An oil tanker is berthed beside loading equipment at the
An oil tanker is berthed beside loading equipment at the Donges refinery on the Loire estuary in Donges in Loire Atlantique in Pays de la Loire in France on September 25 2026. The series documents maritime traffic and oil and gas infrastructure in the Loire estuary in the context of the oil and gas supply shortage following the closure of the Strait of Hormuz.

Freight rates for global crude oil are rising to unprecedented levels. ING senior industry economist Rico Luman said freight for crude shipped from Saudi Arabia's Ras Tanura to Rotterdam in the Netherlands had been about US$2 a barrel last year, but rose above US$35 in September — an increase of about 17 times. ING also said the average daily earnings of crude oil tankers worldwide exceeded US$500,000 in early October, about 10 times the average level in 2025.

More than one route affected

The surge is not confined to a single route. Data from the Baltic Exchange showed that the cost of chartering a very large crude carrier (VLCC) to transport 2 million barrels of crude from the US Gulf to China rose to about US$44.8 million in mid-September, more than 1.5 times the roughly US$17.8 million recorded before the conflict in the Middle East broke out in late February. Daily charter rates on the benchmark Middle East-to-China route, known as TD3C, reportedly topped US$1.2 million in mid-September.

Why capacity is in short supply

Vitol chief executive Russell Hardy said the crisis had evolved from a crude oil crisis and a refined products crisis into a shipping crisis. Ship-to-ship transfers outside the Strait of Hormuz have allowed Middle Eastern crude to continue being exported, but the process is highly inefficient. Many tankers have to wait in the area for days or even weeks, reducing the capacity available for other routes. "There are not enough ships to go around," he said.

Other factors include:

  • Saudi Arabia's suspension of its East-West pipeline.
  • Asian refineries switching to long-haul supplies from Brazil, Guyana and West Africa. Morgan Stanley analyst Martijn Rats said related voyages for Indian refineries could take 30 to 40 days.
  • High war-risk premiums, as well as shipping security concerns.

How costs reach end users

Clarksons Platou estimates that freight accounts for about 15% of the value of a barrel of crude, far above the historical level of about 2%. ING estimates that record freight rates, combined with European refining margins at 2.5 times their 2025 average, could push up the underlying price of diesel by more than US$0.50 a litre. Hardy also said buyers and refineries were currently finding it difficult even to budget for freight costs.

Shipowners benefit as traders and refineries come under pressure

In Hong Kong trading, shares of COSCO Shipping Energy Transportation (1138.HK; Shanghai: 600026) rose as much as 6.6% on October 8. The company forecast in July that its net profit attributable to shareholders for the first half of 2026 would be about 4.5 billion yuan, or roughly HK$4.9 billion, representing year-on-year growth of about 141%. Clarksons data showed average VLCC earnings of about US$278,000 a day in the third quarter, while rates on some routes exceeded US$1.6 million in early October. JPMorgan and Morgan Stanley subsequently reiterated their "overweight" ratings on the stock.

On the other hand, the surge in freight rates has made some long-haul crude trades unprofitable. Bloomberg reported that traders faced the risk of refineries reducing purchases of long-haul crude as margins came under pressure.

Freight rates hinge on the situation in the strait

Clarksons said freight rates could fall if US-Iran talks led to Iran reopening the strait. But Reuters reported that at least 12 oil and gas transport vessels were attacked near the Strait of Hormuz in the week ending October 5, the highest weekly total since the conflict involving Iran began.