U.S. Blockade of Strait of Hormuz Leaves Oil Supply Largely Unchanged

The U.S. double blockade of the Strait of Hormuz has restricted only Iranian shipments while Gulf producers reroute oil through pipelines and ports. April U.S. oil exports reached record levels and non-Gulf suppliers increased output. Saudi Arabia’s East-West pipeline now moves more than 5 million barrels per day, up from under 800,000 barrels per day before the conflict.

Abu Dhabi’s Fujairah Port raised exports 40 percent in March to 1.6 million barrels per day.

China resumed exports and refiners elsewhere raised capacity. Venezuela increased shipping volumes. South Korea and Italy turned to American and Australian natural gas instead of Qatari supplies.

A Japanese tanker transited the strait without paying a reported Iranian toll on April 29. Marginal production costs for Gulf oil average about $20 per barrel, limiting the impact of any additional per-barrel charge. April U.S. consumer inflation stood at 3.8 percent year over year, driven by higher fuel costs.

Broader money supply growth measured by M4 rose 5.8 percent over the same period, matching pre-pandemic rates. Excluding energy and food, U.S. goods prices rose 1.1 percent year over year in April, down from 1.2 percent in March. Truck convoys have begun moving fertilizer previously stranded in the Gulf region.

U.S. stocks reached new all-time highs in recent sessions.

The same pattern occurred in October 2022 while the Ukraine conflict continued and inflation stood at 9.1 percent.