WASHINGTON — The U.S. military has cut escorts for merchant ships passing through the Strait of Hormuz to twice a day. A Saudi Arabian pipeline that had served as the key detour route for crude oil since the war between the United States and Iran has also been hit by a drone attack and has halted operations entirely. With international oil prices topping $100 a barrel as the war intensifies, the routes carrying Middle East oil have narrowed on land as well as at sea.
According to the Financial Times on the 12th, the U.S. Navy's Naval Cooperation and Guidance for Shipping (NCAGS) sent an email to maritime advisers early this month instructing them to reduce merchant ship escort windows to twice a day. The U.S. military had provided air cover for vessels sailing along Oman's coast south of the Strait of Hormuz since May. The move is seen as a step to ensure safe passage after Iran carried out a series of attacks on ships transiting the strait at night. The number of tankers passing through the strait is bound to fall as a result. Reuters reported that an Iranian merchant ship was also hit near Qeshm Island in the Strait of Hormuz on the 13th. The FT said the United States is partly preparing for a prolonged war with Iran by reducing the frequency of escorts, which cost up to $75,000 an hour (about 100 million won).
Both of the main sea routes carrying Middle East crude are now at risk, after Yemen's pro-Iran Houthi rebels seized a strategic point and put the Bab el-Mandeb Strait in jeopardy. Saudi Arabia's East-West Pipeline, a critical overland route that has supplied up to 5 million barrels a day and accounted for 5% of global crude shipments, also came under drone attack and has been fully shut since the 11th. Saudi crude exports are expected to face far more serious disruptions as a result. According to shipping intelligence firm Kpler, Saudi crude exports fell to 3.2 million barrels a day last month, already the lowest level in 13 years. The drone that struck the East-West Pipeline was confirmed to have come from Iraq. Iraqi officials raised the possibility that pro-Iran armed groups rather than regular forces were responsible, and dismissed one military commander involved.
Clashes between the Houthis and Yemeni government forces are escalating further. Yemeni government forces backed by Saudi Arabia killed Houthi members near the Red Sea port of Mocha on the 12th and carried out three airstrikes on Houthi strongholds and barracks. The Houthis said that "over the past 48 hours, Saudi enemy aircraft carried out 129 airstrikes on areas under our control."
Iran and Gulf states will meet in Salalah, Oman, on the 14th to discuss solutions for passage through the Strait of Hormuz. The meeting, arranged by Oman, will bring together Iran, Oman and the six members of the Gulf Cooperation Council (GCC). Iranian Foreign Ministry spokesman Esmail Baghaei said that "the safety of shipping in the Strait of Hormuz cannot be guaranteed as long as aggressive actions and illegal interference continue, including the U.S. naval blockade and economic war," prompting observers to see little chance that tensions over Hormuz will actually ease. Bahrain declared it would not attend, citing the fact that diplomatic relations with Iran have not been restored.
With Middle East oil supply steadily shrinking, analysts say prices that have already passed $100 a barrel could be pushed higher still. The International Energy Agency (IEA) estimated that global oil output last month was down 1.6 million barrels a day from a year earlier and that the decline for the full year would reach 5.7 million barrels a day. Still, the prospect that high prices could curb global oil demand is acting as a limit on further gains.
As the conflict widens across the Middle East, President Donald Trump has drawn a line against direct U.S. military involvement. Jumping into another front while the clash with Iran continues could hurt his party in the midterm elections. Following reports that Saudi Crown Prince Mohammed bin Salman had asked Trump for direct U.S. strikes on the Houthi rebels, Trump said the Houthis had asked the United States not to intervene, adding that "they don't want to fight us." Trump also recently met with U.S. refining industry officials to discuss invoking the Defense Production Act (DPA), enacted in 1950 during the Korean War, to expand domestic refining capacity, according to reports.
