MW Crude oil is going the long way around the world as countries scramble to plug Hormuz supply hole
By Claudia Assis and Myra P. Saefong
Tanker transits around the Cape of Good Hope and through the Panama Canal hit highs recently
Pipelines that transport oil from the Persian Gulf "only carry a fraction of what normally travels via tanker," said Gary Cunningham of Tradition Energy.
Crude oil and vital crude products such as gasoline and cooking gas are taking the long way to their destinations, as the near-standstill at the Strait of Hormuz has forced countries to meet their energy needs via routes that were relatively quiet only a few months ago.
Tanker and dry-bulk-vessel traffic around Africa's Cape of Good Hope is about 20% higher, as measured by vessel capacity, than before the U.S. and Israel launched the war with Iran at the end of February. It reached a record high in mid-April.
Tanker traffic through the Panama Canal is also increasing, hitting the highest level in at least five years in late March.
These routes represent imperfect solutions, but they are workarounds that countries and companies are embracing as they go elsewhere to procure their crude, refined products and other commodities to replace at least some of the products that used to come from Persian Gulf countries through Hormuz. That includes U.S. oil, as U.S. crude exports hit a record in late April.
According to Veson Nautical, tanker and dry-bulk shipping capacity moving around the Cape of Good Hope from west to east, toward Asia, stands at about 78 million deadweight tonnage, which is a measure of how much a ship can carry. Flows from east to west, toward the Americas and Europe, are around 77 million DWT.
That is compared with 64 million DWT and 63.6 million DWT, respectively, in the week ended March 6, the first full week after the start of the war.
Looking at the Panama Canal, data-analytics company Kpler said that weekly tanker transits through the facility linking the Pacific and Atlantic oceans have risen to 76 in early May, the latest available week, compared with 57 a week in early March.
Some of the tankers transiting the Panama Canal are carrying crude oil, but others are carrying gasoline and other crude distillates from the U.S. Gulf Coast to the U.S. West Coast, which is heavily dependent on gasoline from elsewhere, said Brett Gibbs, an analyst with Bloomberg Intelligence. Some of those trips are being made by foreign-flagged ships because the U.S. temporarily waived the Jones Act, he said. The Trump administration in March issued a 60-day waiver of the 1920 law, which restricts waterborne oil shipments between U.S. destinations to ships that are U.S.-flagged and U.S.-built.
Many of the ships taking the Cape of Good Hope route from east to west are likely carrying refined products to Europe, he said. West-to-east traffic is likely mostly Asian buyers turning to the U.S. for their crude oil, Gibbs said.
Going around the cape is less risky even if it's a longer trip - it adds about two weeks to an Asia-to-Europe route, depending on destinations. For the balance of 2026, even if Hormuz reopens and the U.S., Israel and Iran reach a deal, risk-averse shippers are likely to continue to favor passage around the cape, Gibbs said.
This route started to show an uptick in traffic around mid-April. That reflects how companies and countries first worked through inventories as the crisis unfolded, he said.
Container routes have been similarly rearranged, with container-shipping companies continuing to favor the safety of the cape route, even though it adds to the cost and length of their trips.
A few dozen crude tankers have transited out of the strait, taking some pressure off energy markets, and Saudi Arabia and the United Arab Emirates have stepped up efforts to move some of their energy products through pipelines.
But that's nowhere close to the about 20 million barrels of crude and crude products that used to move through the strait every day. By some calculations, the world is missing between 10 million and 12 million barrels a day of those products.
Crude stockpiles are quickly dwindling, leading to higher energy prices around the world, including in the U.S., where the national average for retail gasoline has been creeping up closer to $5 a gallon just as peak summer demand approaches. Crude-oil futures (CL00) (BRN00) are hovering around $100 a barrel.
Iran last week created the Persian Gulf Strait Authority with the aim of asserting its dominance in the waterway. It's a subtler way to exert leverage over the world's most important oil chokepoint, analysts at J.P. Morgan said in a note Tuesday.
"Rather than closing the strait outright, Iran appears to be seeking to regulate it," they said.
Tehran is allowing vessels that follow rules and obtain prior authorization to transit, which has led to an uptick in tankers making the crossing in recent days, although the number is still far from the about 135 daily crossings before the war or even from a mid-April spurt of more than 20 daily crossings that came amid hopes for a deal between the U.S. and Iran, which has failed to materialize.
It is unclear if payments are being exacted under the new system. Earlier in the conflict, Iran reportedly charged tolls for the safe passage of several ships or allowed the transit of ships of friendly nations after negotiations. Iran's latest move has been criticized as violating international maritime law.
The U.S. attempted to carve out its own Hormuz safe passage with a shipping lane hugging the Oman coast, but the so-called Operation Freedom barely got off the ground before President Donald Trump halted it, saying that he was giving more time for negotiations to work.
Some Gulf countries like Saudi Arabia and the U.A.E. have focused on exporting their oil through pipelines.
Saudi Arabia said recently that its East-West pipeline, which sends energy exports to a port in the Red Sea, had reached its maximum capacity of 7 million barrels a day. And the U.A.E. on Friday said it was fast-tracking a pipeline project, hoping to double its export capacity through the port city of Fujairah, the location of several oil and industrial facilities. The existing pipeline carries up to 1.8 million barrels of oil a day.
Pipelines that transport oil westward to the Red Sea or southeast to the Gulf of Oman "only carry a fraction of what normally travels via tanker," said Gary Cunningham, director of market research at energy consulting and procurement firm Tradition Energy.
Such projects also take years to complete, so pipelines might be "more of a solution to stop Iran from using the strait as an economic weapon in the future than any real relief to the issues of today," he said.
Read: The Strait of Hormuz could matter a lot less in the future - here's how
The U.A.E. pipeline project is currently under construction and is expected to become operational in 2027, that country said. There was no word on the previous timeline for the facility or on a precise route.
"My understanding is that this will follow the existing route, which makes sense given the terrain and predevelopment work that is required for any pipeline," said Kenneth Medlock, senior director of the Center for Energy Studies at Rice University.
Several facilities at Fujairah have been damaged during the war by alleged Iranian drone and missile attacks, and some will take years to repair. Pipelines are not immune to attacks, but they are relatively resilient to drone attacks and can be repaired quickly, Medlock said.
Longer-term solutions for the Hormuz crisis would include even more pipelines, either by reviving decommissioned facilities or adding routes. Even though Hormuz has been long known as one of the most consequential chokepoints for the global economy, such projects had been viewed as too expensive and too ambitious to attempt. The war changed that calculus.
"We do think that Middle East energy exporters will conclude that such investments are necessary because Iran will always retain the ability to disrupt tanker traffic in the future," said Simon Lack, a portfolio manager at Catalyst Funds. "Gradually the Strait of Hormuz will lose importance, but it will take many years."
Don't miss: Container shipping routes are shifting due to the Iran war - prices of goods could go higher.
-Claudia Assis -Myra P. Saefong
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May 19, 2026 12:14 ET (16:14 GMT)
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