How much have crude oil shipping costs increased for India-Gulf routes?

Freight rates from Fujairah in the UAE to India's west coast increased from approximately US$1.57 per barrel in late February to US$7.51 in October, representing a rise of nearly 377 percent. Rates also climbed sharply from US$4.76 in September, reflecting the growing impact of geopolitical uncertainty. Before the conflict, freight rates for Gulf crude on Suezmax tankers were generally in the range of US$0.95 per barrel during January and February.

Why are shipping distances increasing and what is the operational impact?

Disruptions affecting the Strait of Hormuz and heightened security concerns have forced vessels to divert around the Cape of Good Hope. These longer routes add approximately 3,500-4,000 nautical miles and 10-14 days to sailing schedules. This results in higher bunker fuel consumption, increased operating costs, reduced vessel turnaround times, and fewer voyages per tanker, effectively reducing available global shipping capacity and pushing freight rates higher.

How has this affected Indian refiner procurement strategies?

Indian refiners are diversifying crude sourcing to Russia, the United States, West Africa, and Latin America. In October 2024, Indian crude oil imports reached a record 5.6 million barrels per day, with Russian crude at 1.97 million bpd (approximately 35 percent of total imports). However, Russian crude transportation costs have increased from US$8-12 per barrel to US$25-30 or higher, narrowing the competitive advantage of alternative suppliers.

What role does war-risk insurance play in current freight costs?

War-risk insurance premiums have substantially increased from their pre-conflict levels of approximately 0.1-0.25 percent of vessel insured value. These elevated premiums, combined with reduced vessel availability and security concerns, represent a significant portion of the freight cost increases. The uncertainty surrounding the Strait of Hormuz has forced many shipowners and charterers to reassess their risk exposure and operational arrangements.

When might freight rates normalize, and what conditions are required?

According to Drewry Maritime Research, normalisation of transit conditions in 2027 could ease freight pressures as more vessels return to Gulf trading routes and war-risk insurance premiums gradually decline. Additionally, the expected addition of new vessels to the global tanker fleet in 2027 could provide relief by improving vessel availability and moderating freight rates. However, prolonged geopolitical tensions and continued disruption could keep transportation costs elevated.

Shipping & Freight

High Impact

Tanker Freight Rates Surge Fivefold as Strait of Hormuz Crisis Disrupts Oil Shipping

Nov 11, 2026

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The signal

Escalating geopolitical tensions in West Asia have created unprecedented disruption to crude oil shipping economics, with tanker freight rates from Gulf ports to India climbing nearly 377 percent since February. Rates from Fujairah to India's west coast jumped from US$1.57 per barrel to US$7.51, driven by security concerns, war-risk insurance premiums, and forced diversion of vessels away from the Strait of Hormuz. This crisis has fundamentally altered the calculus for Indian refiners and energy importers, narrowing the traditional cost advantage that made Gulf crude economically attractive compared with distant alternatives. The disruption extends well beyond crude movements.

Longer shipping routes around the Cape of Good Hope are adding 3,500-4,000 nautical miles and 10-14 days to voyage durations, tightening global tanker availability and pushing freight costs higher across refined products, LNG, and LPG shipments. Indian refiners, already diversifying sourcing to Russia, West Africa, and the United States, now face even higher delivered costs for non-Gulf supplies. The cost of Russian crude transportation has doubled or tripled, increasing from US$8-12 per barrel to US$25-30 or higher. For supply chain professionals, this represents a critical stress test on maritime infrastructure and energy procurement strategy.

The stability of the Strait of Hormuz, which handles approximately 20 percent of global oil supplies, remains the key factor determining whether freight costs normalize in 2027 or remain structurally elevated. Organizations importing energy or dependent on refined petroleum products must reassess inventory management, working capital requirements, and diversification strategies to insulate operations from further maritime corridor disruptions.

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What This Means for Your Supply Chain

Simulation Suggestion

strategic

What if the Strait of Hormuz remains disrupted for 12 additional months?

Simulate a scenario where disruptions to the Strait of Hormuz persist through 2025, preventing normalization of shipping routes and keeping war-risk insurance premiums elevated. Model the impact on: (1) India's crude import costs and refiner margins for Gulf and Russian supplies, (2) global tanker fleet utilization rates as vessels continue longer Cape of Good Hope routes, (3) procurement strategy shifts as refiners increasingly substitute distant Atlantic Basin and West African crude, and (4) working capital requirements for energy importers managing extended inventory cycles.

Run this scenario

Simulation Suggestion

this month

What if freight rates for Russian crude remain above US$25/barrel into 2025?

Model the sourcing and procurement impact of sustained high-cost Russian crude transportation (remaining in the US$25-30 per barrel range through mid-2025). Analyze: (1) the competitiveness of Russian versus other alternative sources for Indian refiners, (2) potential volume reductions in Russian crude imports as delivered costs rise, (3) shift in allocation toward West African and Latin American supplies despite longer routes, (4) inventory carrying costs and working capital strain from elevated freight expenses, and (5) potential pass-through effects on refined product pricing to European buyers.

Run this scenario

Simulation Suggestion

this week

What if global tanker availability tightens further due to Cape of Good Hope routing?

Simulate a scenario where increased diversion of Very Large Crude Carriers and Very Large Gas Carriers around the Cape of Good Hope further constrains global tanker supply. Model: (1) additional upward pressure on freight rates across all major trade lanes (crude, products, LNG, LPG), (2) increased spot market pricing for Indian refiners and energy buyers seeking immediate vessel availability, (3) extended waiting times for vessel loading and discharge at major ports, (4) potential service level degradation for time-sensitive energy imports (LNG spot purchases, emergency crude procurement), and (5) competitive disadvantage for Indian refined product exports to Europe due to prolonged transit and elevated costs.

Run this scenario

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