Middle East energy markets trapped in limbo as Iran tightens control over Strait of Hormuz

Middle East energy markets remain in limbo as escalating conflict and attacks on infrastructure severely disrupt exports. Following the collapse of the U.S.-Iran ceasefire on June 17, 2026, combined Gulf exports fell to 6.2 million barrels per day. Oman proposed letting Iran help administer the Strait of Hormuz, but Tehran rejected it, demanding full control. Consequently, buyers like India's Mangalore Refinery are avoiding the region, forcing producers to consider discounts.

Iran Strait of Hormuz control

• ▪The United States government has repeatedly rejected any proposals requiring ships to pay tolls or fees to transit the Strait of Hormuz.
• ▪Iran rejected a Gulf-backed proposal to administer the Strait of Hormuz, demanding control over the entire inbound shipping channel and part of the outbound route.

Middle East energy export disruptions

• ▪Attacks by Iran and its allied militias forced the shutdown of two major oil refineries in Kuwait and Saudi Arabia.
• ▪The export volume of 6.2 million barrels per day is less than half of the wartime peak of 13.4 million barrels per day recorded in late June 2026.
• ▪Combined energy exports from the Gulf and Saudi Arabia's west coast fell to approximately 6.2 million barrels per day during the week of July 30, 2026.
• ▪United States military forces renewed strikes against Iranian targets on July 28, 2026, following attacks by Tehran and allied militias on tankers and energy infrastructure.

Houthi Red Sea shipping attacks

• ▪Yemen's Iran-backed Houthi militia declared an embargo on Saudi Arabian exports during the week prior to July 30, 2026.
• ▪Attacks on tankers and energy assets have severely complicated shipments from Saudi Arabia's west coast, which served as an alternative route after the Strait of Hormuz was shut.

Gulf state diplomatic proposals

• ▪Oman presented Tehran with a Gulf-backed proposal allowing Iran to help administer the Strait of Hormuz and collect voluntary fees from transit vessels.
• ▪The interim ceasefire agreement between the United States and Iran unraveled on June 17, 2026, leading to a deterioration in regional security.

Asian buyer supply guarantees

• ▪India's state-owned Mangalore Refinery issued a crude purchase tender explicitly requiring suppliers to avoid using the Red Sea and the Strait of Hormuz.
• ▪Asian and European importers of Middle East liquefied natural gas plan to seek lower prices and stronger supply guarantees from Qatar and the United Arab Emirates.

Gulf energy market reputation damage

• ▪Persistent security concerns may force Gulf producers to agree to more bespoke, direct supply deals with importing nations, making the energy market more opaque.
• ▪Geopolitical risks and supply security concerns are forcing Gulf exporters to consider offering discounts to retain Asian and European buyers.