Iran has no leverage as Hormuz standoff keeps Brent near $87

Iran has no leverage in the Hormuz standoff as economic pressure mounts, a former US energy official said, even as Brent holds near $87.

Brent crude fell about 2 percent to $87.20 a barrel Thursday even as the International Energy Agency warned global oil stockpiles are dwindling, with a former US energy official saying Iran has no leverage in the standoff.

"Iran has no leverage as economic pressure mounts," Tala Goudarzi, former acting assistant secretary of fossil energy, said on Fox Business' "Kudlow."

The IEA warned the world faces a shortfall of 1.8 million barrels a day this quarter, more than double projections from a month ago, with global oil stocks falling rapidly. Traffic through the strait, which carried about 20 million barrels a day — one-fifth of global production — before the war began in late February, remains well below pre-war levels of 130 to 140 transits a day.

"The market can't keep pulling down inventories forever. Sooner or later, the cupboard runs bare," Dan Pickering, chief investment officer at Pickering Energy Partners, wrote in a note. "It will be a challenging fall if the Strait of Hormuz remains contested."

President Donald Trump has insisted the US has "total control" over the strait, calling the naval blockade "a wall of steel." Shipping data does not back that claim, with vessel traffic still stalled and ships going dark or transferring cargo at sea to avoid detection, according to Mohit Kumar, chief economist at Jefferies.

Iran's Foreign Minister Abbas Araghchi warned Washington to "be careful," posting on X that "worse than fake news is fake intelligence." Tehran has said it will not reopen the strait fully until the US meets its conditions, and a top adviser to the Islamic Revolutionary Guard Corps said Iran could prolong the war until Trump leaves office.

Several factors are softening the blow from the supply shock. China has reduced oil imports, other countries are drawing down stockpiles, the US has increased production, and Gulf producers have shifted crude to alternative pipeline routes, Kumar noted.

Oil spill adds environmental toll

The standoff has also produced an environmental crisis. An oil spill from the sanctioned tanker Caroline Bezengi, which was carrying about 800,000 barrels of Russian crude when it ran aground off Oman in June, now covers an estimated 500 square miles, according to Greenpeace. Omani authorities said the spill has reached beaches in Ras Madrakah, threatening nesting grounds for sea turtles on Masirah Island. Tehran is demanding compensation for pollution in the Persian Gulf, with CNN geolocating video of oil washing up on a beach around Qeshm Island.

Domestic pain mounts in Tehran

Inside Iran, the economic strain is visible. Food inflation has soared nearly 130 percent over the past 12 months, and a provincial plan to raise petrol prices to 872,000 rials a liter — more than 17 times the subsidized rate — was scrapped within hours after it would have cost drivers more than a quarter of the monthly minimum wage of about 166 million rials. The last time the strait faced a sustained closure, oil prices spiked sharply within weeks; this time, the cushion of stockpiles and alternative supply has kept Brent below $90.

The risk remains skewed to the upside. If the standoff persists into the fall, the drawdown of global inventories will force prices higher, and the IEA's projected 1.8 million barrel-a-day shortfall would deepen. For now, the market is betting that Iran's economic weakness — not US firepower — is the lever that reopens the strait.

This article is for informational purposes only and does not constitute investment advice.