Iran war reshapes global oil trade as Hormuz flows collapse
The war with Iran is accelerating a major reshaping of global oil and gas trade. Falling flows through the Strait of Hormuz are forcing importers to rely on longer and more expensive alternative routes.
Hormuz loses its status as an irreplaceable route
According to Yahoo Finance, roughly 20 million barrels of oil per day passed through the Strait of Hormuz before the escalation, but current flows are estimated at only 6–8 million barrels per day. LNG supply has also been disrupted, with Qatar facing export constraints following damage to infrastructure at Ras Laffan. As a result, Gulf producers are increasingly looking for routes that could reduce their dependence on Hormuz.
The market is already pricing in the risk of a more prolonged disruption. As previously reported, hedge funds increased their net long Brent positions by 37,837 contracts to 261,435, the highest level in more than three months. Bullish positioning in U.S. crude, gasoline and diesel also increased.
Importers are being forced toward more expensive alternatives
The reshaping of supply routes is raising costs for countries heavily dependent on energy imports. Between March and August, total global spending on energy imports was roughly $330 billion higher than previously expected. Asia is particularly vulnerable: Japan, which sourced nearly all of its imported oil from the Middle East before the conflict, has increasingly turned to the U.S., Canada, African producers and Azerbaijan.
Europe is also being forced to diversify supply, while China and India have gained more room to use Russian crude to replace part of the lost Middle Eastern volumes. Longer shipping routes raise freight and insurance costs, ultimately increasing fuel prices for consumers.
Energy realignment adds to inflation risks
If shipping disruptions through Hormuz persist, the consequences of the conflict could extend far beyond the short-term surge in Brent and WTI. Longer and more expensive supply chains could keep energy costs elevated and reinforce inflationary pressure across major economies.
The impact is already visible in the U.S. The average diesel price reached a record $5.85 per gallon, exceeding the peak seen after the start of the war in Ukraine. The increase is particularly significant for transportation and agriculture, raising the risk that higher energy costs will increasingly feed through into consumer prices.
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