The Iran war has severely disrupted global oil tanker routes, pushing freight costs to unprecedented levels and drastically reducing U.S. crude oil shipments to Asia. The cost of transporting crude from the U.S. Gulf Coast to China spiked to $80 million earlier this month, a tenfold increase from pre-war averages. While rates have since eased to around $60 million for a supertanker voyage this week, the high costs have led Asian refiners to cut orders for U.S. crude by about 50% compared to September. If this trend continues, November could see the lowest volumes of U.S. crude oil delivered to Asia in seven years.
The conflict has reshuffled trade routes, with more oil flowing from the Strait of Hormuz through ship-to-ship transfers in the Gulf of Oman. This has tied up supertankers for extended periods, reducing their availability for other key routes like the U.S. Gulf Coast to Asia. The Gulf of Oman shuttle fleet has expanded to about 80 very large crude carriers (VLCCs), but average round-voyage times have doubled to 23 days, far exceeding the optimal 9-10 days.
Freight rates are now a major market factor, according to Randy Hawkins, Vice President of International Crude Oil Supply and Trading at Valero Energy. The cost to move a VLCC from the Gulf Coast to Asia now averages $30 to $35 per barrel, compared to around $5 per barrel in 2025. This surge is causing significant disruptions in global crude pricing as refiners seek closer sources and sellers adjust prices to account for shipping costs. Asian buyers are increasingly turning to Middle Eastern crude, while European refiners are opting for regional supplies.
The higher demand for European and Middle Eastern crude has pushed up premiums on some grades. The Dated Brent benchmark hit a record $20 per barrel premium to Brent last week, and Norway's Johan Sverdrup crude reached a record $24 per barrel premium. In contrast, African and U.S. crudes have seen premiums tumble and discounts widen due to high shipping costs. West African crude prices have slumped to record-low discounts, with some grades down to minus $20 per barrel. In the U.S., the premium of WTI at the Midland East Houston hub has dropped to $0.25 per barrel above WTI, down from over $3 per barrel in early September.