As the Middle East conflict enters its eighth month, the shipping and energy markets are confronting a set of interconnected risks that could escalate sharply if hostilities resume or intensify. The first and most immediate risk is the continued disruption of the Strait of Hormuz, which Iran has maintained as a blockade since mid-July following the collapse of a 60-day ceasefire. Before the conflict, an average of 125-138 vessels transited the strait daily; by May 2026, that number had fallen to approximately 10 per day . The European Commission's knowledge hub reported that as of March 10, transits had dropped 97% from pre-conflict levels, with crude oil and LNG prices rising 27% and 74% respectively in the immediate aftermath .
The second risk centers on the fragility of bypass infrastructure. Saudi Arabia's East-West Pipeline, which carries crude from the Eastern Province to Yanbu on the Red Sea coast, was designed to circumvent Hormuz. However, the pipeline itself became a target, forcing a precautionary shutdown in September after drone attacks . Saudi Arabia has since resorted to ship-to-ship transfers off Oman's Sohar port and is rebuilding cargo flows to Asian markets. The pipeline's vulnerability demonstrates that no single alternative route can fully substitute for Hormuz, and any expansion of the conflict to Red Sea export terminals would further constrain Saudi Arabia's ability to reach global markets.
The third risk is the compounding effect of Red Sea and Bab al-Mandab disruption. The Houthis have consolidated control over Yemen's western coast, capturing Mocha and the Hanish archipelago near the Bab al-Mandab Strait . Shipping traffic through Bab al-Mandab fell 88% from average levels by mid-September, with only four vessels transiting in a 24-hour period . The Africa Center for Strategic Studies reported that Red Sea traffic remains below one-third of pre-October 2023 levels, with insurance premiums rising from 0.1% to 0.7-1.0% of vessel value—equivalent to approximately $1 million in additional costs per round voyage . The critical concern is that Saudi Arabia's pipeline bypass to Yanbu still requires tankers to transit Bab al-Mandab to reach Asian markets, meaning a blockade of the strait would undermine the very route designed to bypass Hormuz.
The fourth risk is the structural transformation of global oil flows toward longer, costlier voyages. VLCC rates have surged more than fourfold over the past year, from approximately $50,000 per day in late 2025 to over $200,000 per day by October 2026 . The cost of transporting crude from the Persian Gulf to the Far East by VLCC has jumped from under $2 per barrel to over $30 per barrel. BCA Research estimates that Bab al-Mandab closures have forced some vessels onto longer routes, while the global supply of available crude tankers has contracted by approximately 20 vessels in two weeks due to attacks . These elevated transport costs are feeding directly into consumer energy prices, even as crude oil prices fluctuate.
The shipping market is already reflecting these pressures. Drewry's World Container Index stood at $4,585 per 40-foot container as of October 22, up 2% week-on-week and the highest in 15 weeks . Security risks in the Gulf have reduced containership sailings into the region to just two in Week 42, down from five the previous week. Meanwhile, Suez Canal transits have edged up slightly but remain far below normal levels . The East-West container freight market remains uncertain, with carriers managing capacity through blank sailings and surcharges while the security environment dictates routing decisions beyond their control.
Oil prices have responded to these supply fears. Brent crude traded at $115.74 per barrel in early Asian trading on October 30, on track for a fourth consecutive monthly gain—the longest sustained rally since July 2025 . The Qatar News Agency reported that prices rebounded more than 1% on October 28 as renewed concerns over potential supply disruptions lifted benchmarks . The combination of a prolonged Hormuz closure, Red Sea instability, and the absence of a credible diplomatic resolution suggests that the risk premium embedded in energy and shipping markets is unlikely to dissipate in the near term.
For India and South Asia, these risks carry direct consequences. India sources a substantial share of its crude oil from the Persian Gulf, and its refiners have already faced elevated freight costs that erode the benefit of discounted cargoes. The IOC chairman's October warning that "freight is a killing factor" reflects this reality . Meanwhile, India's containerized exports to Europe and the US East Coast depend on Red Sea and Suez routings that remain disrupted. If Middle East conflict resumes, the four risks outlined above would compound: Hormuz closure would tighten crude supply, pipeline vulnerability would constrain bypass options, Red Sea disruption would lengthen voyages to Europe, and the resulting freight inflation would feed into India's import bill and consumer prices. The Finance Ministry's October economic review explicitly identified maritime freight disruptions as an inflation risk, and the shipping and energy markets are signaling that this risk remains live.