energy security

The Strait of Hormuz has become the central pressure point in the escalating confrontation between the United States and Iran. Before the conflict, roughly 20 million barrels of oil moved through the narrow waterway each day, equivalent to about one fifth of global oil consumption. For years, traders could therefore rely on relatively consistent estimates of the volumes passing through one of the world’s most important energy corridors.

That certainty has now disappeared.

The use of “dark crossings,” in which tankers switch off their identification and navigation systems, has made vessel movements increasingly difficult to monitor. Satellite imagery, port records, tanker drafts, loading schedules and shipping data are being used to reconstruct movements, but the information remains incomplete. Recent estimates of Hormuz flows have differed dramatically, leaving traders and governments uncertain about the true scale of oil moving through the waterway.

The uncertainty comes as Brent crude has moved above the $100 a barrel threshold for the first time since July, driven by renewed military escalation and concerns over Middle Eastern oil supplies.

The Hormuz Information Gap

The most unusual feature of the current oil crisis is not simply that supplies may have fallen. It is that markets cannot confidently determine how much oil is actually moving.

U.S. Energy Secretary Chris Wright said more than 17 million barrels crossed the strait on August 31 under U.S. Navy supervision. Shipping intelligence firm Kpler, however, estimated that only around 6 million barrels crossed that day. Kpler put average August flows at approximately 4.3 million barrels per day, with flows rising to nearly 5 million barrels per day during the first days of September.

The difference could partly reflect different methodologies, including whether shipments using alternative routes outside Hormuz are included. Tankers that remain invisible to tracking systems for days or even weeks make the picture even harder to reconstruct.

This means that traders are attempting to price global oil supplies without reliable visibility over one of the world’s most important supply arteries.

Why the Strait of Hormuz Matters

Hormuz is strategically important because of the enormous concentration of energy exports that normally pass through it. Any sustained disruption can affect crude supplies, tanker availability, insurance costs and shipping times, eventually feeding into fuel prices and broader inflation.

The current situation is different from a straightforward blockade. The strait has not necessarily become completely impassable. Instead, its reliability has been severely compromised.

That distinction matters because a tanker does not have to be physically prevented from crossing for markets to react. The possibility that vessels may be delayed, attacked or unable to cross safely is enough to increase the cost of transporting oil.

As a result, the market is responding not only to actual supply losses but also to the risk of future disruption.

Iran’s Strategic Leverage

Iran’s ability to disrupt maritime traffic remains an important source of leverage despite indications that its military capabilities around Hormuz have been weakened.

U.S. demining operations and a growing U.S.-protected shipping corridor along Oman’s coast have allowed more vessels to enter and leave the Gulf. At the same time, Iran-linked forces continue to threaten commercial shipping, meaning Tehran retains the ability to create uncertainty even if it cannot completely shut down the waterway.

This gives Iran a form of asymmetric leverage. Tehran does not necessarily need to close Hormuz completely to impose economic costs. Sporadic attacks, warnings or restrictions can increase insurance premiums, delay shipments and encourage traders to price in a greater possibility of supply disruption.

The renewed attacks on Saudi energy infrastructure have added another layer of risk by threatening alternative routes that have become increasingly important as traffic through Hormuz has declined.

Impact on Global Oil Markets

The immediate consequence is a higher geopolitical risk premium on crude.

Oil prices normally respond to measurable fundamentals such as production, consumption, inventories and transportation. But when the market cannot establish how much oil is moving through Hormuz, uncertainty itself becomes part of the fundamental picture.

This can keep prices elevated even if actual physical supply losses are smaller than feared.

Brent has already moved above $100 a barrel, while analysts and major financial institutions have raised their oil price forecasts as concerns about prolonged disruption increase.

For oil-importing countries, sustained high crude prices could translate into higher fuel and transportation costs, increased inflationary pressure and greater economic uncertainty. Airlines, manufacturers and businesses dependent on energy-intensive supply chains would also face higher operating costs.

Economic and Geopolitical Implications

The crisis demonstrates how vulnerable the global energy system remains to a single strategic chokepoint.

For the United States, maintaining freedom of navigation through Hormuz is not simply a military objective. It is also essential to preventing a regional conflict from becoming a wider global energy crisis.

For Gulf producers, the challenge is equally significant. Even countries with substantial production capacity cannot fully compensate for disrupted shipping if export routes remain vulnerable.

For major Asian importers, the risks are particularly serious because much of the energy normally passing through Hormuz is destined for Asian markets. A prolonged disruption could therefore create significant pressure on import bills, currencies and inflation across energy-dependent economies.

The crisis also highlights the limits of alternative routes. Pipelines and routes outside Hormuz can reduce some of the pressure, but they cannot immediately replace the enormous volumes that normally pass through the waterway.

What’s Next?

The key variable is whether the confrontation between Washington and Tehran moves toward negotiations or further escalation.

A diplomatic breakthrough could rapidly reduce the geopolitical risk premium by restoring confidence in shipping and improving visibility over oil flows. A further escalation, however, could produce additional attacks on tankers, restrictions around the Gulf or renewed pressure on alternative shipping routes.

The oil market will therefore be watching tanker movements as closely as military developments.

If shipping activity becomes more visible and flows recover, some of the current premium could disappear. If the information blackout continues, traders may continue pricing the possibility of a much larger supply disruption.

Analysis

The deeper significance of the Hormuz crisis is that information itself has become a strategic commodity.

Modern energy markets have traditionally depended on the ability to monitor ships, cargoes and supply chains with increasing precision. Satellite imagery, tracking systems and port data created an assumption that physical oil flows could be observed and measured with reasonable accuracy.

That assumption is now being challenged.

The result is a market where perception can influence prices almost as powerfully as physical shortages. If traders believe Hormuz is becoming less reliable, they will pay more for crude today even without definitive evidence of a catastrophic supply loss.

This gives Iran an important form of strategic leverage. The threat of disruption can generate economic consequences even when actual disruption remains limited.

At the same time, Washington faces a difficult calculation. Greater military protection may help keep shipping moving, but prolonged confrontation can also increase the geopolitical risk premium that the United States is trying to contain.

The central question, therefore, is no longer simply how much oil is passing through the Strait of Hormuz. It is how long the global market can function without knowing the answer.

If that uncertainty persists, the oil market could continue carrying a substantial security premium even if physical supplies prove higher than current estimates suggest. The longer the uncertainty lasts, the more deeply it can become embedded in prices, inflation expectations and global economic planning.

With information from Reuters.

The Iran conflict and disruption to the Strait of Hormuz are forcing major oil importing countries to rethink how they source crude. Countries that once relied heavily on nearby Middle Eastern suppliers are increasingly turning to producers in the Americas and Africa, accepting longer voyages and higher shipping costs in exchange for greater energy security.

Japan Diversifies Its Oil Supplies

Japan is among the clearest examples of this shift. Before the conflict, more than 90% of its crude came from the Middle East, benefiting from short and relatively inexpensive shipping routes.

Since Gulf exports were disrupted, Japanese imports from the United States have surged. Between March and June, Japan imported more than 4.5 million metric tons of US crude, compared with less than 1 million tons during the same period in 2025.

The alternative comes with a cost. US crude takes roughly nine days longer to reach Japan, increasing freight expenses and requiring refiners to adjust their delivery schedules.

Asia Looks Beyond the Middle East

Japan is not alone. South Korea and India are also increasing purchases from suppliers in the Americas and Africa as Middle Eastern shipments decline.

China, the world’s largest crude importer, has relied heavily on strategic reserves to cushion the impact of the conflict. As those reserves are drawn down, Chinese buyers could return to international markets and intensify competition for crude from alternative producers.

The Americas Emerge as Major Suppliers

The disruption has created a major opportunity for oil exporters outside the Middle East.

US crude exports reached a record 61.6 million metric tons in the second quarter of 2026, up 43% from a year earlier. Brazil, Argentina and Guyana have also recorded strong export growth.

Brazilian shipments to India, for example, were three times higher in the first half of 2026 than during the same period in 2025.

Longer Routes, Higher Costs

The new trade patterns are considerably less efficient.

A tanker travelling from major Gulf terminals to India’s western coast can take only three to five days. A shipment from Brazil to the same destination can take around 25 days.

Longer journeys mean higher tanker demand, greater freight costs and more complicated logistics. Yet importers are increasingly willing to absorb those costs because dependence on a single vulnerable supply corridor carries its own risks.

Avoiding Strategic Chokepoints

The shift is also about reducing exposure to vulnerable maritime routes.

The Strait of Hormuz remains a major risk, while geopolitical tensions have reduced traffic through the Suez Canal. Drought has also constrained the Panama Canal.

As a result, importers are increasingly valuing suppliers whose shipping routes can bypass these chokepoints.

A New Global Energy Map

The emerging pattern is creating a more geographically dispersed oil market.

Middle Eastern producers will remain crucial because of their enormous reserves, low production costs and established infrastructure. But Asian buyers are unlikely to forget the disruption caused by the Hormuz crisis.

Regular purchases from new suppliers can therefore become a form of insurance, even after Gulf exports recover.

Analysis

The most important change is that energy security is beginning to outweigh pure economic efficiency.

For decades, Asian refiners benefited from buying Middle Eastern crude because geography made it cheaper and faster. The Iran conflict has exposed the vulnerability of that model. A short shipping route is of limited value if a single geopolitical crisis can disrupt it.

The result could be a lasting diversification of global oil trade. Importers are unlikely to completely abandon Middle Eastern crude, but they may maintain larger relationships with US, Latin American and African suppliers to create alternative sources of supply.

This means the cost of energy security will increasingly be reflected in the global oil market. Longer voyages, higher freight rates and more complex supply chains may become the price importers are willing to pay for resilience.

The broader shift is therefore from an oil market designed primarily around efficiency to one increasingly designed around redundancy and geopolitical risk.

With information from Reuters.

Japan’s protest over Putin’s visit to the Kuril Islands is loud because its response is capped: Tokyo cannot meaningfully sanction the one Russian energy relationship — Sakhalin-2 LNG — it now depends on more than ever, after the Strait of Hormuz closure gutted its Gulf oil access and made that supply a load-bearing pillar of its energy security through at least December 2026.

On August 13th, Vladimir Putin toured a fish-processing plant on Iturup Island, the largest of the four southern Kuril Islands Japan calls its Northern Territories, with Sakhalin’s regional governor at his side. It was his first visit there in twenty-six years in power. He called the islands’ status “enshrined” as a permanent outcome of the Second World War and pointedly invoked the late Shinzo Abe, who spent years personally courting him toward a peace treaty that never materialised. Tokyo’s response was immediate: Prime Minister Sanae Takaichi called the visit “absolutely unacceptable,” and her Foreign Ministry says an “additional sanctions package” is under consideration. What went unmentioned is that this same government told Washington, in writing, ten months earlier that a full ban on Russian LNG would be “difficult.” That contradiction, not the visit itself, is the story.

The dispute is old: the Soviet Union seized the four islands in the war’s final days, and the missing peace treaty has been Tokyo and Moscow’s unfinished business for eighty years. What is new is the energy math surrounding it. Sakhalin-2, the LNG project sitting directly across the strait from where Putin stood, supplied Japan roughly 3.6–3.9 million tonnes last year — about 9% of its total LNG imports, and enough to make Japan the project’s largest single buyer. The US Treasury sanctions waiver permitting those imports, along with the Gazprombank clearing that finances them, was just extended to December 18th, 2026, pushed back from an original June deadline. Washington’s stated reason was blunt: global supply is “constrained amid the continued closure of the Strait of Hormuz.”

BEHIND THE VISIT

That closure is the piece most coverage of the Kuril visit leaves out. Since February 28th, when the US and Israel launched their air campaign against Iran, the Strait of Hormuz has been effectively shut, with roughly 20,000 mariners and 2,000 ships stranded and Brent crude spiking to $126 a barrel at its peak. Around 90% of Japan’s crude oil and 11% of its LNG normally transit Hormuz. Tokyo has spent 2026 losing its largest energy artery to a war in the Gulf, which means Sakhalin-2 has quietly gone from “one Russian supplier among several” to one of the few pillars still standing under Japan’s winter power grid. Putin picked this year, not an arbitrary one, to make his sovereignty claim visible on the ground.

The waiver renewal is the tell. Washington and Tokyo did not merely tolerate the Sakhalin-2 exemption through the Ukraine-sanctions years — they actively rebuilt it in 2026, in the middle of the Hormuz crisis, explicitly carving out maritime transport, financial clearing, and joint-operations funding through the end of the year. Putin then chose that same window, with that same regional government’s leadership standing next to him, to plant a public flag on the neighbouring islands. He is not testing whether Japan objects. He knows it will. He is testing whether the general logic of sanctioning Russia survives contact with the specific, recently-renewed exemption that keeps Japanese lights on. Compare that to 2010, when Dmitry Medvedev made the first-ever Russian presidential visit to the same islands: Tokyo protested loudly, recalled its ambassador briefly, and moved on within weeks, because no comparable energy dependency was on the table at the time. The script is recognisable. The stakes underneath it are not.

Takaichi’s own words undercut her “absolutely unacceptable” framing before she said it. In October 2025, briefing President Trump on the LNG relationship, she told him directly that a total ban on Russian gas “would be difficult” — an unusually candid admission from a leader now weighing a fresh sanctions package over the same relationship’s home islands. A prime minister who has already told Washington, on the record, that cutting the energy tie is impractical cannot now credibly threaten it without the threat being understood, in Moscow as much as in Tokyo, as theatre. What remains available is a narrow band of symbolic measures — travel restrictions, asset freezes on individuals connected to the visit or the regional administration — that let Tokyo be seen to act without touching a single LNG cargo.

The standard objection is that Japan has options: JERA, its largest buyer, points to a 30–35 million tonne portfolio and spot-market access, and Tokyo Electric-linked utilities cite early-stage interest in the $44 billion Alaska LNG project as a long-term alternative. That is capability, not near-term relief. Japanese firms remain openly cautious about Alaska LNG’s cost and logistics, with no binding offtake timeline in sight, and the global spot market Japan would lean on is the same market already absorbing cargoes redirected from Hormuz-blocked routes — tighter, not looser, than in a normal year. Sanctioning the actual molecules, rather than a list of names, risks the electricity-price and blackout warnings Japanese officials themselves used to justify keeping the Sakhalin-2 waiver alive in the first place.

THE SCENARIOS

Base case (~55%): Japan announces a narrow, largely symbolic sanctions package — individual travel bans and targeted asset freezes tied to the Far East regional government — while explicitly leaving Sakhalin-2 supply and Gazprombank clearing untouched, repeating the 2010 script almost exactly. The December 18th waiver renewal proceeds quietly, folded into the broader Hormuz-driven energy calculus, and Moscow reads the episode as confirmation that its Pacific energy leverage over Japan is durable regardless of who occupies the Kremlin’s chair on any given August.

Downside case: domestic backlash — the same “hardened public sentiment” Takaichi herself warned the visit would produce — pushes her government into a genuine review of the Sakhalin-2 exemption as its December deadline approaches, right as Hormuz remains tight heading into winter and Asian spot LNG prices stay elevated from redirected Gulf cargoes. The result is Japan’s first real taste of sanctions-driven energy pain from the Ukraine-era regime, a burden that has so far landed almost entirely on European households rather than Japanese ones, arriving in the worst possible month of the heating season and forcing utilities into the kind of emergency rationing talk Tokyo has avoided since 2022.

Upside case: Tokyo treats the compounding shock — Hormuz plus the Kuril visit landing in the same year — as the forcing function it has lacked for three years, converting Minister Yoji Muto’s long-stated goal of “steadily reducing dependence” on Russian LNG into actual contracted volume rather than a talking point: accelerated Alaska LNG offtake commitments, expanded US Gulf Coast term deals, and a public timeline for winding down Sakhalin-2 purchases that uses the December waiver deadline as a hard exit ramp instead of an automatic renewal. Even here, the earliest realistic substitution volumes arrive on a multi-year timeline, not by next winter.

THE AFTERMATH

Putin’s flag on Iturup was never really a test of Japan’s territorial resolve — Tokyo’s position on the Northern Territories has not moved in eighty years and was never going to move now. It was a test of whether that resolve has any economic weight behind it at the one moment Japan’s alternatives are thinnest.

Watch for: what actually happens to the Sakhalin-2 waiver around December 18th, not the sanctions package announced this week. A quiet renewal, carved out exactly as before, will tell you Japan’s outrage and Japan’s energy security are now permanently on separate tracks — and that Moscow understands the gap between them better than Tokyo would like to admit.