Gulf Reroutes Keep Oil Moving but Costs and Risks Soar

Overview

• The crisis began on February 28, 2026, when a U.S.-Israeli strike on Iranian sites prompted Iran to close the Strait of Hormuz and attack shipping, forcing Gulf producers to find alternate export routes.
• Producers shifted crude onto backup pipelines to Yanbu and Fujairah, sent tankers via Suez and around Africa, and used ship-to-ship transfers protected by U.S. forces to restore roughly 6–8 million barrels per day of pre-war flows.
• The East–West pipeline was struck in early September and remains out of service, increasing reliance on costly maritime detours and escorted transfers that have driven transport bills sharply higher.
• Market buffers of drawn inventories and weaker demand have helped prevent a price shock, but Brent trades near $100–106 a barrel and EU pump prices are approaching 2022 peaks, squeezing consumers and producer margins.
• Houthi control of parts of the Red Sea and new threats to Bab el-Mandeb create fresh chokepoint risk, making the current, expensive logistics network fragile and likely unsustainable over time.