The volume of crude oil leaving the Gulf region has recovered towards pre-war levels. But the increasingly complicated and expensive methods being used to transport it out of the region mean there is little sign of a return to normal energy costs.
Seven months after the US-Israeli war on Iran all but closed the Strait of Hormuz – a critical waterway for global oil and gas exports – the Middle East’s oil industry has found ways to get much of its crude moving again.
At least 16.5 million barrels a day of crude left the Gulf region, excluding Iran, between 1 and 28 September, close to its pre-war average, according to maritime intelligence firm Kpler. Total Middle Eastern crude flows are at about 98 per cent of what they were before the attack on Iran, according to JPMorgan.
But oil markets are some way from recovery, with suppliers relying on costly new routes and methods.
Kpler estimates that 40 per cent of the region’s crude now leaves without crossing the Strait, compared with 17 per cent before the war, with exporters relying more heavily on pipelines and alternative loading points in Saudi Arabia and the United Arab Emirates.
More than 70 per cent of the crude that passed through the waterway in August was transferred from one tanker to another offshore in the Gulf of Oman, according to Kpler.
Expensive workarounds
The amount of oil transferred between ships in the Gulf of Oman rose from 160,000 barrels a day in 2025 to an average of 3.7 million barrels a day since the war began, reaching 7.2 million barrels a day in September, Kpler reported.
But facilities supporting transfers around Fujairah in the UAE and Sohar in Oman are operating at or close to capacity.
If transfers move farther from the Gulf, tankers spend longer travelling between terminals and transfer points – meaning more ships are required to move the same amount of oil, while longer journeys increase fuel and freight costs.
Just 17 vessels passed through Hormuz over the weekend of 19 and 20 September, compared with an estimated pre-war average of about 125 large commercial vessels a day, according to Reuters.
Rory Johnston, an oil market researcher and founder of the newsletter, notes that recent supply increases “come at extremely high cost” and the “current structure has never been sustainable”.
Higher premiums
Iran has threatened or attacked commercial shipping throughout the conflict, with dozens of vessels coming under fire and at least 22 seafarers killed. The risks of these journeys are being reflected in insurance costs.
War-risk premiums for ships rose from negligible rates before the war to up to 10 per cent of a cargo value, according to Marcus Baker, global head of marine, cargo and logistics at Marsh.
The higher risk has rippled beyond Hormuz. War-risk premiums for Saudi-linked tankers loading at Yanbu on the Red Sea have tripled to about 3 per cent of vessel value, while premiums for ships near Yemen can reach 7 per cent, Reuters reported.
Emirates National Oil Company (ENOC) director Paul Bradshaw said recently that rates above five per cent “could be another $10m (£7.57m) on your cargo insurance”, for bulk suppliers.
Crude is back – but refined fuel isn’t
While crude oil volumes have recovered, the fuel people use every day has not yet returned to normal supply.
Crude oil is the raw material refineries turn into petrol, diesel and jet fuel, which remain under significant pressure in the global market. In the UK, the average diesel price reached £2 a litre last week for the first time since records began.
The pressure is also being felt in the US, where diesel prices hit a record $6.53 a gallon on 22 September.
In September, about 16.5 million barrels of crude a day left the region, according to Kpler. But only about 677,000 barrels a day of refined petroleum products were moving through the Gulf, compared with about 3.6 million barrels a day before the war, the company’s figures stae.
The shortages are worsened by a global crunch in refining capacity, with many of the countries that process fuel affected by war, from the Middle East to Russia.
LNG supplies still far from pre-war levels
Non-oil forms of fuel that consumers rely on – including in the UK – remain far below pre-war benchmarks.
Kpler figures for September showed the highest rate of LNG transits since before the war – but still more than 80 per cent down on that benchmark.
Leading prdoucer Qatar’s LNG trade remains severely disrupted. QatarEnergy has extended force majeure on deliveries to several customers, while its LNG exports have fallen 96 per cent since April. Only 18 shipments had been delivered by the end of August compared with 509 during the same period a year earlier.
Countries that normally rely on Qatari gas have had to find supplies elsewhere, increasing competition for LNG as winter approaches, and driving up prices for consumers.
So when will prices actually fall?
The return of Middle Eastern crude removes one major source of pressure on the oil market, but other parts of the energy system remain severely constrained.
The International Energy Agency (IEA) said oil prices initially eased as emergency stockpiles were released, alternative routes were used, and production outside the Gulf increased.
But global oil inventories had fallen by 507 million barrels by mid-September compared with the start of the war, despite more than 300 million barrels of emergency stocks being released.
The IEA warned: “If Gulf supplies remain constrained in the coming months and commercial inventory buffers continue to deplete rapidly, higher prices and further demand reductions may be required to close the supply-demand gap”.
The oil market has adapted by using pipelines, alternative ports and ship-to-ship transfers. However, those workarounds require more ships, longer journeys and more expensive insurance.
For consumers and businesses, crude may be flowing again, but fuel, gas and transport costs remain under significant pressure.
So, while the energy system is functioning, it comes at a much higher cost than before the conflict began and it’s unclear when they will begin to level out.