CITIC Securities: Discussion on Limited Passage through the Strait of Hormuz

CITIC Securities released a research report stating that there are preliminary signs of “partial recovery of transit capacity” in the Strait of Hormuz, and Iran has begun to establish a shipping “safety corridor” through its territorial waters, anticipating a partial recovery of compliant oil tanker transit capacity. According to our previous external report, the amount of crude oil rerouted through Yanbu, Fujairah, and Omani ports is estimated to be 600,000 to 700,000 barrels per day. Assuming transit volume recovers to 40% of pre-conflict levels and considering demand replacement in the Red Sea and the Gulf of Mexico, the actual demand gap will continue to shrink to below 10%. Attention should be paid to marginal changes in the transit capacity of the Strait of Hormuz; short-term adjustments in the supply chain will lead to longer distances, and the release of U.S. strategic reserves is expected to drive up TD22 (Gulf of Mexico to China) freight rates. Once the strait’s transit capacity partially recovers, the demand for inventory replenishment is also expected to act as a catalyst for an upward cycle.

CITIC Securities’ main viewpoints are as follows:

Preliminary signs of “partial recovery of transit capacity” have appeared in the Strait of Hormuz, and Iran has begun to establish a shipping “safety corridor” through its territorial waters, anticipating a partial recovery of compliant oil tanker transit capacity.

According to Kpler data, since March 1, Iranian crude oil exports have accounted for nearly three-quarters of the transit volume through the Strait of Hormuz. CITIC Securities estimates that Iranian crude oil exports have exceeded 2 million barrels in the past 20 days, higher than the average daily export of 1.59 million barrels in 2025. Some oil tankers entering and exiting the strait and the Persian Gulf have turned off their AIS signals, resulting in missing positioning data. In the past three days, two product tankers have passed through the strait, with transit volumes for the Strait of Hormuz from March 20 to 24 being 2/1/5/7/3 vessels (compared to 127 vessels on February 27). Meanwhile, signals regarding transit policies for the strait have emerged; on one hand, the Iranian Foreign Ministry stated that “as long as there is no participation or cooperation in actions against Iran and compliance with the safety regulations and measures announced by Iran, vessels can safely transit through the Strait of Hormuz after coordinating with the relevant Iranian authorities.”

In addition, according to Lloyd’s List, several governments, including India, Pakistan, Iraq, Malaysia, and China, are reportedly in direct discussions with Tehran about vessel transit plans. Officials from the Islamic Revolutionary Guard Corps have established a preliminary vessel registration system to “approve” the safe passage of vessels. This safety corridor routes north around the islands of Larak and Qeshm, fully under Iranian jurisdiction. According to Lloyd’s List, at least nine vessels have left through this route, including the Panama-flagged container ship “NEW OYAGER,” controlled by a Chinese shipowner, which passed through the Strait of Hormuz on March 23, becoming the first vessel owned by a Chinese shipowner to use this corridor, anticipating a partial recovery of compliant oil tanker transit capacity.

The demand gap caused by limited passage is expected to be manageable; assuming the strait’s transit volume recovers to 40% of pre-conflict levels, and considering demand replacement in the Red Sea and the Gulf of Mexico, the actual demand gap will continue to shrink to below 10%.

It is expected that under limited passage conditions, the demand gap for crude oil shipping due to the blockade will gradually narrow. According to EIA data, crude oil shipping volume through the Strait of Hormuz is about 14.2 million barrels per day, with 74.6% of the crude oil passing through the Strait heading to Asia. If it is assumed that transit volume recovers to 40% of pre-conflict levels, the corresponding crude oil shipping volume would be 5.7 million barrels per day. According to a previous external report from this agency, “Logistics and Transportation Service Industry Oil Transportation Cycle Weekly Discussion Series—VLCC Concentration Increase Reshapes Freight Pricing Mechanism” (March 18, 2026), the amount of crude oil rerouted through Yanbu, Fujairah, and Omani ports is estimated at 600,000 to 700,000 barrels per day. According to news from the U.S. Department of Energy on March 11, the U.S. will gradually release 172 million barrels of strategic crude oil reserves over 120 days (equivalent to 1.433 million barrels per day). If all goes to the Far East, then in this scenario, the actual demand gap will continue to shrink to below 10%.

In the short term, rerouting and releasing strategic reserves will alleviate the crude oil gap. In the medium term, after restoring stable transit, the release of inventory replenishment demand and upstream inventory digestion will create a demand pulse.

From a short-term perspective, the increase in transport distance caused by rerouting can partially offset the crude oil gap due to the closure of the strait; however, infrastructure at ports like Yanbu is relatively weak, and loading and unloading efficiency is limited, resulting in longer actual voyages and similar to congestion situations at container ports. Additionally, for countries with low crude oil reserves, actual purchasing demand is expected to be higher, and price considerations may not be the primary focus. Attention should still be paid to the pace of strategic crude oil reserve releases. From a medium-term perspective, once the Strait of Hormuz regains relatively stable transit, the crude oil reserves consumed during the closure will need to be replenished. Upstream oil producers will need to digest already filled crude oil tanks to create space for increasing production rates, while some countries may further raise crude oil reserve requirements to avoid reenacting the impacts of future geopolitical risk events. This demand is expected to support mid-term demand for oil transportation, thereby driving VLCC freight rates to remain at relatively high levels.

Risk factors:

Significant growth in VLCC capacity; downstream inventory replenishment demand falling short of expectations; geopolitical conflicts impacting more than anticipated.