Gulf nations keep oil flowing, but at mounting cost amid Iran war
Seven months into the conflict, elaborate workarounds like ship-to-ship transfers and pipeline diversions have restored much of the blocked supply. But shipping costs have soared beyond any historical precedent.
When Iran closed the Strait of Hormuz at the start of its war with the U.S. and Israel in late February, the blockade halted roughly 15 million barrels per day of global oil trade. Markets feared economic collapse. Instead, Gulf producers engineered a sprawling set of alternatives: Saudi Arabia diverted flows through its East-West pipeline to the Red Sea; the UAE maximized an existing pipeline to Fujairah; and starting in April, Abu Dhabi developed a ship-to-ship shuttle system off Oman's coast, where tankers transfer cargo in safer waters before smaller vessels complete the Strait transit. Through early September, about 8 million barrels per day—roughly half the original volume—had been restored through these routes. But the complexity carries severe costs. Spot charter rates for supertankers transiting Hormuz peaked at $1 million per day in mid-September, adding roughly $26 per barrel to shipping costs—making freight a quarter of the barrel's price rather than the usual 1 to 3 percent. The September 10-11 drone attack on the East-West pipeline, shutting Saudi Arabia's main bypass route and carrying 4 to 5 million barrels daily, tested these contingencies. While oil prices now hover around $100 per barrel—elevated but not catastrophic—the system remains fragile. Markets are braced for further disruption: Iran could target the ship-to-ship transfer zones off Oman, or the U.S. and Gulf producers could face escalating pressure to deploy more resources just to maintain current flow.
How could this affect you
Traced by who's actually in the path of this — not everyone is.
Likely
U.S. consumers and businesses relying on energy-intensive production
Higher shipping costs on crude flowing through alternative routes eventually transfer to gas and heating oil prices. Current freight premiums add roughly $26 per barrel; sustained high costs compound inflation in fuel and transportation. Trump administration faces political pressure from elevated energy costs.
Likely
Asian economies and refineries dependent on Persian Gulf oil
Ship-to-ship transfers and Suez Canal reroutes add weeks to delivery times and cost. At 6.5 million barrels per day still flowing through Hormuz via workarounds, Asian markets face sustained supply constraints and higher landed costs for crude.
Likely
Global shipping and tanker companies
Supertanker shortage has driven charter rates to record levels. If shipping costs remain elevated, tanker owners benefit from extraordinary rates; but if the conflict escalates and flows halt entirely, the industry faces asset stranding and contract disputes.
Possible
Global financial markets and equities tied to oil-sensitive industries
Uncertainty over whether workarounds can sustain 40% of pre-war volumes creates volatility. Further pipeline attacks or Houthi advances on the Red Sea (Bab al-Mandeb Strait) could eliminate backup routes entirely, forcing a sharp oil shock and equities selloff.
Sources
Every claim here traces back to reporting you can read yourself.
