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Middle East conflict pushes global oil shipping costs to record highs, IEA warns – EnviroNews
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Global oil shipping costs have surged to record highs amid disruptions to maritime trade routes linked to the ongoing Middle East conflict, threatening refinery profitability, tightening fuel supplies and increasing energy costs for consumers, the International Energy Agency (IEA) has warned.
The agency said the cost of transporting crude oil from the Middle East Gulf to Asia on a large tanker exceeded $37 per barrel by mid-October 2026, more than five times the level recorded before the conflict began in February.
The surge in freight rates has added fresh pressure to global oil markets already grappling with supply disruptions, uncertainty over the reopening of the Strait of Hormuz and rising costs of moving crude oil and refined petroleum products between producing and consuming regions.
In a commentary, IEA Oil Market Analyst Daniel Gymer and Senior Oil Market Analyst David Martin said shipping costs, which typically account for a relatively small share of oil prices, had become a major factor influencing the economics of global oil supply.
They warned that escalating transportation costs were particularly affecting Asian refiners that depend heavily on Middle Eastern crude, while economies reliant on imported petroleum products face additional upward pressure on energy costs.
The analysts said the implications extended beyond the immediate disruption to Gulf oil supplies, as longer shipping routes, vessel congestion and reduced tanker availability were driving up freight rates across several international markets.
Strait of Hormuz Disruptions Drive Shipping Costs Higher
According to the IEA, vessel congestion around the Strait of Hormuz, the rerouting of oil shipments and the growing use of ship-to-ship transfers have increased delivery times and reduced the efficiency of the global tanker fleet.
Under normal circumstances, tankers operate along established routes between producing and consuming regions. However, disruptions that extend voyage times leave fewer vessels available to transport other cargoes, pushing up charter rates.
The agency said shipping costs had already increased following Russia’s full-scale invasion of Ukraine, which reshaped global crude oil and petroleum product trade.
The subsequent rerouting of vessels following European and Group of Seven restrictions on Russian oil disrupted established shipping patterns, while the growing use of so-called shadow fleets to transport Russian and Iranian oil outside conventional shipping arrangements further reduced the pool of vessels available to the wider market.
The latest surge in freight rates followed drone attacks on Saudi Arabia’s East-West crude oil pipeline on September 11, 2026.
The pipeline serves as a critical alternative route for Saudi crude exports, enabling oil to reach the Red Sea without passing through the Strait of Hormuz.
The temporary suspension of pipeline flows coincided with increased Chinese oil purchases, resulting in more Saudi crude moving through the Strait and raising demand for tankers.
At the same time, the disruption left very large crude carriers positioned at Sidi Kerir, off Egypt’s Mediterranean coast, without their expected cargoes, forcing charterers to seek alternative supplies and vessels.
The situation was compounded by the Houthis’ maritime blockade of Saudi navigation through the Bab el-Mandeb Strait, which further lengthened shipping journeys and reduced fleet efficiency.
Although Saudi Arabia repaired and reopened the East-West Pipeline within days, the analysts said the combined disruptions and severely curtailed Saudi exports through Bab el-Mandeb continued to affect both oil exporters and importers.
Importers are paying more to receive crude oil and petroleum products, while exporters face downward pressure on the prices they receive for their oil.
West African Oil Shipments Also Face Higher Costs
The disruption has spread beyond the Middle East, affecting tanker markets serving West Africa, Europe and other major oil-consuming regions.
As large crude carriers spend longer navigating disrupted routes, oil traders have increasingly turned to smaller Suezmax and Aframax tankers to transport cargoes that would otherwise have been carried by very large crude carriers.
The shift has increased demand for smaller vessels and tightened their availability.
The IEA said demand for Suezmax and Aframax tankers, measured on a tonne-mile basis that accounts for cargo volumes and distance travelled, was approximately 20 per cent higher in the third quarter of 2026 than a year earlier.
By mid-October, the cost of transporting crude oil from West Africa to Europe on a Suezmax vessel had exceeded $22 per barrel, more than four times the level before the conflict.
North Sea Aframax shipping rates had also tripled, rising above $6 per barrel.
The disruption has extended to the market for refined petroleum products as some shipowners have shifted Long Range 2 tankers, normally used for long-distance petroleum product shipments, to crude oil transportation to benefit from higher earnings.
This has forced more refined-product cargoes onto smaller vessels, further reducing available shipping capacity.
Freight rates for Long Range 1 tankers travelling from the Middle East Gulf to Japan reached nearly $27 per barrel by mid-October, about five times their pre-conflict levels.
The analysts warned that additional trade restrictions could intensify the pressure on shipping markets by forcing petroleum products to travel longer distances between alternative suppliers and consumers.
Asian Refiners Face Mounting Financial Pressure
The IEA identified Asia as the region experiencing some of the most severe effects of rising shipping costs because of its dependence on Middle Eastern crude oil.
Refiners have faced additional expenses as cargoes are transferred between tankers around the Strait of Hormuz before continuing their journeys to Asian destinations.
By mid-October, charter rates for very large crude carriers transporting oil from the Middle East Gulf to Asia had climbed above $1.3 million per day.
According to the agency, the increase in transportation costs has significantly reduced the financial benefits refiners would otherwise earn from processing crude oil into petrol, diesel, kerosene and other products.
In September, the surge in delivered crude costs pushed refining margins for some Asian facilities processing Middle Eastern crude into negative territory.
European refiners had initially been better positioned to absorb higher freight costs because of stronger refining margins. However, rising crude oil prices during the second half of September also began to erode their profitability.
The analysts said refiners could attempt to reduce their exposure by switching to alternative crude grades, including lighter, lower-sulphur oil from the United States.
However, transportation costs on these routes have also increased substantially.
By mid-October, shipping crude from the US Gulf Coast to Singapore cost approximately $33 per barrel, while transportation to Europe cost around $24 per barrel, both more than four times their pre-conflict levels.
Consequently, refiners face difficult decisions over whether to absorb higher crude costs, switch to alternative grades that may produce less favourable yields or reduce operating rates.
The IEA warned that cutting refinery operations could further tighten global supplies of diesel, kerosene and other petroleum products, potentially pushing prices higher for consumers.
Oil Supply Recovery May Not Immediately Lower Freight Rates
The agency said restoring oil production and fully reopening the Strait of Hormuz would be essential to easing pressure on global oil markets.
However, it cautioned that an improvement in security conditions would not necessarily result in an immediate return to lower shipping costs.
High export volumes, efforts to replenish depleted crude oil and petroleum product inventories, and persistent inefficiencies caused by disrupted shipping routes could continue to constrain tanker availability.
These factors, the analysts said, could keep freight rates elevated even after the immediate security crisis subsides.
The developments underscore how disruptions to maritime transportation can amplify the economic consequences of oil supply shocks, increasing costs for refiners and import-dependent economies even when crude oil remains available from alternative sources.
For oil-producing countries, including those in West Africa, the rising cost of shipping also highlights the importance of efficient export routes and reliable maritime access to international markets.
The IEA’s assessment suggests that the duration of the disruption, the pace of recovery in oil production and the restoration of established shipping routes will be critical in determining how quickly transportation costs and pressures on global fuel markets ease.
