The cost of chartering oil supertankers on routes between the Middle East and Asia has surged to an unprecedented $1.2 million per day, driven by the ongoing conflict in Iran, which has significantly disrupted maritime oil shipments. The war has created a shortage of Very Large Crude Carriers (VLCCs), vessels capable of carrying about two million barrels, as ships are forced to reroute and undertake substantially longer voyages.

Since late August, freight rates for VLCCs traveling from the Middle East to China have more than doubled, with similar increases observed on other routes. For instance, shipping costs from Brazil to China have risen by roughly one-third within the past week, according to shipbroker Braemar. This escalation marks a dramatic increase from last year, when rates typically ranged between $20,000 and $50,000 daily. Even before the conflict, a structural shortage of tanker vessels had elevated Gulf cargo shipping costs to historic highs, with prices reaching around $120,000 a day in February.

The dramatic rise in freight charges has begun to impact refinery operations. Some refiners, especially in Asia, have scaled back production as shipping expenses erode profit margins. Diesel fuel prices in key markets reflect these pressures, with costs hovering around $180 per barrel in Singapore and exceeding $200 in both the United States and Europe. Meanwhile, Brent crude prices have declined from peaks above $125 per barrel in April to about $100 this week, as some traders hold back purchases amid the rising delivery costs.

The conflict has complicated supply chains by forcing refineries to source crude oil from more distant regions, increasing transit times and tying up tanker availability. Indian refineries, for example, are procuring crude from countries such as Brazil, Guyana, West Africa, and the North Sea, resulting in voyages lasting 30 to 40 days, according to Morgan Stanley analyst Martijn Rats. Additionally, about 60 vessels navigating the Strait of Hormuz engage in ship-to-ship transfers in the Gulf of Oman, a process that causes delays and leaves approximately 15 percent of the global tanker fleet waiting off the Omani coast, as estimated by shipbroker Clarksons. These transfers can immobilize supertankers for up to 10 days while waiting to receive cargo.

Insurance costs for tankers operating in the Middle East have also surged substantially, with war-risk premiums reaching levels near 10 percent of vessel hull values—significantly higher than the typical 3 percent or less in less volatile regions.

Industry analysts note that shipping costs are no longer a marginal factor but are becoming a key driver of crude oil pricing. Tom Reed, head of oil market analysis at a pricing agency, highlighted that freight expenses now represent about 20 percent of the cost of delivering crude to refineries, underscoring how maritime disruptions are increasingly affecting end-user prices.

In response, some of China’s largest independent refiners have begun reducing throughput. Hengli Petrochemical, for instance, has lowered crude processing at its 400,000-barrel-a-day Dalian refinery to 80 percent capacity, with expectations of further cuts. Rongsheng and Shenghong are also anticipated to scale back operations from late September.

Mary Melton, senior tanker analyst at Braemar, said the record-high shipping costs are starting to weigh heavily on refining margins, noting that freight can constitute between 20 percent and 40 percent of the delivered cost of crude, pressuring global oil markets amid ongoing geopolitical tensions.