Dubai: Massive volumes of Iranian crude are amassing in floating storage across the Persian Gulf and along key Asian shipping routes as major purchasers suspend orders while awaiting the expiry of a 60-day US sanctions window.
Bloomberg market intelligence indicates Iran’s state oil apparatus is struggling to shift heavily discounted barrels after Washington warned insurers, shipping companies and buyers to disentangle themselves or face secondary sanctions. The warning has effectively immobilised the shadow fleet that once enabled Iran’s export flows.
The 60-Day US Window
US Treasury and State Department actions started the slowdown by giving insurers and buyers 60 days to comply. That warning stopped letters of credit from Asian refiners and removed the insurance that allowed risky trades. Loaded very large crude carriers (VLCCs) are now anchored off Kharg Island and near Malaysia, acting as temporary storage. Each holds about 2 million barrels, but using them this way cuts shipping capacity and raises freight costs. Keeping oil afloat is quickly eating into Tehran’s revenues.
Persian Gulf Logjams
Relying on tankers for static storage also raises environmental and security concerns. Many idle vessels operate without full international insurance or oversight, increasing ecological risk. Iran has offered steep, unofficial discounts to lure buyers, but the prospect of exclusion from the US dollar clearing system has blunted demand for even heavily discounted crude.
Africa Feels The Pinch
The supply squeeze is already reverberating in import-dependent countries. Kenya, which brings all its refined fuels through Mombasa, faces a strain on foreign-exchange reserves as elevated global oil prices push domestic pump prices — currently about KES 217 per litre — toward inflationary thresholds. In Nigeria, the congestion adds uncertainty to crude-for-product swaps even as the Dangote refinery ramps up, creating added pressure on the naira and fuel logistics.
Dark Fleet & Alternate Channels
With conventional buyers hesitant, Tehran has leaned on the so-called “dark fleet” of older tankers that turn off tracking systems to carry out ship-to-ship transfers, and on complex financial workarounds including cryptocurrencies and barter arrangements to bypass SWIFT. But advances in satellite surveillance — such as synthetic aperture radar — have improved detection of clandestine transfers, and the capacity of these shadow networks appears insufficient to clear the current backlog.
Outlook For Q3 2026
As the US deadline approaches, the market sees two likely outcomes: a quiet extension that could ease price pressure but suggest a softer diplomatic stance, or strict enforcement that would leave the Iranian fleet stuck and add more volatility to global energy markets.
