HSBC Oil Markets - FJElite
Headline risks around the Strait of Hormuz remain elevated. Iran again declared the Strait ' closed'' on 20 June, yet observed crossings point to a directional improvement since the US-lran memorandum of understanding (MoU). Amid the noise, we prioritise physical data over headlines as a more reliable gauge of near-term conditions. We conclude that activity has improved as Hormuz traffic moves from episodic "leakage" to a more durable recovery; but it remains volatile and capacity-constrained, implying that normalisation is likely to be uneven even if the broader de-escalation holds.
High-frequency data show a clear pick-up. albeit with day-to-day volatility. Hormuz transits more than doubled to >20 a day over 17-21 June, with a peak of 30 on 20 June - the highest since the brief mid-April reopening. Translating this into volumes, we estimate cõmbd of liquids transited Hormuz in the past week, up from d .5mbd in May. and with the highest implied day so far on 21 June at c8mbd - half of the levels needed to fully restore Gulf exports including bypass pipelines. Our Hormuz flow tracker is available on request. Importantly, inbound crossings have also improved, suggesting some recovery in shipowner confidence. However, flows should remain capped as long as the strait's central lane remains closed due to the presence of mines, forcing traffic onto narrower corridors; de-mining could take up to four weeks.
Iran uncertainty likely to be permanent: Inbound flows dipped sharply the day after Iran declared the strait "closed*. This episode, coupled with the Persian Gulf Strait Authority's demand that ships need to apply for permission to transit, suggest that even under a US-lran framework. Iran retains a repeatable lever: it can periodically raise perceived disruption risk or add administrative friction without a full closure.
The Gulf's production recovery is starting, but it is likely to be uneven: early gains reflect stranded laden ships exiting, while sustained exports require empty ships returning and confidence in predictable transit conditions. Gulf countries are moving quickly to restore exports and output: Saudi Arabia has indicated it can return to prewar production within two weeks once logistics normalise; the UAE and Kuwait have told buyers to resume liftings from inside the Gulf; Iraq has instructed operators to ramp towards >3mbd with southern output reportedly back to d 5mbd; and Iran has resumed loadings after a c6-week interruption, with US oil sanctions now lifted for 60 days We retain our modelling assumption of a 3 ’/? month recovery to near-normal at the system level.