Crude shipments are recovering, but damaged refineries, scarce diesel, and costly passage through Hormuz keep the fuel bill high.
The CradIe
For shipowners, these were no longer routine voyage expenses. Months of attacks had turned one of the world's busiest energy corridors into a costly commercial gamble. Tankers could still pass through, but every voyage carried a financial burden far beyond pre-war conditions.
The price of passage
The figures exposed a contradiction at the heart of the energy market. Crude exports from West Asia had begun recovering, yet fuel supplies remained tight and prices stubbornly high.
Crude exports by Gulf producers excluding Iran returned to at least 16.5 million barrels per day (bpd) in September, matching pre-war levels, with some daily shipments exceeding them. Renewed tanker attacks in early October, however, cast doubt on how long that recovery could last.
If more oil is moving, why are consumers still paying so much for fuel?
Crude and retail fuel prices show the uneven impact of the shock. Brent crude closed at $72.48 a barrel on 27 February 2026 and reached $104.72 on 9 October – an increase of about 44.5 percent. Over roughly the same period, average US retail diesel rose from $3.81 per gallon in late February to $6.20 on 5 October, nearly 63 percent.
Crude has retreated from some wartime peaks, but consumers have seen far less relief. The figures reflect the rise in crude prices from pre-war levels and the additional pressure on fuel from constrained refining capacity, depleted inventories, and transport costs. The Brent comparison uses futures settlement prices; the diesel figures are weekly US pump averages, so the two series do not move in lockstep.
The answer lies in the journey between an oilfield and a fuel pump. War has disrupted shipping, refining, storage, and distribution, creating shortages and costs that recovering crude exports alone cannot resolve.
The refinery bottleneck
Crude oil and finished fuels operate in closely connected but distinct markets. Once extracted, crude must reach a refinery capable of processing its particular characteristics. The resulting diesel, gasoline, and jet fuel then require storage facilities, product tankers, pipelines, and distribution networks. A disruption anywhere along this chain can restrict deliveries even when crude is available.
West Asia occupies a pivotal position in this system. Saudi Arabia, Kuwait, and the UAE have invested heavily in large refining complexes, turning the Gulf into a major exporter of petroleum products alongside crude oil.
These facilities depend on sophisticated processing units and interconnected infrastructure. Restoring crude deliveries cannot compensate for damaged equipment, unavailable processing capacity, or restricted export terminals.
The International Energy Agency’s (IAE) September Oil Market Report found that Gulf exports of refined products and liquefied petroleum gas remained 3.7 million bpd, or nearly 60 percent, below February levels.
The squeeze was particularly severe in diesel and gasoil. Net Gulf exports averaged just 390,000 bpd in August, slightly more than one-quarter of their pre-war level.
Russia's refining disruptions compounded the shortage. Together, the Gulf and Russia exported approximately 1.6 million fewer barrels of diesel and gasoil per day in August than in February.
This helps explain the widening crack spread – the difference between a refined product's market price and its crude oil benchmark.
Diesel and jet fuel crack spreads have risen sharply as refiners struggle to meet demand for middle distillates. According to US Energy Information Administration (EIA) data, average distillate and jet fuel crack spreads in the third quarter of 2026 were almost three times their level a year earlier.
High crack spreads do not automatically represent equivalent refinery profits; operating and capital costs still matter. They do, however, reveal the unusually high market value of scarce refined products.
Diesel shortages carry especially broad consequences. Trucks, farms, mines, and industrial facilities depend on the fuel, allowing higher prices to spread through freight bills, production costs, and consumer goods.
A decline in crude benchmarks may therefore bring limited relief while diesel supplies remain constrained.
Warships cannot set insurance rates
The Strait of Hormuz adds another layer of cost. Naval operations may protect certain shipments, but commercial shipping depends on insurers, shipowners, and traders assessing whether a voyage is worth the risk.
War-risk premiums have climbed dramatically. In July, Marcus Baker, global head of marine, cargo, and logistics at Marsh, said additional premiums for vessels transiting Hormuz had risen to approximately 7.5–10 percent of hull value, from roughly 1–3 percent weeks earlier. Rates vary by vessel and voyage; the October quotes of 6–10 percent show that the cost remained severe.
The geopolitics of marine insurance has become central to the conflict's economic consequences. Marine insurers influence which routes remain commercially viable by pricing the risk. A vessel may be legally permitted to sail and still face insurance costs that make the journey unattractive.
Very large crude carriers can sometimes absorb expensive insurance through exceptionally high freight earnings. Smaller clean tankers carrying refined products have less room to accommodate these costs.
Shipbroker BRS explained the disparity in June, noting that smaller product tankers had been discouraged from crossing Hormuz because “insurance premiums are not so easily absorbed.”
A recovery in crude tanker movements can therefore coexist with severe restrictions on diesel and gasoline shipments.
The crisis has exposed the economic limits of Washington’s maritime security strategy. US naval protection can facilitate some crossings, but warships cannot dictate insurance rates or restore shipowners’ confidence.
Iran’s capacity to threaten shipping around Hormuz has become a source of leverage. Pressure on maritime risk perceptions can alter freight rates, insurance decisions, and shipping patterns without a permanent physical closure of the strait.
Gulf exporters and their Asian customers both depend on affordable passage through Hormuz. Rising freight and insurance charges force exporters to absorb higher costs or pass them on to buyers, while Asian importers face tighter fuel supplies and more expensive deliveries.
That interconnected exposure makes Hormuz a particularly consequential arena of geopolitical competition.
The detour has a price
Shipping companies have adapted through longer voyages, ship-to-ship transfers, and alternative export corridors. Such measures have kept some oil moving, but they consume more tanker capacity.
In maritime economics, tonne-miles measure cargo volume multiplied by the distance traveled. Longer routes increase the transport work required even when fewer barrels reach the market.
Jacob Balslev Meldgaard, CEO of tanker operator Torm, described the change in August: “Fewer barrels moved, but they traveled significantly further.”
As Meldgaard explained in the same report, “A single voyage extension of more than 30 days effectively removes a vessel from the market for an additional month.”
Longer journeys tie up ships that would otherwise be available for new cargoes. The result is additional pressure on freight rates and the cost of delivered fuel.
Alternative pipelines, terminals, and maritime routes help exporters maintain operations during geopolitical disruption, but they require additional investment and add logistical and transportation costs.
Saudi Arabia’s East–West Pipeline, linking its eastern oil-producing region to the Red Sea port of Yanbu, illustrates the value and vulnerability of such alternatives.
The Cradle has traced how the September strike on its pumping stations delayed loadings even after the line restarted. Bypassing Hormuz still requires working pumps, terminal capacity, vessels, and safe onward passage through the Red Sea.
The ability to move a barrel by another route preserves supply. That barrel may also cost considerably more by the time it reaches its destination.
Reserves buy time
Governments have drawn on emergency oil reserves to contain the shock, including a further G7 release announced in early October. Such releases can support supply for a time, but crude inventories cannot replace damaged refining infrastructure.
Crude and product stocks serve different purposes. Crude reserves must pass through suitable refineries before becoming diesel or gasoline. Product inventories can reach consumers more directly, provided transportation and distribution remain functional.
The IEA’s September assessment found that observed global oil inventories fell by 507 million barrels between February and August 2026. Replenishing those stocks will create additional demand for crude and petroleum products while current consumption continues.
Saudi Aramco CEO Amin Nasser warned in early October that rebuilding global inventories while meeting demand could take up to two years after Hormuz fully reopens.
The price at the pump shows how little respite has arrived.
Despite emergency measures, diesel remained far above its pre-war price in early October. The EIA’s weekly survey put the US national average at $6.199 per gallon on 5 October, down from a late-September peak of $6.529 but still about 63 percent above the 23 February reading.
Emergency reserves can soften the shock. Repairing refineries, restoring inventories, and securing reliable shipping will take longer.
The cost of a slow restart
Even if fighting around Hormuz stopped immediately, damaged refineries would still face technical and operational constraints. Equipment repairs, replacement components, catalyst requirements, and safe restart procedures cannot always be completed quickly.
Recovering output would have to meet current fuel demand and rebuild depleted commercial inventories. Additional product supply could be absorbed before substantial relief reaches retail markets.
Shipping presents a similar problem. Insurers and operators need evidence of sustained security before revising their risk assessments and commercial terms.
In June, Marsh's Marcus Baker explained that insurers would require “a sustained period of no further attempted or successful attacks on commercial shipping” before meaningful market-wide reductions in insurance costs could occur.
With refinery capacity constrained, fuel inventories depleted, and shipping costs still elevated, a substantial decline in fuel prices remains unlikely in the near term – even if crude exports continue to recover.
Military protection may reopen shipping routes, but the price consumers pay is determined by an industrial and commercial system that responds to different pressures and operates on a different timetable.
Crude tankers may once again cross Hormuz, but shipping volumes alone cannot measure the fuel crisis. Until refineries regain capacity, depleted inventories are replenished, and war-risk premiums ease, consumers will keep paying for disruptions that persist after oil begins flowing again.
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