Iraq offers its largest discount in history: $33 per barrel—but buyers must traverse the perilous Strait of Hormuz to collect their cargo.

【Answer 1】 Behind this discount lies a critical condition: buyers’ tankers must transit the Strait of Hormuz and proceed deep into the Persian Gulf to complete loading. Since the regional conflict erupted at the end of February, this shipping lane has virtually ground to a halt. Discount magnitude: Time-tiered pricing, with maximum relief of $33.40 per barrel According to a SOMO notice dated May 3 seen by Bloomberg News, the discount is tiered by loading period: ・Basrah Medium crude loaded between May 1–10: $33.40 discount per barrel ・Crude loaded for the remainder of May: discount narrowed to $26 per barrel ・Basrah Heavy crude: $30 discount per barrel off the official price Additionally, last week SOMO separately offered Qaiyarah crude via spot tenders—but loading must likewise occur deep within the Persian Gulf. Buyer assumes all risk: Force majeure clause explicitly excluded One clause in this quotation notice warrants close market attention. SOMO explicitly states that, should buyers accept the May pricing terms, “given that this quotation is issued under the current exceptional circumstances, which are known to all parties, the force majeure clause shall not apply.” In other words, Iraq has formally classified the prevailing geopolitical risks as ‘known conditions.’ Once a buyer accepts an order, any losses incurred en route due to hostilities will disqualify them from invoking force majeure for exemption. This effectively transfers the entire transit risk across the Strait of Hormuz onto the buyer. Near-total shipping collapse: Only two tankers completed loading in April The extraordinary size of the discount stems directly from Iraq’s severely impaired export capacity.

Seven months into the Strait of Hormuz blockade: oil continues flowing—but at ever-rising cost and growing fragility.

【Answer 2】 A costly floating transfer system is barely sustaining global energy supply—but whether this emergency mechanism is a temporary stopgap or the new normal remains unclear. The Strait of Hormuz blockade has now entered its seventh month. Middle Eastern oil producers are maintaining exports through a ship-to-ship (STS) transfer system—yet the operational costs of this system are surging sharply. According to Kpler data, exports via the Strait have rebounded since September to approximately 6.5 million barrels per day—the highest level since a brief post-ceasefire recovery in June. However, this export volume comes at an unprecedented logistical cost. Per LSEG data reported by Reuters, the benchmark freight rate for Very Large Crude Carriers (VLCCs) transporting Persian Gulf crude to China has surged to over $30 per barrel—the highest on record. Before the war, such freight costs represented only 2–3% of oil prices; today, with crude trading around $105 per barrel, transportation expenses now exceed one-quarter of total delivered cost. Last week, Brent crude briefly breached $108 per barrel—partly driven by market jitters over reports of disrupted Saudi export routes. Energy markets are adapting—not collapsing—but this adaptation exacts a heavy toll borne collectively by oil producers, the shipping industry, and global consumers. How the floating transfer chain operates The Strait of Hormuz blockade has forced oil producers to redesign export routes. Abu Dhabi National Oil Company (ADNOC) launched the STS scheme as early as April: using vessels as ‘shuttle tankers’ to carry crude from Persian Gulf terminals to safer waters in the Gulf of Oman, where cargoes are transferred to larger vessels bound primarily for Asian refineries. The mother ships then return through the Strait of Hormuz to reload—repeating the cycle continuously. This mechanism reduces per-voyage risk by shortening transit distances across the Strait, while maximizing utilization of scarce—and expensive—tanker capacity, thereby preserving some critical export flows. Increasing numbers of tankers are now transiting the Strait under U.S. Navy escort, navigating narrow coastal corridors near Oman with navigation systems switched off. Saudi Arabia follows suit—and scale expands rapidly What began as an ADNOC-led emergency measure has evolved into a sizable emerging industry—and Saudi Aramco, too, is increasingly reliant on STS transfers to sustain its exports.

Iraq Devalues Currency as Hormuz Disruption Hits Oil Exports

1 day ago

Iraq devalued its currency by 13% amid Strait of Hormuz disruptions that slashed oil exports to 1.25 million barrels per day. The IMF projects the economy will shrink by nearly 7% following $80 billion in conflict-related losses.

bloomberg

2026-10-06

Iraq Devalues Currency as Hormuz Disruption Hits Oil Exports

Iraq Devalues Currency as Hormuz Disruption Hits Oil Exports

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