Both steam and hot water flooding of high-viscosity oils in the presence of swelling clays are difficult methods for producing oil efficiently because of potential formation permeability reduction. This paper pertains to heavy oil recovery from the East Moldabek formation where the oil API gravity is about 22 and is inundated with swelling clays. To achieve this, we used the IntersectTM reservoir simulator to compare oil recovery economics using both hot water and steam injection as a function of steam cycle duration, temperature, and steam dryness. We also studied clay swelling in the East Moldabek formation where clay poses a significant challenge due to its impact on permeability reduction. In this research, we developed an equation based on experimental data to establish a relationship between water mineralization and permeability in the East Moldabek formation. The equation provides valuable insight on how to mitigate clay swelling which is crucial for enhancing oil recovery efficiency—especially in sandstone reservoirs. Our modeling studies provide the recovery efficiencies for salinities of the hot water EOR versus cyclic steam EOR methods in a formation containing swelling clays. Specifically, the reduction in formation permeability as a function of the distilled water fraction is the controlling parameter in hot water or steam flooding—when the formation water mixture becomes less saline, oil recovery decreases. Our research shows that clay swelling can significantly impact cyclic steam stimulation outcomes, potentially reducing its effectiveness, while hot water flooding may offer a more cost-effective and operationally feasible solution in formations where clay swelling is a concern. Economic analysis reveals the potential for achieving an optimal favorable condition for hot water injection. Therefore, this paper provides a guideline on how to conduct thermal oil recovery for heavy oils in fields with high clay content such as the East Moldabek deposit.