WSJ: Gulf energy giants face new reality as Iran tightens Hormuz grip

Persian Gulf energy producers are increasingly concluding that Iran’s control over the Strait of Hormuz could become a long-term reality, threatening regional oil and gas exports and adding uncertainty to global energy supplies, The Wall Street Journal reports.

Gulf officials view a proposed agreement to reopen the strategic waterway as preferable to renewed military confrontation between the United States and Iran, despite concerns that the deal could formalize Iranian oversight of inbound shipping. Negotiations have stalled, with Iran demanding financial relief and a ban on US and Israeli warships in the strait, while Washington rejects any arrangement allowing Tehran to obstruct commercial shipping.

Traffic through Hormuz has been severely disrupted by Iranian attacks since a June memorandum of understanding between Washington and Tehran collapsed last month. UAE officials said four of the country’s vessels were struck last week while attempting to transit the strait. Alternative export routes have also come under pressure, including Saudi Arabia’s Red Sea pipeline route, which has been targeted by Iran-backed Houthi forces.

“In this background the Arab Gulf states cannot really ensure complete safety and openness of the Strait of Hormuz and can no longer rely upon it for transport or trade,” said Umer Karim, a researcher in Gulf security at the University of Birmingham. “Thus there is no other option for now but to concede to a degree to Iranian demands.”

Crude oil exports through Hormuz fell to about 2.2 million barrels per day last week from 8.5 million barrels a month earlier, according to Kpler. Before the conflict, roughly 20 million barrels of oil and petroleum products passed through the waterway daily.

Iranian Foreign Ministry spokesman Esmail Baghaei said that the strait would not reopen until Washington halted and made amends for what Tehran described as aggressive actions, including a blockade of Iranian ports.

Gulf states are exploring alternatives, including expanding pipelines to the Red Sea and Gulf of Oman and increasing oil storage capacity. However, attacks on alternative routes have highlighted their vulnerabilities.

Producers can ease the stranglehold on Hormuz through workarounds, but “it has not been enough to render Iran’s veto irrelevant,” said Eric Alter, dean of the Anwar Gargash Diplomatic Academy in Abu Dhabi.

Ellen Wald, a senior fellow at the Atlantic Council’s Global Energy Center, warned that even a temporary agreement could leave Gulf exports vulnerable.

“But ceding control over inbound and outbound traffic to Iran, even on a ‘temporary’ basis, will not resolve the larger issues and leaves their exports subject to Tehran’s whims for the foreseeable future.”

By Vafa Guliyeva