Market Report Week 16 - 14.04.2026

Trump stated on Sunday evening, following the collapse of the talks, that the US will now block the Strait of Hormuz for all inbound and outbound traffic. This comes at a time when the market had begun to price in increased flows over the coming two weeks during the ceasefire. As most vessels are already blocked, the measure will primarily affect Iranian oil exports, which have largely continued throughout the war. The US Defence Command (US CENTCOM) has subsequently clarified that the blockade specifically targets vessels to and from Iranian ports. Since the start of the conflict, Iranian exports have averaged around 1.5–2.0 mb/d, with the majority going to China. Iran has also continued to export LPG and, to a lesser extent, refined products, though with greater volatility due to logistical challenges and infrastructure damage. 
However, it remains unclear what the precise rationale behind a full blockade is. One objective, of course, is to increase economic pressure on Iran. At the same time, the US has previously eased sanctions, allowing Iran to sell oil at sea. Another possible objective is to pressure China, the largest buyer of Iranian oil, in the hope that China will, in turn, pressure Iran to reopen the Strait and reach an agreement with the US.
This appears to be a rather optimistic strategy. The Iranian regime is unlikely to respond in a predictable or economically rational manner. If anything, Iran may be surprised that such a blockade is only being introduced now. This could very well develop into a full-scale standoff between the US and Iran.
It is also unclear how the blockade will be implemented in practice and how China will respond if the US begins boarding Chinese vessels carrying Iranian oil in international waters.  In fact, it seems that Iran has already tested the US resolve. The first vessel sanctioned by the US to pass the Strait after the blockade came into effect was the Chinese tanker, The Rich Starry. Notably, the vessel did not come from an Iranian port but from the Hamriyad port in the UAE. So far, it has not been boarded by the US. The vessel initially transmitted that it has a Chinese owner and crew.  For the oil market, the blockade comes at a time when the physical market is tightening further, as most of the vessels that sailed out of the Persian Gulf before the war have now arrived, and the large volume of “oil at sea” – primarily from Russia and Iran – is largely gone in practice.