Why Oil Prices Keep Rising Even as Crude Continues to Flow Through the Strait of Hormuz
Oil markets are once again testing multi-month highs. Brent crude has hovered near or above $110 a barrel in mid-to-late October 2026, approaching levels last seen in May, while West Texas Intermediate has traded around or above the $100 mark. This comes despite repeated reports that crude oil is still moving out of the Persian Gulf, including through or around the critical Strait of Hormuz.
The apparent contradiction has a straightforward explanation: current physical flows matter, but the market is pricing the risk that those flows could be interrupted again at any moment, along with the sharply higher costs of moving the oil that does get through.
Flows Have Partially Recovered, but Remain Fragile
Before the escalation of the U.S.-Iran conflict in early 2026, the Strait of Hormuz handled roughly one-fifth of the world’s seaborne oil trade. After severe disruptions earlier in the year, Gulf crude exports have recovered substantially. U.S. Energy Secretary Chris Wright has stated that flows have returned to about 80% of pre-conflict levels. Tracking firms such as Kpler have shown periods in which seven-day averages of Middle East oil movements approached or exceeded pre-war norms when including alternative routes and ship-to-ship transfers in the Gulf of Oman.
Yet recovery is uneven and incomplete. Refined product shipments lag further behind. Recent weeks have seen a sharp increase in attacks on commercial vessels in and around the Strait and the Gulf of Oman—dozens reported in October alone according to maritime authorities and tracking firms. Iran has publicly asserted it has “no choice” but to control the waterway for its security, while also signaling preferential treatment for “friendly” nations. These threats, combined with Houthi attacks on Saudi energy infrastructure, keep the situation highly volatile.
The Risk Premium Dominates Pricing
Oil traders do not only look at today’s tanker traffic. They price the probability of tomorrow’s disruption. Every new report of a vessel struck, a mine claim, or a missile interception adds to the geopolitical risk premium embedded in futures prices. Analysts note that the risks remain skewed to the upside: further escalation could quickly reverse the recent recovery in exports. The International Energy Agency has warned that the Strait has been closed once and “can be closed again,” and that energy markets are unlikely to normalize in 2027 under current conditions.
This forward-looking caution is amplified by depleted global inventories. Earlier disruptions forced heavy draws on commercial and strategic stocks. Even as some barrels resume movement, the buffer against future shocks is thinner than before the conflict.
Higher Logistics Costs Raise the Effective Price
Even when oil leaves the Gulf, it costs far more to deliver. War-risk insurance premiums and tanker freight rates have surged to multiples of pre-war levels. Very large crude carrier rates from the Middle East to Asia have at times accounted for a significant share of the delivered price—reaching levels where freight alone can add tens of dollars per barrel. Ship-to-ship transfers outside the Strait, naval coordination for safer passage, and longer alternative routes all reduce fleet efficiency and tie up more vessels. These elevated costs are passed through the supply chain and support higher benchmark prices.
Broader Supply Risks Compound the Pressure
The Hormuz situation does not exist in isolation. Continued Russia-Ukraine attacks on energy infrastructure, Houthi threats to Saudi facilities and Red Sea routes, and uncertainty over longer-term Middle East stability all reinforce the same message to the market: supply security remains precarious. Diesel and other refined products have felt the squeeze particularly acutely in some regions, further supporting overall energy prices.
In short, the fact that crude is still passing through or around Hormuz is necessary but not sufficient to bring prices down. Markets are responding to the combination of incomplete recovery, sky-high logistics costs, thin inventories, and the persistent threat that the next wave of attacks or escalation could cut flows again. Until the risk of disruption declines meaningfully and shipping costs normalize, elevated oil prices are likely to persist—even while tankers continue to move.
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