Gulf Oil Exports Rebound Despite Hormuz Attacks and Soaring Costs

Despite escalating attacks on vessels in the Strait of Hormuz, Gulf oil exports have rebounded close to pre-war levels. Analysts note that while oil prices remain high, Gulf exporters prioritize maintaining supply over maximizing profits, absorbing higher transport costs and offering discounts to buyers to offset risks.

Between October 1 and 5, at least nine vessels were struck, yet this did not disrupt the recovery of crude shipments. The seven-day average for Middle East oil exports, including key routes like the Strait of Hormuz and the Red Sea, stands at about 18 million barrels per day, slightly below pre-war levels. Producers have adapted by using ship-to-ship transfers outside the strait and relying on US naval protection.

However, the market remains far from normal. Brent crude has hovered around $100 a barrel, up from $68 before the war. Shipping expenses and war-risk insurance have surged, with the cost of chartering a very large crude carrier (VLCC) exceeding $1 million a day, compared to $100,000 pre-war. Gulf nations are also offering discounts to buyers to mitigate the impact of soaring freight costs.

Experts emphasize that higher oil prices do not fully compensate for the broader economic costs, including increased defence spending and infrastructure repairs. The supply deficit from the past seven months and constrained refined products further complicate the market, highlighting that headline export numbers understate the true economic disruption.