Off the coast of Oman, just south of the Strait of Hormuz, a growing fleet of tankers is anchored side by side, transferring crude oil ship-to-ship in a complex system that has become essential for Middle East oil exports amid ongoing regional conflicts. This process, known as ship-to-ship (STS) transfer, has emerged as a critical workaround since the outbreak of hostilities involving Iran earlier this year, allowing Gulf producers to maintain exports despite heightened risks and logistical challenges.

The Strait of Hormuz historically channels about one-fifth of the world’s oil consumption, but Iran’s blockade following the escalation of conflict in February sharply curtailed shipping traffic. Many tanker operators declined to navigate the active conflict zone, and those willing to proceed demanded significantly higher insurance premiums. This disruption forced Gulf producers to find alternatives to safeguard their crude shipments.

In response, the Abu Dhabi National Oil Company (ADNOC) pioneered the use of shuttle tankers in April that transport crude from Gulf terminals to the safer waters of the Gulf of Oman. Here, oil is offloaded onto larger vessels bound for Asian refineries, effectively reducing the exposure of vessels to the dangerous Hormuz transit. Saudi Aramco has since adopted similar measures after increased attacks on its Red Sea shipping routes—particularly following a strike on the East-West pipeline by Iran-backed militants in Iraq on September 10 and Houthi control over parts of the strategically crucial Bab el-Mandeb Strait, which have disrupted alternative export pathways.

According to recent data from Kpler, exports through the Strait of Hormuz have reached approximately 6.5 million barrels per day (bpd) in September, the highest level since a brief surge following a ceasefire in June. Of this volume, an estimated 2.5 million bpd—about 40 percent of total throughput—are loaded via STS transfers, a sharp rise from 1.4 million bpd in August. The UAE’s oil exports alone are projected to hit 3.6 million bpd this month, exceeding 2025 averages.

While this floating transfer network has prevented a more severe disruption to global oil supply, it comes with significant financial burdens. The STS process requires additional vessels, time, and coordination, sharply increasing transportation costs. Freight rates for very large crude carriers (VLCCs) moving oil from the Gulf to Asia have soared above $30 per barrel, a historic high relative to crude prices around $105. Previously, freight accounted for only 2 to 3 percent of crude costs; today, it comprises more than a quarter. To remain competitive in global markets, producers have had to offer deeper discounts to buyers, effectively absorbing a portion of these inflated logistic expenses.

This surge in tanker demand is also driving up global freight rates, as the available fleet is stretched thin. Industry analysts have noted the growing wealth shift from oil producers to tanker operators amid these challenging conditions. As the regional conflict persists, the durability of this intricate shuttle system remains uncertain, raising questions about whether STS transfers will become a permanent fixture in Middle East oil shipping or remain a temporary solution to circumvent ongoing conflict-related disruptions.