Trump Vindicated? Iran Crisis Turning US Crude Into World's Safe Bet

Asian refineries are queuing up to buy US Gulf Coast crude to offset gaps in supply from the Middle East because of the Iran war and are routing these purchases via the Panama Canal to avoid the Strait of Hormuz chokepoint, marine intelligence firm Kpler said this week. US exports through the canal crossed 200,000 barrels a day for the first half of April - the most since July 2022 - and are climbing, even as the Washington and Tehran struggle to secure long-term peace.

But increased traffic through the narrow channel - an 82km dual-lane waterway that links the Gulf Coast to the Pacific Ocean and Asia - means there is a long line of tankers waiting weeks to transit; a crude tanker can take up to 10 hours to clear it.

And shipping firms are increasingly willing to pay large premiums for priority access. Sources told Bloomberg last week that one firm paid $4 million to clear a tanker carrying LPG, or liquified petroleum gas. Others have been paying up to $3 million. And this is above the transit fee collected by the Panama Canal Authority - that can run into hundreds of thousands of dollars.

WTI on the rise, Brent on the ropes

Meanwhile, US crude is benchmarked to West Texas Intermediate that is trading at a $3-4 per barrel premium against Brent.

The difference has been seen as a structural reversal because the Iran war - which has included missile strikes on oilfields and export terminals - scared Brent past the $100 a barrel red line to $113 in early March, the highest since June 2022.

The scenario that then plays out seems to benefit the United States.

US President Donald Trump seemed to welcome that outcome in early-March. Under pressure over the Hormuz blockage, he pointed out: "The US is the largest oil producer in the world, by far, so when oil prices go up, we make a lot of money."

Trump is correct; the US is the largest oil producer in the world today.

Data from the International Energy Agency indicates it produced over 13.5 million barrels daily in 2025.

US President Donald Trump (File)

That was around 16 per cent of the global output. Russia and Saudi Arabia produced 19 million between them.

And US refineries, most along the Gulf Coast, can produce 18 million barrels of export-ready crude per day.

The queue for Gulf crude and re-routing via the Panama Canal reinforces a US-centric tilt of global oil flows in the Iran war phase. And that is underscored by WTI's premium over Brent.

This seems to be setting up Gulf crude as a possible new global default, or at least a more stable war-time option than Brent, which has seen heightened volatility amid contradictory remarks by Donald Trump.

WTI offers that degree of supply security Hormuz oil lacks right now.

Re-routing world crude map

Before the war, Hormuz shipments accounted for around 20 per cent of global seaborne crude flows, most to Asia. As the war raged, that was re-routed, with the Suez Canal–Red Sea route the most logical alternative and Malacca remaining the busiest.

The Red Sea route has its own concerns; ships must pass through the Bab al-Mandab Strait that can become a chokepoint if the Houthis—an Iran-backed militia in Yemen—join the war.

The Panama Canal seems to be joining that list as part of a redrawing of global oil flows, which will likely now have to factor in increased shipping costs and travel time needed to cancel, or mitigate, any chokepoint risk.

'5 Straits Trap': How Hormuz Blockade Exposes Global Oil's Fatal Flaw

But the result is still a world (seaborne) crude oil map that is forced to navigate chokepoints, whether Hormuz, Panama, Bab al-Mandab, or Malacca.

Asia under the pump

In the current Iran war scenario the pivot to Gulf crude makes sense, particularly for energy-hungry Asian nations like India, which burns through around 5.6 million barrels daily.

Pre-war, New Delhi secured around 40 per cent of that via the Hormuz. That line has now been cut off, or squeezed, while the war lasts. The government has moved to diversify sources, including taking advantage of a one-time US waiver to buy sanctioned Russian crude, but the sizeable shortfall leaves it with very few reliable single-source options, apart from the US.

China, Japan, and South Korea were the other three major buyers of Hormuz crude.

China picked up the lion's share of this amount. Beijing moved to offset that loss by buying more Russian crude, having already been cut off from Venezuelan crude by the US' January raid.

US consumers squeezed

Meanwhile, as the Gulf crude surge rewards US refiners and exporters, it is also pushing domestic fuel prices to record highs, Reuters reported, since it tightens available supply. This could lead to a headache for Trump before the November mid-terms, particularly with American voters already polling negatively on impact of the war on fuel prices.