,000 bpd; North Sea dated traded almost $50 per barrel in April, averaging $120.36.
2Strategic Bypass and Alternative Routes
Nations and energy companies are actively seeking or developing alternatives to the Strait of Hormuz. Saudi Arabia's East-West pipeline to Yanbu has increased capacity to 7 million barrels per day, and the UAE plans to double its bypass pipeline capacity by 2027. Shipping routes around the Cape of Good Hope have seen a massive increase in trade, while the Panama Canal faces pressure to maintain capacity amid drought concerns.
Aramco statement on 1,200 km pipeline ramp-up to 7 million bpd (); UAE decision to double pipeline capacity bypassing Hormuz by 2027 (); graphical representation showing Cape of Good Hope as the 'great beneficiary' of trade ().
3Asian Nations Broker Deals with Iran Amidst Blockade
Despite the US blockade, several Asian nations, including Qatar, Pakistan, India, China, and Japan, have successfully brokered transit deals with Iran to move critical oil and LNG shipments through the Strait of Hormuz. This indicates Iran's increasing leverage and the willingness of these nations to navigate complex geopolitical landscapes to secure energy supplies.
First Qatar LNG shipment moved through Hormuz since the war started (); second Qatari LNG tanker heads out (); Iran and Pakistan strike transit deals (); US and China agree no shipping tolls (); China-linked supertanker makes rare transit (); India-bound LPG tankers and Japanese-linked oil tankers also sailing via Hormuz ().
4Fertilizer Supply Chain Collapse Threatens Global Food Security
The disruption in the Strait of Hormuz has severely impacted the flow of essential fertilizers (urea, map, dap) from the Persian Gulf. This collapse in fertilizer supply, coupled with ongoing issues in the Black Sea, poses a significant threat to global food production, particularly for vulnerable regions like Africa, which previously relied on the Persian Gulf to compensate for shortages.
Africa's farmers brace for food crisis as war moves fertilizers flow collapse (); Persian Gulf fertilizer supply is a 'much different issue' than oil, requiring timely delivery.
Bottom Line
Iran's seizure of a Chinese-owned floating armory ship, despite recent oil transit deals with China, suggests a lack of full coordination within Iranian authorities (e.g., between the Islamic Revolutionary Guard Corps and diplomatic efforts).
This internal disconnect could lead to unpredictable actions, increasing risk for commercial shipping even when diplomatic agreements are in place, complicating international efforts to stabilize the region.
Understanding these internal dynamics could inform more targeted diplomatic or security strategies, potentially by engaging specific Iranian factions or establishing clearer communication channels for commercial vessel safety.
Greek ship owners are demonstrating a willingness to bypass the US blockade by turning off AIS transponders and making 'arrangements' to transit the Strait of Hormuz, as exemplified by the Carolus tanker.
This behavior could set a precedent for other commercial vessels, further undermining the effectiveness of the US blockade and creating a 'shadow transit' system that is harder to monitor and control.
For risk-tolerant shipping companies, this highlights potential, albeit risky, avenues for maintaining trade flows. For enforcement agencies, it necessitates advanced intelligence gathering and monitoring techniques beyond standard AIS.
Opportunities
Develop and invest in alternative energy export infrastructure (pipelines, terminals) that bypass geopolitical chokepoints like the Strait of Hormuz.
Saudi Arabia and the UAE are already doing this. Companies could offer engineering, construction, and financing solutions for such projects, or invest directly in these new routes.
Expand US LNG export capacity and related shipping infrastructure.
With global energy supply disruptions, US LNG becomes a more critical and reliable source. Investment in new liquefaction plants, export terminals, and a dedicated fleet of LNG carriers could capitalize on this demand.
Lessons
- Businesses reliant on Persian Gulf trade should immediately assess and diversify their supply chain routes, considering the increased use of the Cape of Good Hope and alternative land-based pipelines.
- Governments and international organizations must prioritize diplomatic efforts to de-escalate tensions in the Strait of Hormuz to prevent a further collapse in global oil and fertilizer supplies.
- Energy companies should explore investments in resilient energy infrastructure, such as pipelines bypassing chokepoints and expanding LNG export capabilities from stable regions, to mitigate future geopolitical risks.
Notable Moments
The host humorously acknowledges his earlier incorrect prediction that the Hormuz blockage 'probably won't go on much longer,' now stating it 'is never going to end.'
This highlights the unexpected longevity and escalating complexity of the crisis, underscoring its deep-seated geopolitical roots rather than a temporary disruption.
The host questions CENTCOM's reporting of only four disabled ships, citing imagery of 'a lot of ships burning off' the Port of Jask, suggesting underreporting of US military actions.
This raises concerns about transparency in military operations and the true extent of damage to commercial shipping, impacting risk assessments for vessels in the region.
Quotes
"This this this is never going to end. I I mean, I'm pretty sure. This is This is going to go on for the rest of our days, and every week I'm going to be doing an update on this blockage."
"Gene understands shipping probably better than any other human being on the planet. Not to mention the fact that he is the best-dressed man in shipping in my in my opinion."
"I mean, Greek ship owners just don't give a flying Slovakia about this. They just don't."
Q&A
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