Sustained Iranian oil flows amid Hormuz disruption reflect prepositioned supply since late 2025

At the same time, floating storage declined sharply, but total crude on water did not drop proportionally. “This divergence indicates that barrels were not removed from the system but converted from idle storage into active transit and discharge,” he added.

“The late-2025 movement is best understood as a conversion of floating storage into active flow,” Mr Zannikos noted. Floating volumes fell sharply while transit volumes rose, suggesting that previously idle barrels were absorbed into the system through discharge and movement toward end markets. This reflects sustained absorption capacity rather than actual supply destruction.

“This is why the Iran story is better described as prepositioned supply than as resilience by accident. The stock build in the earlier phase provided a buffer, while the subsequent velocity-driven drawdown demonstrates how quickly that buffer could be mobilised when demand conditions aligned or geopolitical turmoil increased,” he explained.

Potential supply constraints ahead

The situation has highlighted a market shift, where supply is increasingly prioritised for domestic needs. “Restrictions on refined product exports, such as those recently imposed by China, demonstrate how quickly supply can shift from global circulation to domestic retention,” Mr Zannikos said.

“Even without an outright crude supply loss, such measures tighten global availability by preventing barrels from circulating internationally,” he added.

Under sustained stress, similar behaviour could emerge in crude markets, with producers prioritising domestic needs or restricting exports, effectively reducing the supply available to the global system without any physical loss of production, Mr Zannikos highlighted.

If disruption persists, the next phase may not be further rerouteing, but potential supply destruction or administrative restriction of flows – particularly in systems without buffering capacity or alternative routeing flexibility. “Availability would no longer be determined purely by price or logistics, but by access and policy decisions,” he said.

“Today’s disruption is not just testing whether oil can move, but whether the system that prices, insures, finances, and routes it remains a market at all, or becomes a series of managed corridors shaped by governments rather than traders,” Mr Zannikos added.

For the shipping industry, the current phase has increased tonne-miles as flows are rerouted and inefficiencies build. However, a more constrained scenario could have negative implications. “Where supply is actively withheld or physically disrupted, total volumes may decline even as routeing remains fragmented,” Mr Zannikos said.

“This creates a market where miles remain elevated, but tonnes become uncertain,” he concluded.

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