“The control of the sea, by maritime commerce & naval supremacy, means predominant influence in the world” - Admiral Alfred Thayer Mahan
CHOKEPOINTS.
The Gulf oil system lost its redundancy this week.
Hormuz is still contested, the Houthis now sit on the approaches to Bab al-Mandeb, and on Thursday the East-West pipeline - the Saudi bypass that moves barrels around Hormuz to Yanbu - was hit & shut.
Brent went from roughly $97 to around $108 inside a week & US diesel printed a national $6 handle for the first time.
Riyadh confirmed the East-West shutdown after multiple attacks on Thurs.
OSINT & US reporting put the drones’ origin in Iraq’s Maysan province (not Yemen), which widens the set of launch points Riyadh has to defend against.
The line had been carrying ~7 mb/d around Hormuz, and Yanbu exports are expected to fall until repairs are done.
Trump reportedly declined Saudi requests - across two calls with MBS - to strike the Houthis as they closed on Bab al-Mandeb.
Riyadh is absorbing drone hits from the Iraqi side & Houthi pressure on the Red Sea without US strike support.
On the Red Sea side, the Houthis seized Perim (Mayun) & pressed Mocha & the coast.
ISW & AFP now describe operational control of Yemen’s west coast and islands, meaning that Iran now has leverage on both sides of the Gulf system.
Meanwhile, Hormuz stayed active:
CENTCOM destroyed five Iranian crude carriers on Sept 8th, after IRGC hits on a US warship, with strikes near Kharg & Jask.
At the same time, TankerTrackers had blockade-line exports averaging above 10 mb/d for the first time in two months, w/ the UAE, Iraq & Kuwait near pre-war levels, via clandestine Hormuz crossings.
Barrels are moving…
… through a strait where vessels were hit - by both sides - this week…
Products are the problem (and where scarcity shows):
US gasoline hit $4.31 nationally yesterday, $1.33 above where it was at the start of the Iran war.
Diesel crossed $6 nationally for the first time per GasBuddy.
Retailers are flagging $4 gasoline as the level where consumer spend breaks, and diesel is feeding into grocery inflation.
And the political Catch-22…?
If Trump increases US military activity in the region - in an attempt to free-up chokepoints & drive down prices - then he suffers the wrath of American voters’ anti-war sentiment.
If Trump does nothing, then he suffers the wrath of American voters’ anti-inflation sentiment.
As mid-term elections are 7wks out, expect the pressure to hold.
The timing isn’t a coincidence -
OTHER.
Dan Pickering’s thoughts on China & Demand
Javi Blas on Russian refineries
Recommend Odd Lots’ (always great) interview w/ Robert Friedland on the topic of copper
That’s it for this week -