Iran Oil Terminal That Bypasses Strait of Hormuz Is Filling Up

The geopolitical dynamics of the Middle East have long been dominated by the strategic importance of the Strait of Hormuz, a critical choke point for global oil exports. However, recent developments indicate a shift in Iran's oil export strategy, with the country's oil terminal on the island of Kharg filling up, potentially reducing its dependence on the Strait of Hormuz.


The Kharg Island oil terminal, Iran's top crude terminal handling about 90% of its exports, has seen a significant increase in activity. Satellite images have shown tankers leaving the island, suggesting a strategic move to avoid potential damage from a potential Israeli strike. This move comes amid escalating tensions between Iran and Israel, with the US discussing potential attacks on Iranian oil facilities with Israel.


The export slowdown from Iran, as evidenced by the data, has been significant. Iran's crude export loadings averaged 816,244 b/d in the week to Oct. 9, well below the normal levels of 1.7 million b/d so far this year. This slowdown has been accompanied by a rise in Brent crude futures, reflecting market concerns over the potential impact of a full-blown war between Israel and Iran on global oil supplies.

The increased usage of the Kharg Island oil terminal has strategic implications for Iran. By utilizing this alternative terminal, Iran gains geopolitical advantages, such as reducing its vulnerability to disruptions in the Strait of Hormuz. This terminal's location and capacity also enhance the strategic value of Iranian oil exports, as it provides an alternative route for exports, potentially mitigating the impact of any disruption in the Strait of Hormuz.

The impact of this terminal's increased usage on global oil prices and supply dynamics is significant. The potential closure of the Strait of Hormuz, which handles almost 18 million b/d of crude and products, could theoretically double the war risk premium in crude futures. However, market watchers believe that a major supply disruption remains unlikely and would be mitigated quickly by global oil stocks and output from other OPEC producers.

In conclusion, the Kharg Island oil terminal's increased usage is a strategic move by Iran to reduce its dependence on the Strait of Hormuz and enhance its geopolitical position. This development has significant implications for global oil prices and supply dynamics, as it provides an alternative route for Iran's oil exports and mitigates the impact of potential disruptions in the Strait of Hormuz. As tensions in the Middle East continue to escalate, the strategic importance of this terminal will likely remain a key factor in the global oil market.