The reinstatement of U.S. sanctions targeting Iranian oil exports has effectively halted crude shipments from the country, removing Tehran as a factor in global oil supply balances, according to Bob McNally, president of Rapidan Energy Group.
The blockade, reintroduced in the Gulf of Oman after the collapse of indirect U.S.-Iran negotiations in July, has suspended exports from Iran’s primary terminal at Kharg Island, which handles over 90% of the country’s shipments. McNally told CNBC that Iran’s crude exports have effectively been removed from the market, stating that "Kharg Island is not exporting anymore."
While Iranian crude may no longer be a direct supply factor, analysts warn that the broader geopolitical risk remains underpriced in crude futures. The energy expert noted that refined product markets are already signaling tighter conditions, with diesel crack spreads in the U.S. and Europe hitting record highs this week. The U.S. diesel crack spread surged to a peak of $102 per barrel on Monday before easing to around $100 per barrel on Tuesday.
The disruption in the Strait of Hormuz, a critical chokepoint for oil transit, has further reduced market optimism about a near-term resolution. McNally cautioned that the longer the blockade persists, "the risk is that crude will follow products higher," as supply tightness in refined products could spill over into crude markets.
Crude prices have already risen above $91 per barrel this week amid heightened security concerns for Middle East shipping routes and diminishing prospects for a U.S.-Iran diplomatic breakthrough.
