Just two months ago, the US was shipping more oil than Saudi Arabia. Now American crude exports have hit their lowest point since last November, a whiplash reversal driven by a single diplomatic handshake in the Middle East.

US crude oil exports averaged 3.66 million barrels per day in July, a steep decline from the 5.7 million bpd peak reached in May. The culprit: the US-Iran memorandum signed in June, which opened the floodgates for Middle Eastern crude flowing through the Strait of Hormuz and made American oil a lot less attractive to international buyers.

The numbers tell a brutal story

Asian buyers, historically the backbone of US crude demand abroad, pulled back hard. Shipments to the region dropped to roughly 40% of total exports in July, down from 52% just one month earlier. Japan’s appetite cratered most dramatically, with crude imports from the US falling 67% month-over-month.

Europe wasn’t much kinder. The continent took just 1.7 million bpd in July, compared to 2.5 million bpd in May. That’s a 32% decline in two months.

Meanwhile, the Strategic Petroleum Reserve offered almost no cushion. SPR releases contributed a paltry 31,000 bpd in July, barely a rounding error in the context of a global oil market that moves tens of millions of barrels daily.

Why the Iran agreement changed everything

The June memorandum between Washington and Tehran wasn’t just a diplomatic milestone. It was a supply-side earthquake. Increased tanker traffic through the Strait of Hormuz, the narrow waterway through which roughly a fifth of global oil passes, meant that barrels previously sanctioned or restricted were suddenly competing with American shale output for the same customers.

This is a remarkable reversal from May, when US exports surpassed Saudi Arabia’s output to make America the world’s top crude exporter. That milestone, achieved through a combination of surging shale production and constrained Middle Eastern supply, lasted exactly two months before geopolitics reshuffled the deck.

The decline also raises questions about the long-term competitiveness of US crude in Asian markets. Transportation costs for American oil shipped across the Pacific have always been a disadvantage compared to Middle Eastern producers located much closer to Asian refineries. When geopolitics neutralized that cost differential by limiting Middle Eastern supply, US exporters thrived. Without that tailwind, the structural disadvantage reasserts itself.

What this means for investors and risk assets

Some analysts expect a rebound above 4 million bpd in August and September as supply chains recalibrate and pricing dynamics settle. But that expectation comes with a significant asterisk: geopolitical conditions in the Middle East remain inherently unpredictable.