Gulf oil flows recover but high costs keep energy prices elevated

The flow of crude oil from the Gulf region has nearly returned to pre-war levels, but the methods used to transport it have become more complex and costly, keeping energy prices elevated. Between 1 and 28 September, about 16.5 million barrels of crude per day left the Gulf, excluding Iran, according to maritime intelligence firm Kpler. This is close to the pre-war average, and total Middle Eastern crude flows are now at 98% of what they were before the conflict, per JPMorgan.

However, suppliers are relying on expensive new routes and methods. Kpler estimates that 40% of the region’s crude now leaves without crossing the Strait of Hormuz, up from 17% before the war. Instead, exporters are using pipelines and alternative loading points in Saudi Arabia and the UAE. More than 70% of the crude that passed through Hormuz in August was transferred between tankers offshore in the Gulf of Oman.

The amount of oil transferred between ships in the Gulf of Oman surged from 160,000 barrels a day in 2025 to an average of 3.7 million barrels a day since the war began, peaking at 7.2 million barrels a day in September. These workarounds increase costs, as tankers spend longer traveling between terminals, requiring more ships and boosting fuel and freight expenses. Just 17 vessels passed through Hormuz over the weekend of 19 and 20 September, compared with a pre-war average of about 125 large commercial vessels a day.

Insurance costs have also risen sharply due to the risks posed by Iranian attacks on shipping. War-risk premiums for ships have jumped from negligible rates to up to 10% of a cargo value. The higher risk has rippled beyond Hormuz, with premiums for Saudi-linked tankers loading at Yanbu on the Red Sea tripling to about 3%, and premiums for ships near Yemen reaching 7%.

While crude oil volumes have recovered, refined fuel supplies remain under pressure. In the UK, the average diesel price reached £2 a litre for the first time since records began. In the US, diesel prices hit a record $6.53 a gallon on 22 September. Only about 677,000 barrels a day of refined petroleum products were moving through the Gulf in September, compared with about 3.6 million barrels a day before the war.

LNG supplies are still far below pre-war levels, with shipments exiting the Strait of Hormuz reaching the highest level since the war began but still more than 80% down on the benchmark. Qatar’s LNG trade remains severely disrupted, with exports falling 96% since April. The International Energy Agency (IEA) warned that if Gulf supplies remain constrained, higher prices and further demand reductions may be required to close the supply-demand gap.