Oil prices have rebounded from a six-week low, with Brent crude surpassing $94 a barrel, amid persistent uncertainty over a temporary peace agreement between the United States and Iran that would reopen the Strait of Hormuz and end a blockade that has fractured Gulf economies.
West Texas Intermediate (WTI) crude has also climbed to approximately $91 a barrel. The price increases follow an ongoing exchange of messages between Washington and Tehran regarding amendments to a draft agreement aimed at extending a ceasefire and reopening the critical maritime chokepoint. However, there is little clarity on the progress of the negotiations.
The negative repercussions of the US blockade on Iran are becoming apparent, according to Bloomberg. While Tehran continued to export oil at near pre-war levels in March, export volumes plummeted by two-thirds in April when the blockade began. This has trapped surplus production in the Arabian Gulf, forcing Iran to divert supplies to storage facilities rather than international markets.
Gulf economies fracture into winners and losers as US blockade chokes Strait of Hormuz
The closure of the Strait of Hormuz has not impacted all regional producers equally. According to Bloomberg, the crisis has divided the seven other nations bordering the strait into four distinct economic categories.
Oman has emerged as the clearest beneficiary, maintaining export volumes near pre-war levels while capitalising on an approximately 60% increase in oil prices, leading to substantial windfall gains.
Meanwhile, Saudi Arabia and the United Arab Emirates have utilised alternative export routes bypassing the Strait of Hormuz. Although their export volumes remain 30% to 40% lower, the elevated oil prices are sufficient to fully offset, and even exceed, the revenue lost from reduced shipments.
In Kuwait and Qatar, oil exports remained at exceptionally low levels for a second consecutive month in April. However, massive financial reserves and low debt levels indicate both nations can absorb the economic shock for months or longer without facing significant pressure.
Conversely, Bahrain and Iraq have lost the majority of their primary export revenues, an unsustainable situation for both nations. Bahrain, among the world’s most indebted countries, has already required intervention from the UAE, which provided support via a currency swap line. Iraq’s cash reserves are projected to last only until August in the absence of oil exports.
Financial markets reflect these stark divergences. Since the outbreak of the war, the cost of insuring debt against default has risen most sharply for Iraq and Bahrain, underscoring their funding needs and disrupted exports. In contrast, these costs have declined for Saudi Arabia and Oman, signalling their continued export capacity and profitability.
Bloomberg noted that these figures remain subject to revision, as some vessels may evade tracking systems. Furthermore, Iran may continue to generate revenue from oil stored outside the Strait of Hormuz. While the wartime economy may not be Tehran’s absolute priority, the confirmed reduction in exports directly translates to a decline in state revenues.
