Mideast Gulf oil producers are urging the US to address the disruption to oil flows through the strait of Hormuz "straight on", warning that interim measures such as tapping into Iran's so-called "oil-on-water" risk strengthening Tehran's position while leaving regional producers exposed, senior Gulf officials have told Argus.
"The issue is not supply. The 140mn bl figure discussed by US officials on oil-on-water does not indicate the full picture," one senior Gulf official said. "Oil-on-water today includes production from Saudi Arabia, the UAE, Kuwait and Iraq, as well as from our western oil company partners in joint ventures, loaded on tankers stuck within the strait."
The US Treasury Department's sanctions enforcement arm, the Office of Foreign Assets Control (OFAC), issued a licence late on Friday allowing the sale, delivery and offloading of Iranian crude loaded into tankers on or before 20 March, until 19 April. The OFAC licence also allows the import of Iranian crude into the US for further resale. There are no conditions attached to payments for such cargoes.
US Treasury Secretary Scott Bessent estimated on 19 March there were 140mn barrels of Iranian oil at sea, without providing further detail.
These US efforts to stabilise markets by leaning on floating storage volumes are viewed in Mideast Gulf capitals as a temporary fix, senior Gulf officials said, that fails to address directly the core issue — the effective disruption of the world's most critical energy transit chokepoint.
Gulf officials warned that such measures risk creating an uneven dynamic in which Iranian crude continues to flow — primarily to China — while exports from US-aligned Gulf producers remain constrained. "China is the most obvious buyer of Iranian crude, but what about Japan, or South Korea — our buyers and US allies?" the senior Gulf official asked, noting that interdicting Iranian flows is not straightforward and that Tehran has developed sufficient mechanisms to bypass sanctions and retain access to revenues. A second senior Gulf official said producers in the region cannot accept an outcome where "Iran takes the strait of Hormuz hostage," describing such a scenario as a structural shift in global energy markets.
Gulf capitals are increasingly concerned that Washington could move to wind down the conflict before securing a durable resolution on maritime access, leaving Iran with de facto control over traffic through the strait. "Nobody in the Mideast Gulf asked for this war, but now that we find ourselves in the midst of it, the US should sort this out," the first official said. "The US should finish the job and not forget about its allies in the region," both officials said separately.
US president Donald Trump said late on Friday that he has no plans to end the war quickly, telling reporters that "you don't do a ceasefire when you're obliterating the other side." But he also signalled that Washington is "very close" to achieving key military objectives as it considers winding down operations — messaging that has added to unease in Gulf capitals.
The comments follow a week of the most extensive damage yet to energy infrastructure across the Mideast Gulf. For Mideast Gulf officials, reopening the strait of Hormuz remains the only viable path to restoring market balance and preventing Iran from exerting sustained influence over global oil prices. "The US needs to find a solution, and it is faced with three options," the first Gulf official said. "A compromise with Iran over freedom of passage, alignment with Iran's dictates, or the use of force."
Concern in Gulf capitals is growing, and an outcome in which Iran exercises control over the strait of Hormuz is creating a perception that they have been left behind. This, in turn, could complicate relations between the US and its regional allies, the senior Gulf officials said.
