Shock to Hopes of Cheap Oil: Hormuz Oil Shipping Costs Rise Tenfold

Despite Energy Agency Claims, Fears of Ongoing Attacks in the Persian Gulf and Yemen Drive 2027 Oil Prices to Record High

The International Energy Agency predicts that more oil will be produced next year and that supply will outstrip demand. In such a situation, prices are usually expected to decrease. But something else is going on in the futures market: the price of Brent oil for delivery in December 2027 has reached $86 and has increased by more than 13% since the beginning of September alone. Why is the market still paying a high price for oil that is supposed to be delivered in more than a year?

In an analysis published on Thursday, October 15, 2026, Reuters columnist Ron Bosso sees this gap between forecasts and market behavior as a sign of traders' doubts about the return of normal conditions after the Iran war.

According to his writing, at the beginning of the war, the oil market thought it was facing a severe but temporary disruption; An event that raises prices for a while, and after the conflict subsides, the downward path of prices resumes. Eight months later, that perception has changed. Reserves that helped offset supply shortages in the first months have dwindled, refining capacity has been damaged, and the return of exports from the Strait of Hormuz is still at risk of disruption.

Bosso believes that the market is now reckoning with another possibility: that even with the end of the war, it will take time to rebuild the damaged parts of the energy industry, and the price of oil and its products will remain high until 2028.

Oversupply on paper, concern in the market

At first glance, the estimate of the International Energy Agency is promising. This institution expects the global oil supply to increase from 100,700,000 barrels per day in 2026 to 108,300,000 barrels in 2027; A growth equivalent to 7.6 million barrels per day, an important part of which depends on the revival of Middle East exports.

On the other hand, global demand is expected to reach 104 million 400 thousand barrels from 102 million 400 thousand barrels. Therefore, if these predictions are realized, the daily supply of oil next year will be about 3.9 million barrels more than the demand.

Such a surplus under normal conditions should put downward pressure on oil prices. However, the price of long-term contracts has moved against this expectation.

Brent oil contracts for delivery in December 2027 (December 1406) have become more expensive by more than 13% since the beginning of September 2026 (September 1405) and have reached $86; The highest price recorded for this contract. The price of December 2026 delivery contracts (Azar and December 1405) has also increased by about 12% in the same period.

Bosso emphasizes that the price of futures contracts should not be considered as a definite prediction of the oil price in the future. These prices are influenced by various factors including the demand for risk coverage. However, their increase shows that refiners, airlines and traders are willing to pay more to protect themselves against continued high energy prices.

In fact, the market's disagreement with the agency's estimate is not about the possibility of increasing production. The main doubt is whether Middle East exports can fully and sustainably return to pre-war conditions.

Part of the answer should be found in the Strait of Hormuz. According to Reuters, the flow of oil through this waterway has returned to near pre-war levels in recent weeks, partly with the support of the US Navy. But increasing the traffic of oil tankers does not mean the return of security and cost of transportation to the previous conditions.

Last week, Iran intensified attacks on ships and warned of further disruptions. Outside the Persian Gulf, the Yemeni Houthis have increased their missile and drone attacks on Saudi Arabia. including this week's attack on Aramco headquarters in Dhahran.

This uncertainty has changed the cost of oil exports. More complex transportation, vessel charter, insurance and military protection now account for nearly a third of the cost of moving a barrel of oil out of the region, according to the figures Buso provided in his analysis. While before the war, the share of these costs was only about three percent.

In this way, even the oil that leaves the Persian Gulf without disruption, may reach its destination at a higher cost.

According to the Reuters author, until a stable agreement on the security of Hormuz is reached, part of these costs can remain in the price of energy. In order to return to pre-war conditions, the oil market needs to ensure the continuity of exports, in addition to increasing supply.

But there is another problem that will not be solved immediately even by establishing the security of the shipping lanes: the lack of capacity to produce petroleum products.

diesel; The link between war and inflation

While the attention of many market participants is focused on the price of crude oil, Bosso warns that developments in the diesel market may have more important economic consequences.

The price of European diesel index future contracts reached a record of $1,480 per ton in mid-September 2026 (late September 1405); equivalent to about 210 dollars per barrel. The disruption in Middle East supply and damage to Russian refineries has exacerbated the shortage of this fuel.

Since the Russian invasion of Ukraine in 2022 (1400 and 1401), Ukrainian drone attacks on Russian refineries have taken part of the country's oil production capacity out of orbit. Moscow also banned diesel exports earlier this year.

US President Donald Trump recently announced an agreement with Vladimir Putin to resume part of Russia's diesel exports and spoke of an "energy ceasefire" between Moscow and Kiev. However, Bosso writes that the additional exports mentioned by Trump are equivalent to only about 12 hours of global diesel supply; A volume that seems insignificant compared to the lack of the market.

Traders also apparently do not expect the pressure on the diesel market to disappear quickly. The price of the December 2027 delivery contracts (Azer and Dey 1406) has exceeded one thousand dollars per ton for the first time. Before the Iran war, the price of these contracts was 644 dollars; It means that now it is more than 55% higher.

The importance of this increase goes back to the position of diesel in the world economy. Trucks move goods, ships transport commercial cargo, and many factories and agricultural machinery depend on this fuel. A sustained increase in the price of diesel can increase the cost of transportation, production and food; Even if the price of crude oil decreases at some point.

This issue is also important for central banks. The general inflation of America in September 2026 (September 1405) has reached 3.7%; Almost twice the Fed's 2 percent target. At the same time, core inflation is increasing, and the continuation of high fuel prices can make the process of controlling inflation more difficult.

Therefore, the market's concern is not only about the amount of oil produced. Crude oil must be converted into fuel in the refinery and then reach the consumer at an acceptable cost. Damage to any of these steps can limit the effect of increased oil supply.

The end of the war is not the end of the energy crisis

At the end of his analysis, Bosso points to a change that has occurred in the eyes of investors over the past eight months. At the beginning of the war, the main question was when oil exports from Hormuz would return to normal. Now, in addition to the security of this route, the market is worried about the time to rebuild oil reserves, refineries and supply chains that have been damaged during the conflict.

International Energy Agency estimates show that if Middle East exports are revived, the world will not face a shortage of crude oil next year. But the increase in the price of oil and diesel future contracts indicates that market participants are still not sure about the speed and durability of this return.

From the point of view of the Reuters author, this uncertainty has created the risk of the persistence of higher energy costs; A situation that may continue long after the conflict has stopped.

The conundrum of the oil market has developed in the meantime: the world may have enough oil again, but the return of cheap oil and cheap fuel are two different things.