A $20 million tanker voyage through the Strait of Hormuz is becoming a measure of the new economics of Middle Eastern energy, as war pushes up freight and insurance costs, restricts Iranian oil exports and intensifies Europe’s competition with Asia for gas.
TotalEnergies Chief Executive Patrick Pouyanné said moving a very large crude carrier through Hormuz now costs about $20 million, adding roughly $10 a barrel to transport costs. Yet the French energy major can buy some Gulf crude for $50-$60 a barrel, well below Brent at more than $90, allowing it to profitably move discounted oil despite the extraordinary freight premium.
The distortion reveals an important feature of the six-month conflict: the constraint is increasingly not the existence of hydrocarbons, but the cost and risk of getting them to market. The war premium is also being distributed unevenly. Producers can be forced to discount stranded barrels even as shipowners, insurers and traders charge more to move them.
TotalEnergies is already looking beyond Hormuz. Pouyanné said the company plans to invest in alternative export infrastructure, including expansion of the UAE’s Habshan-Fujairah pipeline, which bypasses the strait.
Iran faces a more severe access problem. Its oil shipments to China are estimated at about 534,000 barrels a day in August, down roughly 35% from 823,000 bpd in July, as Washington’s campaign to constrain Iranian exports tightens. China, which normally absorbs more than 80% of Iran’s shipped oil, has traditionally bought those barrels at sanctions-driven discounts. Scarcity has now pushed some offers towards premiums instead.
That inversion is striking: oil once discounted because of sanctions risk is becoming more expensive because accessible supply itself is scarce.
The shock is also moving from oil into gas. Reduced Middle Eastern LNG availability has intensified competition between Europe and Asia for flexible cargoes just as European buyers need to rebuild inventories ahead of winter. Goldman Sachs estimates European gas prices may need to rise above €100 per megawatt-hour in December to attract enough supply if disruption persists. Northwest European storage is projected to finish August at about 51% full, according to the bank.
Maritime risk, meanwhile, extends beyond Hormuz. Saudi shipping group Bahri said its VLCC Amzan suffered a security incident in the Red Sea on Monday, with its crew reported safe. The incident comes as attacks and heightened regional risks have already pushed insurers to restrict some Red Sea coverage and raise war-risk premiums. Reuters reported in July that indicative premiums had risen to about 0.75% of a vessel’s value from around 0.3% before the latest escalation.
Saudi Arabia is now considering whether the state should absorb part of that risk. Riyadh has held talks with London brokers over a proposed insurance pool offering as much as SAR700 million ($186 million) of commercial cover per insured incident, with additional backing potentially provided by the state-owned Saudi Export-Import Bank. The scheme remains under negotiation.
The proposal marks another stage in the crisis: governments may increasingly have to backstop risks that commercial insurers can no longer price cheaply enough to keep regional trade moving.
The Iran war is therefore changing the meaning of energy security. Production capacity and reserves alone are no longer enough. Pipelines, ports, tankers, insurance capacity and alternative export routes are becoming strategic assets in their own right.
For global markets, the question is no longer simply whether Hormuz remains open. It is how much the world must pay to keep Middle Eastern energy moving.
Related news:
Iran War Redraws Global Energy Trade Around Strategic Choke Points
Beyond Hormuz: How the Gulf Crisis Is Redrawing the Middle East’s Energy Map
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