Iran War Triples Logistics Costs for Oil Services Firms

The main cause is the nine-month Iran war and its effect on regional energy operations. The conflict has damaged infrastructure, forced employee evacuations, and disrupted equipment deliveries. Moving supplies through the Strait of Hormuz has also become increasingly difficult. These problems make ordinary transport slower, riskier, and more expensive.

Maire CEO Alessandro Bernini said logistics costs on some Middle Eastern contracts have tripled. Fuel expenses have doubled, and labor costs have risen between 30% and 40%. Saipem CEO Alessandro Puliti said his company had been waiting outside Hormuz for months. NESR has kept materials in warehouses longer to guard against interruptions.

The result is a cost shock for contractors. Longer storage, delayed shipments, extra transport, and higher wages consume money. Companies may not recover those costs from customers. Bernini warned that the pressure could eventually raise energy prices and add to inflation, even as higher oil prices create more drilling work in some markets.

Oilfield-services companies support energy producers rather than selling most of the oil themselves. They supply specialized equipment, skilled personnel, engineering, maintenance, and field operations. Their work happens across drilling sites, production facilities, and infrastructure projects. Each project requires the right tools and people to arrive at the right place and time.

The article highlights this dependence through Saipem, whose CEO said equipment had been waiting outside the Strait of Hormuz for months. NESR has stored materials in warehouses for longer periods to protect against interruptions. These examples show the key mechanism: delayed equipment or missing workers can slow, postpone, or stop project activity.

That dependence makes service companies vulnerable to conflict and transport disruption. Even when higher oil prices encourage more drilling, contractors still need affordable access to equipment, workers, fuel, and transport. If those inputs become expensive or unreliable, projects cost more and company margins shrink. The article reports exactly that pressure in the Middle East.

The reported increases show a severe cost squeeze rather than one uniform industry trend. Maire said logistics costs tripled on some Middle Eastern contracts. Fuel expenses doubled, while labor costs rose 30% to 40%. Contractors also face longer warehouse storage and more expensive equipment, personnel, and transportation. The article does not give one overall percentage for total project costs.

Revenue figures show how uneven the market is. SLB reported third-quarter Middle East and Asia revenue of $2.81 billion, up 9% sequentially but down 6% from a year earlier. Baker Hughes reported $1.26 billion, down 13% year over year, partly because of a business divestiture.

These figures describe different measures. Logistics, fuel, and labor increases affect project expenses. Revenue changes show business activity and company results. Higher oil prices supported additional drilling in some markets, but the extra work became more expensive to perform. Contractors therefore faced rising demand alongside rising operating costs.

When contractors cannot recover higher costs, the first effect is financial. Extra spending on fuel, wages, transport, delays, and storage comes directly out of project margins. The company may still complete its contract, but it earns less from the same work. NESR CEO Sherif Foda said contractors often “eat” the cost of precautions such as extended warehouse storage.

The project itself can also become more expensive and less predictable. Equipment delays can interrupt operations, while employee evacuations and damaged infrastructure create additional disruption. Maire CEO Alessandro Bernini said logistics costs had tripled on some contracts and labor costs had risen 30% to 40%. Those increases raise the cost of delivering energy projects.

The longer-term risk is pass-through. Contractors may seek higher prices from customers when contracts allow it. Bernini warned that added expenses would eventually contribute to higher energy prices and inflation. The article also shows an uneven recovery, so higher drilling activity does not guarantee better profits.

The Strait of Hormuz matters because it is the narrow maritime gateway between the Persian Gulf and the Gulf of Oman. Many regional ports, energy projects, and supply chains depend on vessels using this passage. When movement becomes difficult, deliveries can be delayed before equipment even reaches its destination. That makes a geographic chokepoint a business problem.

The article gives a direct example. Saipem CEO Alessandro Puliti said the company had been “sitting outside Hormuz for months.” The delay prevents equipment from reaching projects and can leave crews, machinery, and contracts waiting. NESR responded by holding materials in warehouses longer to guard against supply interruptions.

The current disruption raises transport and storage costs for contractors. It can also delay project schedules and reduce margins. The article does not quantify Hormuz’s total share of regional trade, but it clearly links difficult passage with delivery problems, longer storage, and higher operating expenses during the Iran war.

When a maritime chokepoint becomes difficult to use, companies can spread risk across routes and inventories. Possible strategies include rerouting cargo through other ports, moving urgent items by air, using land links where practical, sourcing equipment locally, and keeping extra supplies near project sites. These options are established logistics responses, but they may cost more or carry capacity limits.

The article directly documents one strategy: NESR has stored materials in warehouses for longer periods across Saudi Arabia, the UAE, Kuwait, Oman, and Iraq. The company uses that inventory buffer to protect against supply interruptions. Saipem offers the opposite example, with equipment waiting outside Hormuz for months. Both cases show how companies manage access risk.

These measures do not remove the disruption. Warehousing ties up money and creates costs that contractors often cannot recover. Rerouting or faster transport could also increase expenses, though the article does not report specific alternative routes or prices. The practical goal is continuity, but continuity may come at the expense of margins.

Higher oil prices can encourage producers to drill more, creating additional work for oilfield-services companies. That is the demand benefit. But service companies must deliver the work using equipment, personnel, fuel, and transport. If supply-chain disruptions make those inputs scarce or expensive, revenue can rise while profit falls. Inflation magnifies the pressure by raising costs across the economy.

The article shows both sides. SLB’s Middle East and Asia revenue rose 9% sequentially to $2.81 billion, yet remained 6% below the prior year. Baker Hughes reported $1.26 billion, down 13% year over year. At the same time, logistics costs tripled on some contracts, fuel doubled, and labor rose 30% to 40%.

The outcome depends on pass-through power. If contractors can charge customers more, they may protect margins, but project and energy costs rise. If they cannot, they absorb the increases. That leaves higher drilling activity competing with weaker profitability and possible inflation.