Iran War Oil Workarounds Prove Costly, But Global Supply Remains Sufficient

The Iran war has led to alternative routes for oil exports from Gulf nations, but at a cost. When Iran shut down the Strait of Hormuz in March 2026, oil prices were feared to skyrocket. However, nearly seven months on, prices are expensive but not exorbitant.

Saudi Arabia and other Gulf producers found alternative routes, including unused pipeline capacity. When these were targeted by Iran and its allies, workarounds were implemented. The U.S. military and oil exporters continued to find new ways to keep energy flowing.

The East-West pipeline was attacked in July, forcing the Saudis to redirect Asia shipments northwest to the Mediterranean through the Suez Canal or a pipeline across Egypt. This added time and expense to the voyage. In September, the East-West pipeline was shut down, potentially for weeks, and the Saudis shifted again, joining other Gulf producers sending oil through the U.S.-guided corridor in the Strait of Hormuz.

Rahul Choudhary, vice president of upstream research at Rystad Energy, estimates that some 6-7 million barrels per day are being drawn down from the globe's abundant oil inventories. Demand has fallen by around 5 million barrels per day due to higher prices and sluggish economic growth in key markets.

The workarounds have been expensive and may not be sustainable. The cost of shipping is a quarter of the price, instead of the usual 1-3%. Markets are braced for further disruption, which could lead to even higher prices.