The ongoing conflict involving Iran has triggered a new disruption in the global oil market, this time affecting the availability of oil tankers rather than crude supply itself. Recent drone attacks targeting Saudi Arabia’s East-West Pipeline have forced more oil shipments back through the Strait of Hormuz, intensifying pressure on a tanker fleet already under considerable strain.
The pipeline, Saudi Arabia’s primary bypass of the Strait of Hormuz, transports crude oil from the Persian Gulf to the Red Sea port of Yanbu. Since it was shut down earlier this month, Saudi Aramco has been compelled to route a greater volume of crude through the Gulf, relying increasingly on tanker shipments navigating the busy and geopolitically sensitive strait. This shift has led to unprecedented increases in tanker charter rates worldwide.
According to maritime intelligence, the daily cost of chartering very large crude carriers (VLCCs) for voyages including the Strait of Hormuz recently surged to over $1 million, a record level that sums to roughly $26 per barrel — about one-quarter of the crude's market value. Typically, shipping expenses represent only a small fraction of a crude cargo’s worth. Rates on key trade routes beyond the Middle East, such as West Africa to China, have also spiked notably.
The tanker shortage coupled with rising freight rates has further complicated global oil logistics. Some refiners face tightened margins as fuel transportation costs climb, potentially keeping pump prices elevated despite shifts in crude market prices. This dynamic adds a layer of uncertainty ahead of the U.S. midterm elections in November, where gasoline prices remain a critical political issue.
Delays and disruptions have been felt particularly acutely in Europe and Asia. Aramco reportedly warned some customers about potential shipment postponements or cancellations extending into October if the East-West Pipeline does not resume partial operations soon. Ship tracking data indicates that no crude vessels have loaded at Yanbu since the attacks, with several Saudi-flagged tankers avoiding the Bab el-Mandeb Strait due to security concerns linked to Iran-aligned Houthi militants operating in the area.
To mitigate the impact, Aramco has increased its use of ship-to-ship transfers near the Strait of Hormuz. This approach involves moving crude from Gulf terminals to nearby ports outside the strait, where it is then transshipped to vessels bound for global markets. While this workaround maintains some flow of oil, it occupies ships for multiple short trips, reducing availability for longer voyages and pushing rates higher.
As a result of the pipeline disruption and attacks on Saudi vessels, many Saudi-flagged ships have rerouted around the Cape of Good Hope, adding roughly two weeks and about $1 million in costs per trip. Analysts note that about 15% of the global VLCC fleet is currently positioned off the coast of Oman engaged in these shuttle runs or longer detours.
Although discussions are ongoing between Aramco and some Asian buyers about further crude transfers from tankers off Oman, the capacity for additional ship-to-ship operations is reportedly limited. Experts caution that this strategy’s effectiveness depends heavily on Iran’s tolerance of increased maritime traffic through the Strait of Hormuz.
Overall, the tanker shortage represents a significant bottleneck in oil logistics amid the Iran-related conflict, adding to global energy supply challenges and keeping transportation costs—and by extension fuel prices—at elevated levels.