In recent weeks, the United States has succeeded in loosening Iran's grip over the Strait of Hormuz while virtually shutting down Iran's own oil exports, accelerating its economic free fall. But the war launched by the U.S. and Israel in February — intended to last a few weeks — is still far from over, and the stalemate is costly for both sides. An agreement reached in June quickly crumbled, with so sign of diplomatic progress since then.
Low-level fighting persists, and the U.S. does not seem to have an exit strategy. The mounting economic pressure on Iran has yet to stoke an uprising, and if its leaders are backed into a corner, they may opt for military escalation rather than capitulation. Their Houthi allies in Yemen have meanwhile stepped up attacks on Saudi Arabia, helping to push oil prices back up.
The price of a barrel of Brent crude, the international benchmark, surged above $100 this week, and diesel — heavily used in transport and farming — hit a record, potentially stoking inflation. President Donald Trump has acknowledged that gas prices are likely to stay high through the midterm congressional elections. The war is likely to be protracted with no clear victor.” Iran loses leverage as oil moves through the Strait of Hormuz Iran effectively closed the Strait of Hormuz — through which a fifth of the world's traded oil and gas transits in peacetime — in the opening days of the war, using the worldwide economic shock as leverage.
Meanwhile, it continued to export its own oil, mainly to China. But in recent weeks, the balance has reversed. A U.S. blockade has virtually halted Iran's exports, while the American military has facilitated greater exports by Gulf countries, according to figures compiled by Homayoun Falakshahi, an oil expert at Kpler, a global trade monitor.
He found that Iran's oil exports had dropped from 1.85 million barrels a day last spring to around 255,000 in August. Exports of non-Iranian oil rose from 300,000 barrels a day at the height of the war to 8.4 million in September, and exports through alternative routes took that number to 10.8 million. Energy Secretary Chris Wright boasted of similar figures on Sunday, saying “we’re probably two-thirds or more of preconflict flows.” Non-Iranian exports were at around 14 million barrels a day before the war, according to Falakshahi.
But the increased flow depends on a major U.S. deployment in the strait that has strained the military's resources. The unpopular war has already cost U.S. taxpayers more than $37.5 billion and left 18 U.S. service members dead, and is expected to weigh on Republicans in November's election. The tightened blockade and new U.S. sanctions are already taking a heavy toll on Iran's economy, driving up prices and causing even longer lines outside gas stations.
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