Recent geopolitical tensions between Israel and Iran have triggered ripple effects in global oil markets and shipping logistics. For many traders, operators and industries dependent on energy and bulk liquid transport, what once seemed like distant conflicts have now become immediate cost pressures. Most recently, Israeli airstrikes on Qatar caused oil prices to spike briefly, with Brent crude climbing above US$94 per barrel before settling back as the situation stabilised. This serves as a stark reminder of how vulnerable global energy markets remain to sudden escalations in the Middle East. In this post we explore the latest developments, analyse available data, and consider what the implications may be for supply chains, with industries like bitumen and fuel transport in mind.
Freight Rates Skyrocketing amid Vessel Tightness
Freight costs for Very Large Crude Carriers (VLCCs) along key routes, especially from the Middle East towards Asia, have surged sharply. On 18 September 2025, freight rates for the TD3C route (Middle East to China) rose to W108 on the Worldscale scale. That translates to around US$6.6 million for a single voyage. This figure marks approximately 150 per cent growth since early in 2025. This escalation is largely due to increased crude exports from the Gulf, higher demand in Asia especially from China and India, and fewer vessels available for longer travel.
Another contributor to these soaring costs is that shipping operators are now navigating both logistical constraints and risk. When vessel supply is tight and demand is high, even modest disruptions can lead to significantly higher transit and insurance premiums. As a result, companies shipping crude, fuel, or bitumen are now paying more just to access secure routes and maintain schedule reliability.
Oil Price Spikes and Mixed Forecasts
Oil prices have responded to these pressures by spiking when notable events arise. A clear example came with the recent Israeli strikes on Qatar, which triggered a sharp but temporary increase in oil prices. Brent crude jumped above US$94 per barrel following the attack, as markets weighed the potential risks to energy exports and regional stability. However, prices quickly corrected as it became clear that there was no immediate disruption to supply. Experts caution that while such incidents can jolt markets in the short term, sustained price increases typically only follow prolonged supply or infrastructure threats.
On the other hand, long term projections are more tempered. HSBC forecasts an oversupply of about 1.7 million barrels per day in Q4 2025, increasing further into 2026. That surplus may dampen sustained price hikes unless conflict intensity escalates or crucial chokepoints are impacted. Many analysts suggest worstcase scenarios could push prices toward US$120 to US$130 per barrel, especially if shipments through vital passages such as the Strait of Hormuz become restricted.
Thus while oil benchmarks are under upward pressure, market fundamentals like supply, demand, inventories and cost of shipping all intersect to produce volatile but sometimes contradictory signals.
Insurance, Delays and Shipping Disruptions
Beyond pricing, operational risks are rising. Insurance providers are revising premiums upward in response to conflict risk, especially for vessels travelling in or near conflict zones. Such surcharges can significantly increase total shipping costs, particularly for high value or hazardous cargo.
Delays are also occurring. Some operators are choosing alternate routes that avoid certain chokepoints to reduce risk. Others are postponing cargoes or avoiding bookings in affected regions until there is greater clarity on safety and insurance liabilities. These choices add cost, extend transit times and reduce predictability.
Industries that rely heavily on just-in-time (JIT) delivery (e.g. bitumen supply for road construction or fuel supply for refining) are especially vulnerable. When delayed shipments result in gaps in supply, prices along the chain often respond upward.
Supply & Demand Forces Holding the Balance
Geopolitical risk is only one factor. At the same time, other market forces apply downward pressure on oil prices. Global crude production is rising thanks to OPEC+ easing production cuts and planned increases. That is feeding into inventory builds in some regions even while other regions face constrained supply. For example, U.S. crude stockpiles have recently dropped sharply, but increases in distillate and diesel inventories have raised concern about demand strength.
Demand growth remains uneven. Some areas show strong consumption (Asia, parts of the Middle East), while others (parts of Europe, possibly the U.S.) are seeing slower economic signals, which could dampen energy demand. Overall, markets remain alert to balance between rising cost pressures and signals of weakening demand.
Recommendations for Businesses in Transport Intensive Industries
For companies operating in oil, fuel, or bitumen transport, current conditions suggest a number of strategic actions:
- Diversify shipping routes and transit options. Do not rely exclusively on one route or chokepoint. Look for alternate paths or mixed transport modalities.
- Expand storage capacity closer to end markets. Holding buffer stocks locally can reduce exposure to shipping delays or cost hikes. This is particularly valuable for materials that are costly to transport or temperature sensitive, such as bitumen.
- Monitor insurance and contract terms. When shipping costs or insurance premiums spike, renegotiate or hedge where possible to avoid cost surprises.
- Keep supply agreements flexible. Fixed contracts may protect against some price swings, but suppliers or customers may need to adapt due to unexpected delays or geopolitical risk.
The Iran‑Israel conflict is having a clear impact on oil prices through shipping cost rises, risk premiums and supply chain uncertainty. Yet, persistent supply, moderating demand and global market adaptations are forcing a complex picture rather than a simple upward trajectory in price. Businesses that recognise this complexity and build resilience are more likely to weather the current volatility.
For additional insight into how these disruptions are affecting international transport and shipping more broadly refer to our earlier post: How Geopolitical Conflict in the Middle East Is Disrupting Global Shipping Logistics