Markets & Finance22 Oct 2026 · about 6 min

IEA: Gulf Oil Shipping Costs Top $37 Per Barrel, Five Times Pre-War Levels

The brief

A shipping cost above $37 per barrel means transport alone adds more than $37 to the cost of each barrel moved from the Middle East Gulf to Asia. It does not describe the oil’s production price or the final price of fuel. It measures the freight required to move the crude. Before the conflict, shipping the same route cost less than $7 per barrel, because the normal transport network was cheaper and more direct. By mid-October, rates had climbed above $37, more than five times prewar levels. The increase reflects attacks, detours, transfers, and higher risks for ships and crews. That extra cost affects the entire oil chain. Companies transporting or refining crude face higher bills, and some costs can eventually reach consumers through market prices. Oil is still moving, but maintaining those flows has become far more expensive and inefficient.

What does it mean for crude-oil shipping costs to exceed $37 per barrel, and how does that compare with prewar costs?

Before the conflict, shipping the same route cost less than $7 per barrel, because the normal transport network was cheaper and more direct. By mid-October, rates had climbed above $37, more than five times prewar levels. The increase reflects attacks, detours, transfers, and higher risks for ships and crews.

That extra cost affects the entire oil chain. Companies transporting or refining crude face higher bills, and some costs can eventually reach consumers through market prices. Oil is still moving, but maintaining those flows has become far more expensive and inefficient.

How large is the increase in shipping costs, and what would it cost to transport a typical 2-million-barrel VLCC cargo?

The increase is enormous because freight rates rose from below $7 per barrel before the war to more than $37 by mid-October. That is an increase of more than $30 for every barrel and more than five times the earlier level. The change comes as ships face attacks and use a more complicated route network.

A typical very large crude carrier, or VLCC, carries about 2 million barrels. At more than $37 per barrel, its freight bill exceeds $74 million for one cargo. Before the conflict, transporting that same volume cost less than $15 million. The calculation is simple: the per-barrel rate is multiplied by the cargo size.

These figures show why the current system is so costly. Even though exports have recovered above prewar levels, transport absorbs far more money. The burden falls first on shipping and oil companies, then can move through refining, trading, and fuel markets.

Why are oil exports from the Middle East Gulf still above prewar levels despite attacks on ships and the danger around the Strait of Hormuz?

Oil exports remain high because companies are not relying on one route. They are combining pipelines, short-haul tanker shuttles, and offshore transfers to keep crude moving despite escalating Iranian attacks in the Strait of Hormuz. U.S. military protection also supports some dangerous tanker movements.

The scale is striking. Middle East oil shipments averaged more than 24 million barrels per day in the week ending October 18. That exceeded the prewar average of 23.3 million barrels per day. Saudi Arabia and the United Arab Emirates expanded pipeline exports to terminals outside Hormuz, while ships used protected corridors and transferred cargoes offshore.

This resilience comes with major costs and risks. Oil flows through Hormuz, including offshore transfers, remained about 82% of prewar levels, so the strait still matters. The system keeps volumes high, but attacks, hazard payments, detours, and transfers make every barrel more expensive to deliver.

What is the Strait of Hormuz, and why is it such an important corridor for moving Persian Gulf oil to world markets?

The Strait of Hormuz is a strategic sea corridor between the Persian Gulf and the Gulf of Oman. It is the main maritime gateway discussed in the article for moving Persian Gulf oil toward international markets. Its importance comes from the large volume of crude that normally travels through this limited passage.

Before the war, only about 17% of the region’s crude exports bypassed Hormuz. By September, pipelines had raised that share to 40%, but oil flows through Hormuz, including offshore transfers, still stood at about 82% of prewar levels. Tankers also continued crossing near the Omani coast under American military protection.

The corridor is dangerous because Iranian attacks have intensified. Maritime security reports cited approximately 30 vessel attacks in October. Hormuz therefore remains both essential and costly: oil can still pass through it, but ships face high danger, and companies must pay more for protection, risk, transfers, and alternative arrangements.

How have pipelines, short-haul tanker routes, and offshore ship-to-ship transfers allowed more oil to bypass or reduce reliance on the Strait of Hormuz?

The improvised system uses several ways to reduce the amount of crude traveling through the Strait of Hormuz in one continuous voyage. Pipelines carry oil from producing countries to export terminals outside the strait. Short-haul tankers make shorter crossings, and offshore ship-to-ship transfers move cargo between vessels in the Gulf of Oman.

The shift is measurable. Before the war, about 17% of regional crude exports bypassed Hormuz. By September, that share had risen to 40%, as Saudi Arabia and the United Arab Emirates expanded pipeline exports. Other tankers still crossed Hormuz, often near Oman under U.S. military protection, before transferring their cargoes to different vessels.

These methods keep oil moving but do not remove the danger entirely. Hormuz-related flows, including offshore transfers, remained about 82% of prewar levels. The network is therefore more flexible, but also more expensive, inefficient, and exposed to attacks.

Who ultimately bears the higher cost and risk of this improvised shipping system—traders, oil companies, refiners, or consumers—and how might the costs move through the oil market?

The higher cost does not belong to just one group. Shipping companies face larger operating and risk costs, while oil companies, traders, and refiners pay more to move or receive crude. Consumers may eventually face some of the increase if businesses pass higher costs into fuel or other oil products, although the article does not quantify that effect.

The mechanism is visible in the freight bill. A 2-million-barrel VLCC now costs more than $74 million to transport, compared with less than $15 million before the conflict. Traders can also earn about $20 more per barrel reselling Iraqi crude, while seafarers receive hazard bonuses for dangerous crossings.

The result is a costly chain. Traders may capture some extra margin, but transport and refining companies face higher expenses. Those costs can move through crude prices, freight rates, refined products, and eventually consumer prices. The article’s clearest conclusion is that oil volumes have recovered at significantly higher cost and risk.

What are crude oil, tankers, pipelines, and refineries, and how do these parts work together to deliver fuel from oil-producing countries to consumers?

Crude oil is unrefined liquid petroleum produced from underground deposits. Tankers are large ships that carry crude by sea. Pipelines are fixed networks that move oil over land or between production areas and export terminals. Refineries are industrial facilities that process crude into fuels and other petroleum products. The article focuses mainly on transport costs, not on detailed refining operations.

The chain begins when an oil-producing country extracts crude. A pipeline may carry it to a terminal, or a tanker may load it for overseas delivery. In the article’s Gulf system, tankers can cross Hormuz, use short-haul routes, or transfer cargo to another ship offshore. The crude then reaches refineries in importing markets.

Refineries process the crude into products used by consumers. Higher transport costs affect the chain before refining begins. In this case, attacks and rerouting have made delivery more expensive and risky, even while Middle East exports remain above prewar levels. The article does not specify exactly how much consumers will pay.

This brief was written by AI from the original reporting and checked by other models. Names, figures and quotes come from the source; read it for full context.