Tighter US economic sanctions designed to squash Iran’s economy ought to have worsened global energy-supply anxiety. Yet, the oil market has shown signs of relief in recent days.
Notwithstanding US President Donald Trump having claimed the Strait of Hormuz as US territory, crude oil prices slumped below the $90 per barrel mark after Iran and Oman said they had discussed joint operation of a shipping path through the contested strait. Brent crude oil dropped about 6% in two days to $85 per barrel on Wednesday.
The market’s response reveals who it sees in control of that vital sea passage: Iran or the US. America’s blockade of Iranian trade is in place, of course, but China’s rejection of US efforts to isolate Iran have made its isolation unlikely.
With Trump now focused on US mid-term polls due in November, observers are watching for signs of a shift in the global balance of power. The stance taken by Beijing signals confidence in keeping its access to Iranian energy intact, which may mean shadow fleets and encrypted dealings.
But when will the Gulf’s crude flows return to pre-war levels? That depends on how the dust eventually settles on the war that broke out six months ago.