The Strait Of Hormuz Is Caught In The Crossfire Again. Traffic Has Plummeted By Two Thirds

Tankers are increasingly avoiding the Strait of Hormuz since hostilities between the U.S. and Iran resumed, according to new data.

Citing data from Lloyd's List Intelligence, CNBC detailed that only 53 vessels crossed the key waterway in the week through July 20, a 66% drop compared to the previous week.

Data from Kpler also shows that traffic dropped right after hostilities began again, with Iran striking vessels not going through the route approved by Tehran. Daily crossings had averaged more than 20 before July 15 but have dropped to the single digits last week.

Despite the disruption, oil prices have remained surprisingly restrained, defying early predictions that crude could soar to historic highs.

When the conflict intensified at the end of February, many analysts warned that Brent crude could surge to between $150 and $200 per barrel if Iran succeeded in disrupting traffic through the Strait of Hormuz, the strategic waterway that carries roughly one-fifth of the world's oil supply. Instead, Brent crude peaked at about $126 per barrel, well below the all-time record of nearly $147 reached in 2008, according to Reuters.

Prices averaged around $101 per barrel between the start of the conflict on February 28 and June 11, when President Donald Trump announced a halt to U.S. strikes against Iran. Although fighting later resumed, oil briefly fell back to around $70 per barrel in early July before bouncing back as hostilities escalated again. Brent crude, the international benchmark, climbed more than 2% and went back above $90 a barrel, while West Texas Intermediate, the U.S. benchmark, made similar gains and stood at $84.45 a barrel at 9:54 a.m. ET.

Several key factors have helped keep markets from spiraling higher despite the ongoing geopolitical uncertainty. One of the biggest surprises has come from China, the world's largest crude oil importer. Rather than increasing purchases to build strategic reserves during the conflict, Chinese crude imports fell to their lowest levels in nearly a decade by June.

Demand weakened for several reasons. China curtailed fuel exports, accelerated the use of electric taxis instead of privately owned gasoline-powered vehicles, and its petrochemical industry reduced processing volumes. The unexpected slowdown in consumption significantly eased pressure on global oil markets at a time when traders had anticipated stronger demand.

The United States also played a major role in stabilizing global supplies. As the world's largest oil producer, U.S. crude output climbed to a record 13.93 million barrels per day by April, offsetting some of the supply risks created by the conflict.

At the same time, Washington coordinated with the International Energy Agency to release a record 400 million barrels from the Strategic Petroleum Reserve in March, injecting additional supplies into the market and helping cushion any disruptions. It is unclear how prices will behave if hostilities continue for an extended period after all the measures that have been taken.