Hormuz: Limpet Mines and $118 Oil

The News

December Brent closed on October 30 at $117.64 a barrel, up 2.4%, after touching $118; WTI closed at $104.12. This is the highest close since late April. Brent ended October up 13.6% and WTI up 15.2%. In the strait, a tanker was hit by explosives attached by a small boat, according to maritime security authorities. The incident was described as the first announced successful limpet-mine attack on a commercial vessel in the strait since the war began.

Background

Hormuz has been disrupted since February 28. On October 25, CENTCOM commander Admiral Brad Cooper announced that his forces had cleared Iranian mines from the main international shipping lanes. But successive incidents followed, including an IRGC claim that tankers struck mines on what it calls "unlicensed routes"; no independent source has verified this claim. Maritime security authorities recorded 43 security incidents involving commercial vessels in the region in October, including 30 attacks on tankers, making it the most incident-heavy month since the war began.

Why It Matters to the United States 

• Iran has moved from sea mines to limpet mines delivered by small boats, from a weapon that can be cleared to one that is hard to prevent. The timing serves two goals: raising the cost of waiting for Washington before the elections, and showing that the U.S. "clearance" announcement does not guarantee safe passage. The paradox is that average Middle East oil exports via Hormuz and alternative routes exceeded 24 million barrels per day in the week ending October 18, above the pre-war level of 23.3 million. Prices, in other words, reflect risk rather than supply, and are pricing in the possibility of post-election strikes more than the strait incidents themselves.
• High prices hit American consumers directly, days before the vote. Under Ben Fishman's framework, a true chokepoint rests on three conditions: near-total monopoly, absence of alternatives, and asymmetric harm. Hormuz is gradually losing the "absence of alternatives" condition as volumes return to market via other routes, but it retains "asymmetric harm." The danger is that the main alternative route, the Saudi East-West pipeline to the Red Sea, is itself under Houthi attack. If both routes are disrupted at once, the market loses its last safety valve.