MediumI Geo-Economics & Chokepoints1 October 2026, Thursday
Tanker congestion in Hormuz pushes oil transfers to India's coast
An analysis based on Vortexa data shows that Gulf producers have, for the first time in the war's seventh month, moved some ship-to-ship transfers to India's Gulf of Kutch. The cost of chartering a supertanker has risen above $1 million a day.
Ship-to-ship transfer (STS), in which cargo is moved from one tanker to another at sea, has become the main way of moving oil out of the Strait of Hormuz. According to a Maritime Executive report dated 30 September, more than 70% of Gulf oil is now transferred in the strait using shuttle tankers. A Bloomberg analysis cited by gCaptain on 1 October found at least two VLCCs (very large crude carriers) conducting transfers in the Gulf of Kutch. The receiving ships list Singapore and South Korea as destinations. Discharging a fully laden VLCC now takes five to six days.
One cause of the congestion is Saudi exports heading to Hormuz instead of the Red Sea because of the Houthi threat. According to Maritime Executive, Saudi crude exports rose to 6.4 million barrels a day in September, above the pre-war average. Iraqi sellers, meanwhile, are offering cargoes at up to $37 below the benchmark price to get them through the strait. Ship & Bunker reported that JPMorgan estimates Middle Eastern crude exports at 17.5 million barrels a day, 98% of pre-war levels. HSBC, by contrast, expects only a gradual recovery in a 'structurally damaged' Hormuz and puts pre-war volume at 19–20 million barrels a day.
Talay assessment
Bottom line
Gulf crude volumes are back near pre-war levels, but only through costly means such as shuttle tankers, lengthening transfers and Iraqi discounts of up to $37. The shift of transfers to India's coast shows that infrastructure around Hormuz has reached its limits. The most likely path is that volumes hold while transport costs stay high.
Likely effects
- Tanker freightNegativeWeeks
VLCC charter costs above $1 million a day and transfers stretching to five or six days raise transport costs per barrel and tie up the tanker fleet.
- Iraq's public financesNegative1–6 months
Selling at up to $37 below the benchmark means Iraq's oil-dependent budget loses revenue even as volumes recover.
- Asian buyers and TürkiyeUncertain1–6 months
The return of volumes to 98% eases supply concerns, but high freight rates keep up pressure on delivered costs for importers, Türkiye included.
Possibilities, ranked
- 1Volumes hold, costs stay high55%
Gulf exports stay close to pre-war levels, transfer points diversify and freight rates remain elevated.
Watch: October Gulf export data from Kpler and Vortexa, and the number of VLCCs off Kutch
- 2Congestion cuts volumes30%
Transfer capacity proves insufficient, attacks continue and October exports fall well below 98%.
Watch: VLCC charter costs staying above $1 million a day and new UKMTO attack warnings
- 3The strait normalises15%
A political settlement increases direct transits, reducing the need for shuttle tankers and distant transfers.
Watch: A formal agreement in US–Iran talks on reopening the Strait of Hormuz
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- VLCC charter cost▼ $1m+/day
- Iraqi crude discount▼ up to $37
- Saudi crude exports (September)▲ 6.4m b/d
- JPMorgan: share of pre-war level▲ 98%