‘Business as usual’ for Iranian shadow fleet passing through South-east Asia, say analysts

KUALA LUMPUR – Even as war in the Middle East places significant strain on global oil supplies, it is business as usual for Iran’s shadow fleet, say maritime intelligence analysts.

This network of tankers transports sanctioned oil from Iran through illegal ship-to-ship (STS) transfers, evading detection through opaque ownership, frequent flag changes and disabled tracking systems.

Ms Bridget Diakun of Britain-based Lloyd’s List Intelligence said the Iranian shadow fleet continues to transport and export Iranian oil through the Strait of Hormuz towards East Asia even after the outbreak of war in Iran.

“There is more evidence to suggest that things are moving in a relatively normal pattern, rather than indicating that ships are stopping or significantly changing their behaviour,” she told The Straits Times on March 17.

Malaysia has, in recent years, been identified as a hub for illegal STS transfers. According to United Against Nuclear Iran (UANI), instances of such activity involving sanctioned Iranian oil in Malaysian waters rose from 280 in 2023 to 679 in 2025, driven largely by demand from China.

Since the 1979 Iranian Revolution, the US and later the UN and European Union have sanctioned Iran over its support for terrorism and nuclear activities. The sanctions were eased in 2015 but reinstated in 2018 by US President Donald Trump.

STS activities are commonly reported off the east coast of Johor in the South China Sea, but have also occasionally occurred near Penang in the Strait of Malacca.

In early February, two overseas vessels suspected of illegal STS transfers were intercepted near Penang and seized by the Malaysian authorities before being released on bond.

Ms Diakun, a senior risk and compliance analyst, estimates that 50 to 70 shadow fleet tankers transited Malaysian waters each month in 2025. “There’s nothing to suggest that the STS off Malaysia has significantly decreased (after the Middle East war started),” she said.

UANI, a US-based advocacy group that monitors sanctions evasion, said the Iranian shadow fleet has continued its operations in South-east Asian waters.

Most recently, UANI senior adviser Charlie Brown observed that the Iranian tanker Amber was near two US Navy littoral combat ships that had arrived in Penang.

He said the tanker had been spotted in Bandar Abbas, Iran, on March 4, four days after the start of the US-Israeli air strikes against Tehran, before passing through the Strait of Malacca and the Singapore Strait on March 15.

On what possible action the US naval ships may have taken, he said: “The US won’t sink any of these ships, even Iranian-flagged vessels. They could seize as war prize the Iranian-flagged ships in certain circumstances.”

Under international law, a nation at war cannot sink vessels in the shadow fleet that belong legitimately to another country. At most, the US may seize a vessel if it is not acting as a neutral party, he added.

The two US naval ships were docked at Penang Port from March 14 to 16 for “logistical arrangements such as replenishments”, Malaysian Defence Minister Khaled Nordin told local news outlet New Straits Times on March 17.

Since the US-Israeli strikes on Iran began, Tehran has retaliated by attacking merchant ships and laying naval mines in the Strait of Hormuz, the narrow waterway through which 20 per cent of global oil and liquefied natural gas exports flow.

This has sent oil prices soaring globally. The benchmark Brent crude oil hovered above US$100 per barrel on March 17, a 30 per cent hike that has left Asian countries dealing with soaring inflation and fuel shortages. The Malaysian government estimated that its fuel subsidy has risen fourfold to RM3.2 billion (S$1.04 billion) per month since the war broke out.

Mr Trump has threatened to strike the oil infrastructure of Kharg Island – the Islamic republic’s primary petroleum export hub, where the US attacked military installations on March 15 – unless Tehran stopped attacking vessels in the Strait of Hormuz.

While Iran’s shadow fleet seems to be carrying on as usual for now, the US military could intercept these vessels in the Strait of Hormuz and the Gulf of Oman, said Dr Lam Choong Wah, an expert in international and strategic studies at Universiti Malaya.

He does not think that the US would destroy the oil terminal on Kharg Island, as this would cause crude oil prices to spike further, which Washington would find unbearable.

“Rather, the US is aiming to occupy (the island) and utilise the oil stock. But the island is 30km away from the mainland, within the range of Iranian artillery and drone strikes. It’s easy to occupy but hard to defend,” Dr Lam said.

Even if its shadow fleet is disrupted, Tehran might look at other means of transport, such as tapping railways to transport oil via Central Asia to customers in East Asia, he added.

While China has officially reported no imports of Iranian crude since 2022, its Customs data has repeatedly shown imports of Malaysia-sourced oil exceeding the country’s annual production, a discrepancy that points to Iranian oil being relabelled as Malaysian, analysts say.

In 2023, the International Maritime Organization adopted a resolution urging member states to do more against dark fleets, including monitoring their territorial seas and exclusive economic zones for STS operations and inspecting vessels that turn off their automatic identification system.