Gulf shipping costs endure despite the U.S. strike pause

By Daniel Okafor

Gulf crude shipments have recovered to 16.7 million barrels per day, but freight and insurance expenses remain roughly ten times their prewar levels.

The Trump administration's pause in major military strikes against Iran has reduced fears of another escalation in the Middle East conflict. Gulf oil and natural gas producers still face elevated transport costs, maritime security threats, and uncertainty over long-term infrastructure investment.

A reduction in military activity does not automatically restore commercial normality. Regional crude exports have nearly recovered to prewar levels, yet the expense of sustaining those flows remains substantially higher than before the conflict began in February.

What has recovered across the Gulf?

Kpler reports that crude shipments through the Strait of Hormuz averaged approximately 10.5 million barrels per day from the beginning of October. Before the war, the average was 13.5 million barrels per day.

Alternative routes have softened that shortfall, lifting the wider Gulf supply picture much closer to its prewar benchmark without fully restoring direct Strait of Hormuz traffic. Total Gulf crude shipments, including alternative export routes, reached approximately 16.7 million barrels per day. The prewar average was 17 million barrels per day.

Oil & Gas 360's market analysis links the returning barrels to lower prices. Brent crude fell below $90 per barrel on Tuesday, November 10, after reaching approximately $118 on October 30.

More physical supply now reaches buyers. The price response does not mean that the underlying shipping and insurance costs have faded.

Takeaway: Gulf export volumes are nearly normal, but the operating premium remains abnormal.

How costly has the maritime disruption become?

The International Maritime Organization recorded 131 confirmed maritime incidents near the Strait of Hormuz between February 28 and November 9. October alone accounted for 35 incidents.

Regional producers have increasingly relied on naval escorts, coordinated tanker movements, alternative shipping corridors, and ship-to-ship transfers. These arrangements have allowed substantial volumes of crude and liquefied natural gas to reach international markets, while leaving the risk premium embedded in freight, insurance, coordination, and routing.

The logistics work. The bill does not shrink. Freight and insurance expenses remain approximately ten times their prewar levels, even as total Gulf crude flows approach their earlier average.

Those expenses reach producer revenues and crude pricing differentials. They also change the economics of supplying international customers. A lower benchmark price does not necessarily offset the added cost of moving each cargo.

Takeaway: Escorts and rerouting preserve Gulf supply, but sellers and buyers still pay for the protection.

Where does infrastructure capital go?

Continued security concerns could delay permanent repairs to damaged energy infrastructure. Operators may hesitate to commit substantial capital to facilities that remain exposed to further attacks.

For institutional investors, the uncertainty extends across upstream production, LNG exports, refining, shipping, and energy infrastructure, changing which businesses absorb costs and which retain them. Higher transportation costs may reduce producer netbacks while benefiting certain shipping operators. Refiners could encounter different crude discounts, while infrastructure developers face greater uncertainty over project timing and capital requirements.

Takeaway: Damaged assets and future facilities await a more durable view of regional risk.

Can diplomacy reduce the shipping premium?

Diplomatic efforts involving Qatar and Pakistan have yet to resolve major disagreements between Washington and Tehran, particularly over Iran's nuclear program. The central question is whether negotiations can produce lasting improvements in maritime security.

Oil & Gas 360's scenario analysis warns that prolonged, lower-intensity conflict could become an enduring feature of regional energy markets. Under that scenario, geopolitical risk could support oil prices even as recovering production and increased competition among exporters place downward pressure on crude benchmarks.

The result would be an uncomfortable market structure. Exporters could maintain substantial volumes while absorbing higher operating expenses and investment risks. Buyers could see continued price support, but refiners and infrastructure developers would still confront changing differentials, uncertain margins, and delayed capital needs.

Takeaway: Diplomacy is the watch item. Until security improves, Gulf producers can keep barrels flowing without restoring prewar economics.