When Israel and the US began attacking Iran at the end of February, analysts predicted that headline oil prices would soon cross $200 a barrel. That hasn’t materialized yet. Even as the war has continued, global stock markets, driven by an AI mania, have soared.
But that doesn’t mean there is no oil crisis. It is simmering in the background. Market experts are now warning of multiple crises. Speaking at an energy conference in London, Russell Hardy, chief executive of commodities trading giant Vitol, said that what started as a crude oil crisis became an oil products (petrol, aviation fuel) crisis, and has now morphed into a shipping crisis.
All at sea
For oil industry analysts, a shipping crisis, especially those ships trying to move crude oil and gas out of the , is now their topmost concern. Even as the US upped its efforts to move ships through the Strait of Hormuz, Iran escalated its attacks on merchant ships braving the waterway. Numerous seamen have been killed in the attacks. The danger has also forced shipping costs up dramatically.
The average cost of shipping 1,000 barrels of crude on the West Asia to Indian west coast route escalated from $0.5-0.6 per mile in 2022-2025 to $3.4 per mile in June 2026 and further to $5.1 per mile in August 2026. This is about 8-10 times the average from 2022 to 2025, according to data from Clarksons Research, a maritime data and research firm. According to a Hindustan Times in September, daily charter rates for tankers to India more than doubled in two weeks as conflicts escalated in West Asia.
Risk and reward
The surge in freight rates has boosted shipowners’ earnings. Gross earnings of shipowners to ship crude in very large crude carriers (VLCCs) from West Asia to China—a benchmark route to assess freight costs—are now about $1.2 million per day, against about $480,000 in early August. Net earnings will be lower, factoring in insurance and crew incentives.
Higher freight rates and crude prices also give shipowners an incentive to take greater risks with their vessels and crews. Tankers willing to traverse the Strait of Hormuz now follow a ‘shuttle’ system. They pass through the Strait with their transponders, which broadcast GPS locations, switched off and under the cover of darkness.
Their destination is the Gulf of Oman, where they offload crude to another tanker before returning for another load. The second tanker carries the crude to its final destination, whether China or .
Costs not contained
The disruption is no longer confined to oil tankers. Shipping costs for other goods, including finished products transported in standardized containers, have also risen.
The Freightos baltic index (FBX), a global benchmark of container shipping costs, has risen 73% since the US-Iran war began. Although the latest increase is not as much as seen during the covid years of 2020 and 2021, it is still significant. Segments that are directly impacted by the war, like crude oil shipping, have seen a much faster rise.
One obvious reason for the rise in container freight costs is the increase in bunker fuel prices. Used to power ships, bunker fuel has become more expensive alongside other fuels because of the war. In addition, shippers have been avoiding the Red Sea routes through the Suez Canal for a few years now because of in the region. Instead, they have been traversing longer routes to Europe through the Cape of Good Hope. In recent weeks, though, Suez Canal traffic has picked up, according to Bloomberg.
Commodity constraints
Transporting ‘dry bulk’ cargo, including commodities such as iron ore and foodgrain, has also become more expensive for reasons similar to those affecting container shipping. The Baltic Dry Index has risen about 49% since the US-Iran war began.
However, multiple factors drive commodity shipping prices, not just the US-Iran war. For instance, both are major grain exporters. Their war, since February 2022, has disrupted exports, especially in the past two months, with each attacking the other’s trade infrastructure, such as ships and ports.
While trade data and analytics company Kpler recently noted that crude oil exports through the Strait of Hormuz have increased sharply in recent weeks, it added that the recovery did not mean a return to normal market conditions. The “continued threat to vessels transiting Hormuz is keeping freight costs elevated,” and the market was therefore demonstrating that a diplomatic solution was not necessary to restore physical supply, but operating without one came at a cost, it added.
Supply gains
If Kpler’s reading is correct, and given the dynamics of the Russia-Ukraine war as well, shipping costs will remain high for some time to come. Higher revenues for shipowners and operators mean greater incentive to invest in new shipping capacity. The year 2025 saw the maximum number of new ships built (in tonnage terms) since at least 2014, according to UN Trade and Development (UNCTAD) data.
Two countries, China and South Korea, dominate the global market for shipbuilding, accounting for about 80% of new shipping tonnage added in the last three years, up from 65-70% in the previous decade. More is expected to come.
According to the Baltic and International Maritime Council, a shipping industry association, the global shipping order book in early 2026, comprising new ships on order at shipyards around the world, hit a 17-year high. “This is equivalent to 17% of the global fleet, the highest ratio since 2011,” it said. Unless wars are resolved, shipowners will sail into an era of high prices.
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