Oil prices maybe easing because Saudi Arabia has started bypassing the Strait of Hormuz?

[https://oilprice.com/oil-price-charts/]

Instead of shipping oil out of the Persian Gulf, Saudi Aramco is pushing crude through the East-West Pipeline — the 750-mile Petroline — across Saudi Arabia to the Red Sea port of Yanbu.

[https://oilprice.com/Latest-Energy-News/World-News/East-West-Pipeline-Key-to-Saudi-Arabias-New-Oil-Export-Strategy.html]

That allows tankers to load oil without passing through Hormuz at all.

Now that’s actually a very good observation.

Because when markets saw that oil could still move — even with Hormuz effectively closed — some of the panic premium in oil prices began to bleed out.

But here’s the important point.

That isn’t the whole story.

Let’s be clear about what has actually happened.

The Strait of Hormuz is not just “dangerous.”

It is effectively closed to non-Iranian commercial shipping.

Iran’s new supreme leader, Mojtaba Khamenei, has said it should remain shut as a tool to pressure the enemy.

Tankers are not moving because shipowners fear physical attack. Insurance has become almost impossible to secure.

This is, according to multiple energy analysts, the largest oil supply disruption in modern history.

Roughly 20% of the world’s oil — around 20 million barrels a day — normally passes through that narrow waterway.

When the market priced in a full, indefinite closure, Brent crude exploded to nearly $120 a barrel.

But then a few things happened.

Saudi Arabia showed it could reroute millions of barrels a day through Yanbu. Aramco has ramped the East-West Pipeline to its full 7 million barrel per day capacity. Yanbu exports have surged 330% from pre-war levels.

The US and its allies announced the largest coordinated release of strategic oil reserves in IEA history.

Trump told CBS the war was “very complete, pretty much” — and traders took it as a signal the disruption might be short-lived.

Naval escorts for tankers started being discussed, though the US Energy Secretary admitted the Navy is “simply not ready” and all military assets remain focused on degrading Iran’s offensive capabilities.

And here is a detail that most commentators have missed. The US decommissioned its four dedicated Avenger-class minesweepers from the Gulf in September 2025 — just five months before the war. The UK withdrew its last mine countermeasures vessel, HMS Middleton, from the Gulf in early 2026 under Labour’s “NATO first” policy. The result? The world’s most critical energy chokepoint now has fewer minesweeping assets than at any point since the 1980s. Iran reportedly holds 5,000 to 6,000 naval mines. Even if escorts begin, clearing the strait could take weeks or months — and you cannot sweep mines while someone is shooting at the minesweepers.

[https://www.navylookout.com/royal-navys-last-gulf-minehunter-hms-middleton-has-returned-to-uk/]

The oil market is recalibrating, overall.

Brent fell from nearly $120 to below $80 in a single session, before rebounding to around $90–$100.

That is not oil prices “returning to normal.”

That is the market repricing the probability distribution — moving from a binary catastrophe scenario to a range of severe but partially manageable disruptions.

There’s another factor too.

A lot of oil trading is speculation, not physical oil.

When traders pile into panic bets and then a US president signals the war might end soon…

they unwind those positions fast.

Think of it as time decay on a geopolitical option. The longer Hormuz stays contested without full permanent closure, the more those panic positions bleed value. Liquidation follows regardless of whether the underlying risk has actually changed.

But here’s what the bypass cannot do.

The Petroline’s 7 million barrel capacity on paper does not translate to 7 million barrels of exports. Yanbu’s terminal can handle roughly 3 million barrels per day. That is a fraction of what normally flows through Hormuz.

Iraq, Kuwait, Bahrain, and Qatar have no comparable bypass. Their production has been cut dramatically. Iraq alone has lost roughly 70% of its southern output.

And the oil leaving Yanbu still has to pass through the Red Sea — which means the Houthis now become relevant. All that infrastructure remains exposed to drones.

So yes — the Saudi pipeline bypass is part of the reason oil has eased from its spike.

But it’s also about psychology, geopolitics, strategic reserve releases, and traders recalibrating the expected duration of the disruption.

Which raises a bigger question.

If the Strait of Hormuz can be partially bypassed by Saudi Arabia…

but not by Iraq, Kuwait, Bahrain, or Qatar…

and the bypass itself faces Houthi risk in the Red Sea…

does Iran actually have as much leverage over the global oil market as everyone assumed?

Iran’s ability to close Hormuz has always functioned like an insurance policy — but in reverse. In financial markets, a “put option” gives you the right to force someone else to bear a cost. Iran has held something similar: the implicit threat that at any moment, it could shut Hormuz and impose catastrophic costs on the global economy.

That threat has shaped diplomacy, military planning, and oil pricing for decades — not because Iran ever exercised it, but because everyone believed it could.

What we are now discovering is that the threat was overpriced.

Saudi Arabia can reroute millions of barrels. Strategic reserves exist. And the world, while hurting, has not collapsed.

The bypass infrastructure hasn’t eliminated Iran’s leverage. But it has reduced it. The threat is still real — but it no longer carries the same fear premium it once did.

And then, last night, the calculus shifted again.

Trump announced that the US had “totally obliterated every military target” on Kharg Island — Iran’s crown jewel, the terminal through which roughly 90% of its crude exports flow. He said he chose not to destroy the oil infrastructure. For now. But he warned that if Iran continues to block the Strait of Hormuz, he will immediately reconsider.

[moneycontrol.com/world/i-can-change-my-mind-in-seconds-trump-said-kharg-island-not-high-on-list-hours-before-us-strike-video-article-13860213.html]

Iran responded by threatening to reduce US-linked oil facilities across the region to “a pile of ashes.”

And now the Pentagon is deploying a Marine Expeditionary Unit to the Middle East — roughly 2,500 Marines and sailors, the kind of force built for amphibious assaults and ship-to-shore operations. Analysts are openly speculating that the target could be Kharg Island itself.

That is not a denial. That is an option being kept open.

Think about what this means. The US has already bombed military targets on Kharg. It has Marines moving into position. And it has explicitly linked the safety of Iran’s oil infrastructure to the reopening of Hormuz. The US is now holding Iran’s oil exports hostage to force the strait open — while Iran holds global oil flows hostage to force the war to stop. Each side has a put option on the other’s energy security. And neither side knows the other’s strike price.

And in markets, as in geopolitics, when fear fades, prices follow. But when two sides hold each other’s leverage in a vice grip, fear doesn’t fade easily.

MUTUAL LEVERAGE: US OPTIONS vs IRAN OPTIONS

© The Times of Israel (Blogs)