DOHA – A US naval blockade of Iranian ports is likely to squeeze Iran’s oil output in the coming weeks but claims it will throw the Islamic republic into economic free fall remain premature, analysts say. After weeks of bombing and counter-strikes, focus has shifted to the standoff in the Strait of Hormuz, which ordinarily carries around a fifth of the world’s oil and liquefied natural gas.

In response to Iran’s blockade of the strait since the start of the Middle East war, the US imposed a counter-blockade of the Islamic republic’s ports, a push to force its leaders into a compromise in peace talks.
That bid, however, looks set to fail, at least in the short term.

“If the blockade lasts for more than two or three months, it can cause more damage” to Iran, economic analyst and professor at Shahid Beheshti University in Tehran Saeed Laylaz told AFP.
“If Iran suffers any damage, the damage to the countries in the southern Persian Gulf will definitely be greater,” he added.
There’s a limit on how long Iran can bide its time, however.

Arne Lohmann Rasmussen, chief analyst at Global Risk Management said Iran “was expected to run out of storage capacity within approximately one month, but it may already be forced to shut in part of its oil production within a couple of weeks”.
Trump said Tuesday that Iran was “collapsing financially” under the blockade imposed by the US Navy on 12 April, claiming that the country was “starving for cash”.

Treasury Secretary Scott Bessent said the blockade meant storage at Iran’s Kharg Island, the main export terminal through which most of the country’s crude is shipped, “will be full and the fragile Iranian oil wells will be shut in”.

Jamie Ingram, managing editor of Middle East Economic Survey (MEES), told AFP it was likely the timeline for Iran to hit its oil storage limits would be measured in “weeks rather than days”.

He added it was likely that “Iran will slightly reduce production before getting to the stage where storage constraints start to bite”.
According to analysis by oil expert Homayoun Falakshahi shared by energy intelligence firm Kpler, Iran’s crude production has already slowed since the start of the war.

Output fell by around 200 000 barrels per day in March to 3.68 million bpd and is expected to drop a further 420 000 bpd in April to about 3.43 million bpd, reflecting “the broader impact of export disruptions and refining constraints linked to the ongoing conflict,” Falakshahi said.

But Laylaz in Tehran said beyond the psychological effect of the blockade, the “real material effect has been small so far”.

Ingram said Kharg Island “shouldn’t be a particular bottleneck,” for Iran.
“This is the final storage facility used before oil is exported and Iran can divert crude oil to other facilities rather than straight to Kharg,” he said. 

– Nampa/AFP