Middle Eastern oil producers are actively shipping large volumes of crude out of the Persian Gulf via covert means, helping to keep global oil prices in check and mitigate an energy-driven inflation spike. This involves ferrying oil through the Strait of Hormuz undetected and transferring barrels onto tankers in the Gulf of Oman, a practice that is reportedly operating at full capacity despite recent vessel attacks. This strategy is proving crucial in maintaining supply stability amid ongoing geopolitical tensions.
The persistent tensions around the Strait of Hormuz are prompting a significant reshaping of global trade routes. With fewer than 20 ships transiting the waterway over a recent weekend and no immediate resolution in sight for the US-Iran conflict, countries are seeking alternatives. Qatar, for instance, has cut spending, while Saudi Arabia is discussing political risk insurance for shipping companies. Asian nations like South Korea and China are dispatching ships via the Arctic to reduce their dependence on Middle Eastern trade routes.
Despite these efforts, the oil market is increasingly viewing disruptions to Middle Eastern energy supplies as a long-term reality rather than a temporary shock. Hopes for a diplomatic breakthrough between the US and Iran have faded, with the interim ceasefire collapsing and no plans to extend it. Crude oil prices have stabilized around $90 a barrel, approximately 50% higher than at the start of the year, reflecting the market's adaptation to a prolonged crisis rather than an immediate collapse or swift return to normalcy.
The economic costs of the conflict are mounting for both sides. Iran is experiencing significant strain, with inflation exceeding 80% in July and crude exports drastically reduced from 1.7 million barrels per day (bpd) in 2025 to 294,000 bpd so far this month. The US is also facing consequences, with President Trump warning Americans of high fuel costs; gasoline prices reached an average of $4.06 per gallon, a 29% increase from a year ago. Covert operations by Gulf producers, particularly the UAE, using vessels that disable tracking systems, make it difficult to determine the exact volume of oil reaching consumers, adding to market uncertainty.
The crisis has also impacted refining capacity and freight markets. Global refinery throughput in July was nearly 5 million bpd below year-earlier levels due to capacity loss in the Middle East and damage to Russian facilities. This has led to exceptionally tight refined fuel markets and record-high refining margins. Freight rates for very large crude carriers from the Middle East to China have surged to $490,000 per day, nearly ten times higher than at the start of the year, due to shipowners' reluctance to enter conflict zones and increased demand for longer-haul shipments from alternative suppliers.
