Blockade of the Strait of Hormuz Shakes Oil Markets; Saudi Arabia Bucking the Trend Boosts Revenues and Emerges as the Biggest Winner

Latest industry analysis shows that the Strait of Hormuz was effectively blocked, triggering a sharp rise in international oil prices; this counterintuitive situation delivered windfall gains to Saudi Arabia while Middle Eastern oil producers lacking alternative shipping routes suffered heavy losses.

After U.S. and Israeli airstrikes on Iran at the end of February that escalated regional hostilities, Iran gained de facto control of the waterway that carries roughly one-fifth of global oil and LNG shipments. Although Iran allowed vessels not involved with the U.S. or Israel to transit, energy markets still experienced extreme volatility — Brent crude posted a monthly gain of 60% in March, a record increase.

Under the geopolitical conflict, Middle Eastern oil exporters have diverged sharply in fortunes; the ability to bypass the Strait of Hormuz became the key dividing line.Saudi Arabia, Oman and the UAE can secure exports via pipelines and offshore ports,Iraq, Kuwait and Qatar, lacking alternative routes, saw exports all but halted.

Data show that most Gulf countries’ crude and condensate exports fell sharply in March,with Iraq and Kuwait’s oil export revenues plunging about 75% year-on-year. In contrast,Iran’s export revenues rose 37% year-on-year, Oman’s rose 26%, and Saudi Arabia’s rose 4.3%.

Among countries whose exports were constrained by the strait, Saudi Arabia was the only economy to post revenue growth in March. The surge in oil prices fully offset the drop in export volumes and even pushed total revenues higher. Calculations are based on Kpler vessel tracking and JODI data, using Brent crude as the pricing benchmark; major Middle Eastern crude grades currently trade at a notable premium to Brent.

East–West pipeline proves crucial as Saudi prepositions to secure exports

Saudi Arabia’s countertrend revenue gain was driven primarily bythe 1,200 km East–West oil pipeline. Built during the Iran–Iraq War to link eastern oilfields with the Red Sea port of Yanbu, the pipeline now runs at full expanded capacity of 7 million barrels per day. After accounting for domestic consumption of about 2 million barrels per day, roughly 5 million barrels per day are available for export. Shipping data show that even when Yanbu was attacked, shipments in the week of March 23 still reached 4.6 million barrels per day, near capacity.

Data indicate Saudi crude export volumes fell 26% year-on-year in March to 4.39 million barrels per day, but higher prices raisedexport values by about $558 million year-on-year. Notably, Saudi Arabia had already raised export volumes in February to levels not seen since April 2023 as part of contingency planning to cope with the conflict.

The rise in oil revenues directly bolstered Saudi public finances: royalties and tax receipts from Saudi Aramco increased in step, providing strong support for the country’s economic diversification efforts.

Divergent national outcomes — Iraq suffers the worst losses

The UAEpartly avoided the shock via the Habshan–Fujairah pipeline (capacity 1.5–1.8 million barrels/day), but its March oil export receipts stillfell by $174 million year-on-year, and attacks on Fujairah port further disrupted operations.

Iraqwas the hardest hit: its March oil revenuesplunged 76% year-on-year to $1.73 billion.

Kuwaitclosely followed suit,Down 73% to $864 millionThe revenue data released by the Iraqi State Oil Marketing Organization on April 2 broadly matched industry estimates.

The good news is that the Iranian military announced an exemption from Strait restrictions for “ brother country Iraq ”; the measures are targeted only at hostile states. If the exemption is implemented, it could free up about3 million barrels per dayof Iraqi crude oil transport capacity.

Rating-agency analysts noted that, except for Bahrain, Gulf states have moderate debt levels and ample fiscal space and can respond to short-term shocks by tapping reserves or issuing debt. However, uncertainty remains over the long-term impact. Some Western institutions have called for increased investment in fossil fuels to guard against supply risks, while other analysts argue that accelerating the development of renewable energy is the fundamental safeguard.