Strait of Hormuz Traffic Crashes, China EV Shift Accelerates

Global oil markets are being pulled in opposite directions by escalating Middle East conflict and a structural shift in demand from China, creating a volatile outlook for Bakken crude prices. Shipping traffic through the critical Strait of Hormuz plunged to single digits on Thursday, according to Reuters and preliminary data from Kpler.

Only seven vessels transited the strait in the past 24 hours, a sharp drop from the recent 10-day average of 15. The data, which tracks ships with positioning systems on, suggests "dark transits" are higher as operators switch off systems to avoid detection amid strikes on tankers. The re-escalation of hostilities has made owners and exporters increasingly cautious. Oil prices jumped above $100 per barrel this week and were on track early Friday to end a trading week above that mark for the first time since May, OilPrice.com reported.

“Oil’s resilience reflects a market now repricing both the duration and severity of the conflict, along with a clearer recognition of the mounting threat to regional supply,” ING commodities strategists Warren Patterson and Ewa Manthey wrote in a note. They added that while meaningful volumes still move through the strait, flows remain well below pre-war levels, underscoring the fragile situation. Most estimates put crude and product volumes exiting the Strait of Hormuz at about 10 million barrels per day, half of pre-war levels.

Concurrently, a major long-term threat to oil demand is accelerating. China aims for electric and hybrid vehicles to account for up to 70% of all passenger car sales by 2030, according to a new government plan. These "new energy vehicles" already represented 65% of sales in August and 54% at the end of last year. The country also targets 40% of new commercial vehicle sales to be electric by 2030.

Analysts say the 70% target could be achieved earlier than planned, as this year's oil price shock is accelerating the shift. The ambitious targets are expected to continue eroding road fuel demand in China, which has been falling for two consecutive years. Chinese state refiners are preparing for plateauing and falling demand. Sinopec's research institute expects Chinese oil demand to drop 8.9% in 2026 year-on-year, with gasoline demand down 8.7% and diesel consumption crashing 11.4%.

For Bakken operators, the immediate price support from geopolitical risk is tempered by the looming demand pressure from the world's largest oil importer. The high prices that benefit North Dakota producers in the short term are also cited as a key factor destroying demand and speeding up EV adoption in China, suppressing total oil demand growth.