Golden opportunity for Iran in the field of technology

Iran's oil export situation under the pressure of the US blockade

Iran is facing a difficult situation as its military and political mobility has shrunk. While Iran does not need an immediate deal, the current crisis has turned oil into a problematic asset. For years, Iran's export model has survived sanctions by relying on China, selling oil at discounted prices, ship-to-ship transfers and an anonymous logistics chain from Kharg Island to Malaysia, Singapore and China's independent refining system.

The crisis in the Strait of Hormuz has not destroyed this model, but it has impacted the ability to move crude oil out of the Gulf, something Tehran cannot easily replace.

Iran's oil export data

In April, Iran's crude oil exports averaged about 1.5 million barrels per day, down 20% compared to March. In May, cargo volume dropped sharply to only 260,000 barrels/day. The current June situation is even bleaker as most shipments have not yet been assigned to any destination and remain within the Gulf, while only three May shipments have crossed the Strait in June.

Effects of military blockade

When a US military blockade was imposed on April 13, preventing Iranian ships from entering or leaving the Strait, Tehran's previous tactic of keeping the passage open for its fleet while restricting others ended. The timing of the blockade was painful, because before the conflict, Iranian oil prices were reported to be trading at a discount of around $9-10 per barrel. However, when the conflict broke out, Iranian oil prices turned into scarcity, and in April, Iranian light crude oil was sold at a price about $1.5-2 USD/barrel higher than ICE Brent.

This helped Tehran earn about $124 million per day in a strong price environment until the US blockade took effect in mid-April.

Oil inventory and production situation

According to data from Kpler, Iran's onshore crude oil inventories rose to their highest level since the Covid era, from 60.6 million barrels in mid-January 2026 to 72 million barrels in mid-June, an increase of about 15%. From May until now, this number has remained virtually unchanged, making the situation more like a "full tank" situation. Iran's overall floating inventories have fallen from 43 million barrels to 33.5 million barrels since mid-May, but floating inventories stuck in the Gulf have increased steadily from 14 million barrels in mid-May to about 24 million barrels today.

The reduction in floating inventories near Singapore and China shows that Iran is turning the barrels that escaped the Gulf before the blockade was completely closed into a source of revenue. Conversely, rising floating inventories in the Gulf suggest new barrels are stranded with no hope of being transported through the US blockade.

China remains central to the oil trade

Before the crisis, Beijing absorbed almost all of Iran's 1.5-2 million bpd of exports, either directly or through STS points near Singapore and Malaysia. Although China's need for crude oil imports has declined, Iranian barrels remain an essential part of the country's total demand. In May, crude oil imports from China fell to 6.8 million bpd from 11.4 million bpd in February, but direct trade with Iranian oil remained at 1.4 million bpd, down only about 150,000-200,000 bpd from pre-crisis levels.

However, most of this oil is not new batches loaded from Iran after the blockade. Barrels in May and June mainly came from floating inventories near Singapore or the Chinese coast.

Assessment of Iran's oil production

It should be noted that since the beginning of June, both land-based and floating fleet inventories have remained largely unchanged despite the lockdown. The most likely explanation is that Iran has reduced or halted oil production, with the shutdown likely starting in mid-May or late May. The production stoppage was not just a technical adjustment; Restarting flows could be difficult, domestic oil and gas services disrupted and revenue losses deepening. What begins as an export problem can gradually become a production problem.

Significance of the agreement with the US

That's why the deal that President Trump and the Iranian government are expected to formalize next Friday is so important to Tehran. Reopening the US blockade may be more important than the Recovery and Development plan or the return of frozen Iranian funds. These are politically valuable, but the immediate need is simple: Iran needs to reopen the export valve before storage restrictions force deeper and more damaging production cuts.

Washington also clearly needs this deal. Although the military blockade has put severe pressure on Iran, the costs have spread globally. Crude oil, gas and refined products markets have been disrupted. US partners in the Gulf have had to temporarily halt oil and gas production, while Asian refineries, including in countries allied with Washington, have been hit by disruptions to regional flows. The disruption of one of the world's most important energy hubs was never just a local event.

Upcoming challenges

This week's political breakthrough will not bring immediate relief, however. Even when the Straits are reopened, ships will need to line up, while insurers, lessors and refiners will have to reassess risks. The 60-day ceasefire must hold and eventually be extended; otherwise, normalization cannot be expected. Any lifting of sanctions on Iranian oil would require rigorous compliance work, while Iran's banking system remains largely under sanctions. Rare transactions by buyers outside of China previously relied on complex payment routes.

Finally, price is the ultimate risk. Every buyer, shipowner and bank involved in Gulf goods will have to price the risk. This risk will appear in transportation costs, insurance, payment terms and oil price differences. Iran will almost certainly have to return to the discounted crude model that existed before the crisis. However, China will quickly return to Iranian barrels as soon as possible, because for Beijing, discounted Iranian crude with political and logistical risks is still preferable to barrels from other Middle East, which although have similar regional risks but do not have price advantages.

Therefore, the current moment can be said to be very important for Tehran. The blockade has turned its oil complex into a storage problem, its export model into a logistics problem, and its sanctions strategy into a cash flow problem. The deal comes just as pressure has grown enough to affect production immediately, but before the ability to ship crude out of the country becomes a deeper loss of production capacity.

— Natalia Katona for Oilprice.com