Crude shipments out of the Persian Gulf have climbed above their prewar pace even as Iranian forces keep up attacks on shipping in the Strait of Hormuz, a sign that a makeshift, U.S.-backed transport network is keeping barrels moving. The International Energy Agency’s chief, however, cautioned that global energy markets are more than a year from anything resembling normal.
The seven-day moving average of oil flows from the region, counting the strait, the Red Sea and the Gulf of Oman, stood at just over 24 million barrels a day, according to Kpler data cited on Tuesday. That exceeds the prewar average of roughly 23 million barrels a day. Volumes passing directly through Hormuz or transshipped near the Gulf of Oman have recovered to about 14 million barrels a day, or 82% of the level seen before the conflict.
The gains rest on two workarounds. Saudi Arabia and the United Arab Emirates have ramped up their cross-country pipelines, which now carry about 40% of exports, up from 17% before the war. Meanwhile, tankers load inside the Gulf, switch off their AIS transponders to run the dangerous stretch, and transfer cargo to larger vessels in safer waters off Oman before heading back in, a shuttle pattern that U.S. forces support from the air.
“The transport system through the risky Strait of Hormuz is already established, and oil export officials’ risk appetite has increased,” said Hamad Hussain, chief commodities economist at Capital Economics. Iran would need to act far more aggressively than in the past to reassert the kind of control it once held, he added.
The economics are doing much of the work. Reselling Iraqi crude can fetch an extra $20 a barrel, according to Kpler analyst Homayoun Falakshahi, which works out to about $40 million per very large crude carrier. Three such voyages would cover the roughly $100 million price of a used tanker, he said. Crews on the risky leg are paid danger bonuses of two to three times normal wages, with one Chinese manning agency advertising up to $25,000 for a round trip of one to two weeks. Older ships that once hauled Venezuelan or Russian crude are being redeployed to the Middle East route.
Prices and costs are absorbing the strain. Brent crude has traded above $110 a barrel in recent sessions, near its highest since May, after a gain of nearly 80% this year. Front-month futures slipped 0.2% to $109.38 a barrel, while West Texas Intermediate eased 0.3% to $103.32.
BenchmarkRecent levelMoveBrent crude$109.38-$111+ a barrelNear highest since May; up nearly 80% this yearWTI$103.32 a barrelDown 0.3% in latest sessionGulf crude flows (7-day average)Just over 24 million b/dAbove prewar average of about 23 million b/dHormuz and Gulf of Oman transshipmentsAbout 14 million b/d82% of prewar levelPipeline share of Gulf exportsAbout 40% in SeptemberUp from 17% before the war
Shipping costs have followed. Freight for very large crude carriers from the Middle East to China has approached a record $37.37 a barrel, and war-risk insurance premiums have jumped from under 3% of a vessel’s value to as much as 10%. About 30 attacks on ships have been reported this month alone, including a rocket-propelled grenade strike on a Tanzanian-flagged tanker that punched a hole in its water tank.
IEA Executive Director Fatih Birol told an industry gathering in London that the market should not take comfort from crude prices that have stayed well below the $200 a barrel some analysts predicted at the start of the war. “I don’t see any credible pathway that 2027 will be a year of normalisation,” he said, warning of “overlapping crises in the Middle East” that could escalate further. The strait has been closed once, he noted, and “it can be closed again.”
Birol argued that judging the crisis by crude alone is “myopic” because “we don’t use crude oil, we use products.” Diesel prices have doubled from prewar levels, driven mainly by the Iran conflict and partly by attacks on Russian refineries, just as seasonal demand rises and large refineries enter planned maintenance. “We are on thin ice and I am very worried about this,” he said. The agency’s 32 member countries have already released 80% of a historic 400 million-barrel emergency stock draw agreed in March, and hold about 1.6 billion barrels in reserve. “We are keeping it for the rainy days,” Birol said, adding that members “will not hesitate to look into the option of releasing further stocks” if needed.
On the political side, Iran’s First Vice President Mohammad Reza Aref said Tehran had no choice but to assert control over the strait to protect national security, and blamed Washington for the current situation. U.S. Energy Secretary Chris Wright said flows through Hormuz had recovered to roughly 80% of prewar levels, though refined product shipments remain constrained. Saudi Arabia, meanwhile, has come under intensified attack from Iran-backed Houthi militants, who claimed strikes on energy, airport and military sites including an Aramco facility at Yanbu, the Shaybah oilfield and airports in Riyadh and Abha. The kingdom called off its flagship investor conference a week before it was due to begin.
ANZ analysts warned the recovery could stall, with preliminary data suggesting crude flows may have slowed again as attacks on vessels resume.
The tension for investors is that physical supply has held up while the cost of moving it has not. “If the problem in April was ‘not enough crude,’ the problem in October is ‘the cost of moving crude,'” said Natasha Kaneva, head of global commodities strategy at J.P. Morgan. Traders caution that a more aggressive Iranian escalation ahead of the U.S. midterm elections could paralyze the transport network once more, a risk that keeps a premium baked into both freight and futures even as barrels keep flowing.