The Iran war has severely disrupted global oil tanker operations, pushing freight costs to unprecedented levels and drastically reducing U.S. crude oil exports to Asia. The cost of shipping 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, potentially resulting in the lowest November delivery volumes in seven years.
The conflict has reshuffled trade routes, with more tankers tied up in inefficient voyages, particularly in the Gulf of Oman. The average round-voyage time for oil transfers has doubled, limiting the availability of very large crude carriers (VLCCs) for other key routes. Record-high freight rates in the Middle East are drawing tankers away from other regions, exacerbating the global shipping crisis.
Freight costs are now a major factor in global crude pricing, 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 has surged to $30, $35 per barrel, compared to just $5 per barrel in 2025. This has led refiners to seek closer sources, while sellers are forced to discount barrels to offset shipping expenses.
Asian buyers are increasingly turning to Middle Eastern crude, often purchasing on a delivered basis to reduce costs. In Europe, refiners are opting for regional supplies due to the spike in tanker rates. Meanwhile, African and U.S. crudes are seeing premiums tumble and discounts widen as high shipping costs make long voyages less viable. The premium for WTI at the Midland East Houston hub has dropped to $0.25 per barrel, down from over $3 in early September.