Crude oil exports from the Middle East have recently hit their highest level since the outbreak of the war in Iran, as an increasing number of Persian Gulf producers have resumed shipping cargoes through the Strait of Hormuz, despite the persistent threat of Iranian strikes. However, oil prices continue to trade at elevated levels. This highlights a critical dimension of the current energy crisis: logistical bottlenecks can trigger market disruptions nearly as severe as an actual drop in physical crude supply.
According to Reuters, citing data from analytics firm Kpler, crude oil flows through the Strait of Hormuz reached a seven-day average of 14.2 million barrels per day on September 26—roughly 80% of pre-war levels. Since then, transit volumes have receded, though these numbers are likely to be revised upward as vessels frequently turn off their satellite tracking systems while navigating the Strait of Hormuz and for several days thereafter. In any case, the overall picture is clear: significantly larger volumes of crude oil are once again moving through the Strait of Hormuz. The question, therefore, is straightforward: Why is Brent still trading above $100 per barrel? The answer comes down to a single word: logistics.
War has fractured the global oil supply chain
For decades, the global oil industry operated as a finely tuned system, engineered to move vast quantities of crude oil and refined fuels over long distances at the lowest possible transportation cost. However, conflicts across the Middle East and Eastern Europe have effectively shattered this model. The convergence of unprecedented tanker freight rates, surging maritime insurance costs, and a severe deficit in refining capacity has created severe bottlenecks across the entire energy supply network. Worse still, resolving these structural dysfunctions could take months or even years. This means end consumers may face sustained high energy costs, even as the immediate pressure from crude oil scarcity begins to abate.
Breaking the siege of the Strait of Hormuz
Iran’s blockade of the Strait of Hormuz following the outbreak of war with the US and Israel on February 28 rapidly reshaped global oil flows. Persian Gulf producers redirected a portion of their exports through alternative routes, buyers turned to crude supplies from more distant regions, and governments executed unprecedented releases from their strategic petroleum reserves. Among the most significant shifts was Saudi Arabia’s decision—formerly the world’s top oil exporter—to channel exports through the East-West Pipeline, which carries crude oil to the port of Yanbu on the Red Sea. At one point this year, approximately 4% of total global oil supply was being transported along this single corridor. However, after the East-West Pipeline came under attack in early September by Iranian-backed Iraqi militants, Saudi Arabia was forced to reroute its export volumes back through the Strait of Hormuz toward the Persian Gulf.
It is a passage that Riyadh discovered remains operational, contrary to initial market assumptions. According to Kpler data, Saudi exports via the Strait of Hormuz averaged 3 million barrels per day in September, marking their highest monthly level since conflict erupted. Although Saudi crude exports through Hormuz in September still represented barely half of their pre-war baseline, they could rebound rapidly as the East-West Pipeline progressively resumes normal operations. Herein lies a striking paradox. The attack on the East-West Pipeline, intended to paralyze Saudi Arabia, may ultimately have weakened Tehran’s primary bargaining chip: the threat of complete control over the Strait of Hormuz. The reason is that the strike demonstrated how, even under conditions of persistent conflict, substantial volumes of crude can continue moving through the Strait of Hormuz and other vital export hubs.
Oil transportation costs surge out of control
Despite rising export volumes, the market’s return to normalcy remains highly precarious. On one hand, expanded exports from Persian Gulf nations have helped narrow the global crude deficit. Energy Aspects estimates the global oil market currently faces a shortfall of roughly 1.6 million barrels per day, down from nearly 4 million barrels per day at the peak of supply disruptions in May. Under normal market conditions, such a supply recovery would exert strong downward pressure on crude oil prices. Yet Brent crude remains locked above $100 per barrel, standing more than 40% higher than pre-war baselines. Undoubtedly, current oil prices incorporate a substantial geopolitical risk premium, driven by fears of further conflict escalation. Washington and Tehran have yet to reach any formal understanding regarding the future security of the Strait of Hormuz. Yet geopolitical uncertainty accounts for only part of the equation. Freight and insurance charges, which once represented a small fraction of delivered crude costs, have emerged as a primary driver of overall energy prices.
The tanker vicious cycle
A major root cause lies in the overly complex transport logistics now surrounding the Persian Gulf. Moving crude through the Strait of Hormuz into the Gulf of Oman often requires multi-stage shuttle runs involving multiple oil tankers. In the Gulf of Oman, cargoes are transshipped onto smaller vessels before making the long voyage to Asian buyers. This multi-step operation ties up a large portion of the global fleet of Very Large Crude Carriers (VLCCs) for extended periods. Consequently, tanker availability in other major producing regions around the globe has tightened dramatically. Simultaneously, more buyers are sourcing crude from the Atlantic Basin, sending ships on far longer trade routes to Asia. This shift places even heavier strain on global tanker capacity.
The impact
Tanker freight rates have surged to historic levels. Data from shipbroker Poten & Partners shows the daily charter rate to transport Middle Eastern crude to Asia on a VLCC recently surpassed $1.2 million per day. Back in January, that same charter cost roughly $30,000 per day. In other words, freight charges that once made up about 3% of the delivered price of a barrel of crude have now ballooned to approximately 27%. Nor is this issue expected to resolve anytime soon. These freight costs will likely stay elevated until global oil trade routes revert to something resembling their pre-war structure. In fact, a distinct paradox is emerging. A further increase in crude exports through the Strait of Hormuz could initially worsen the situation. As export volumes rise, so does demand for the complex shipping and transshipment networks required to safely move oil through the Persian Gulf region.
The second time bomb: The refining crisis
The crisis is exacerbated by lost refining capacity across both the Middle East and Russia. In Russia, Ukrainian drone strikes have knocked dozens of refineries offline, intensifying pressure particularly within the diesel market. Diesel prices have reached historic highs, creating a major political headache for US President Donald Trump ahead of next month’s midterm elections. This is because diesel serves as the primary fuel for a vast swath of global industrial, agricultural, and commercial transportation. The G7 decision last week to release diesel from strategic stockpiles will likely offer only temporary relief. That action does nothing to rebuild lost physical refining capacity. At the same time, refiners are competing aggressively to purchase medium-sour crude, which yields higher outputs of middle distillates like diesel. This specific crude grade is produced primarily in the Middle East and Russia—precisely where supply disruptions remain most acute.
The feedback loop keeping oil above $100
This structure creates a dangerous feedback loop: Constrained refining capacity drives up diesel prices, which boosts demand for high-yielding crude grades, supporting overall crude oil prices. As a result, oil prices are no longer determined solely by how much raw crude is available on the global market. Instead, pricing hinges on something far more complex: The global energy sector’s physical capacity to transport and refine available crude oil. That reality makes a sustained drop in oil prices far more difficult to achieve. The broader picture shows that even if transit flows through the Strait of Hormuz continue to recover, the global market remains constrained by infrastructure, transport, insurance, and refining bottlenecks. The war did not merely create a shortfall of crude oil; it created a far more intractable problem by making it significantly harder and more expensive to move and refine the oil that remains available. That fundamental shift explains why, despite recovering export volumes, Brent crude remains firmly above $100 per barrel.
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