Middle East VLCC Rates Reach Record High Amid War Risk
The current market is not simply short of ships. It is short of vessels willing and able to operate efficiently in the Middle East Gulf, where war risk has fundamentally altered freight pricing. VLCC rates in the Middle East reached $37/bbl, with earnings of $1.4m/day. Although the compliant fleet remains tight, conventional supply-and-demand indicators cannot explain the scale of the increase.
War Risk Continues to Drive Record Freight
War risk continues to drive record freight rates in the Middle East Gulf. MEG-China VLCC rates have held at $37/bbl reflecting the limited number of owners willing to operate in the high-risk region. The Gulf of Oman shuttle fleet has expanded to approximately 80 VLCCs, but average round-voyage times have reached 23 days, compared with an optimal 9–10 days.
Operational Constraints Tighten Effective Supply
Operational constraints are tightening effective supply. Saturated ship-to-ship transfer capacity is pushing cargoes toward India and longer direct voyages, reducing vessel productivity. Charterers must offer increasingly competitive rates to attract vessels away from the region.
Atlantic Freight is Being Priced Against Middle East Earnings
Atlantic freight is being priced against Middle East earnings. Charterers must offer increasingly competitive rates to attract vessels away from the region. Refining margins will determine the ceiling: Freight can remain exceptionally high while cargo economics support it, but negative margins are already limiting Atlantic rates.
Is Tanker Demand Driving Rates Higher?
No. Middle East VLCC ton-miles have recovered into the five-year range but remain 34% below 2025 levels. Even ton-days, which better capture the operational burden of STS transfers, remain 24% below pre-war levels. The disconnect between demand and freight reflects a sharp deterioration in effective vessel availability rather than a shortage of cargo-carrying capacity.
Why Has a Larger Shuttle Fleet Failed to Relieve the Market?
Ship-to-ship (STS) transfers have enabled Middle East exports to continue while limiting the number of vessels exposed to the Strait of Hormuz. However, the system is becoming increasingly inefficient. The Gulf of Oman shuttle fleet has expanded to approximately 80 VLCCs. Yet average round-voyage times have reached 23 days, more than double the optimal 9–10 days for a Basrah-Sohar round trip.
Ownership concentration is further strengthening freight rates. Approximately 50% of the Gulf of Oman shuttle VLCC fleet is controlled by South Korean operator Sinokor, with national oil companies accounting for much of the remaining tonnage. This concentration leaves a relatively small pool of owners willing to operate in the high-risk region, giving them considerable negotiating power over freight rates. With shuttle operations expanding and the threat of attacks increasing, charterers have limited alternatives. This reinforces the war-risk premium and helps explain why adding vessels to the shuttle fleet has failed to ease freight rates.
Consequently, each additional barrel of export capacity requires more ships, even as the fleet expands.
Original Article: Why are tanker rates so high? — Kpler