The wrong kind of oil is now flowing through the Strait of Hormuz
Summary
- Crude oil shipments through the Strait of Hormuz have recovered to 76% of pre-war levels, but refined product flows remain significantly lower at 11% of total flows, due to damaged refineries in the region.
- Saudi Arabia's oil exports doubled in September, indicating US control over strait traffic, though the focus has been on escorting crude oil tankers rather than more valuable fuel cargoes.
- In the US, diesel prices reached record highs in late September, prompting President Trump to allow tax-free dyed diesel for road use, while G7 countries released 100 million barrels from reserves without restricting fuel exports.
- The bottleneck has shifted from crude oil shipments to refining capacity, maintaining high refining margins and elevated diesel prices, contributing to inflationary pressures as transportation costs impact commodity prices.
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Automatic translation: Originally published in Finnish 06/10/2026, 04:44 GMT. Give feedback here.
Crude oil is already flowing through the Strait of Hormuz at nearly the same rate as before the Iran war. However, the flows of refined products such as diesel remain a fraction of normal, which is reflected in fuel prices here and elsewhere.
Source: WSJ
WSJ recently reported on the recovery of crude oil shipments through the Strait of Hormuz. According to Kpler, cited by the publication, an average of 10.3 million barrels of crude oil per day passed through the strait last week, which is 76% of the pre-war level. However, refined products shipments stood at only 1.3 million barrels per day. Their share of total flows was 11%, compared to over 20% before the war. The reason is that several refineries in Saudi Arabia, Kuwait, the United Arab Emirates, and Iraq are out of commission following missile and drone strikes. Saudi Arabia's oil exports doubled in September to 7 million barrels per day, suggesting that the US has brought traffic in the strait under control. However, the US Navy has primarily escorted large crude oil tankers. Oil companies, on the other hand, are hoping it would prioritize fuel cargoes, which are about twice as valuable.
In the United States, the average price of diesel rose to new record highs at the end of September. Since diesel powers trucks, the price is widely reflected in consumer prices. On Monday, President Trump issued an executive order allowing the use of tax-free dyed diesel, typically used in agriculture, on roads as well until the end of the year. Meanwhile, G7 countries agreed to release 100 million barrels from emergency reserves, but they did not restrict fuel exports. Despite these measures, relief is still far off. According to the WSJ, the crude oil passing through the strait mostly ends up in Asia, where China, Japan, and South Korea keep their refined products at home. In addition, new Iranian attacks on shipping traffic could slow the recovery of supply. The market bottleneck has shifted from crude oil shipments to refining capacity. This keeps refining margins high and diesel prices elevated, even as crude oil supply recovers. Transportation costs are passed on to commodity prices broadly with a delay, which in turn adds to inflationary pressures.
