Gulf oil flows top pre-war levels — so why is Brent crude still above $110?

Crude exports from the Gulf are flowing at their highest volumes since the US-Iran war began in February, yet oil prices remain more than 60 percent above pre-war levels and briefly topped $117 a barrel last Friday. On Monday, Brent slipped more than 1 percent to around $111.84 after Iranian and Qatari officials held a third consecutive day of talks aimed at ending the conflict — but analysts say the forces pushing prices up run far deeper than any single diplomatic session can fix.

Data from market intelligence firm Kpler show Gulf crude exports running at 24.6 million barrels per day (bpd) in the week to October 18, a figure that surpasses the pre-war average of 23.3 million bpd. On paper, that should ease prices. In practice, it hasn't — and understanding why requires looking at five problems working in combination.

The first and most powerful force is the fear that the war will flare up again. The US and Iran have not returned to the full-scale combat of the spring, but they continue to exchange blows. Traders are watching the US deploy another aircraft carrier and additional troops to the Persian Gulf. A drone attack the previous month took Saudi Arabia's East-West Pipeline offline. The Iran-backed Houthis in Yemen have announced a blockade of Saudi shipping through the Bab el-Mandeb Strait, threatening yet another export route. Markets are also braced for what happens after Tuesday's US midterm elections, with one analyst warning that Brent could be pushed toward $120 if rhetoric around Iran intensifies.

The market is doing exactly what it is supposed to do: It is telling us there is plenty of prompt oil, but there is no end to this war in sight — in fact … escalation is very likely. Therefore, futures markets reflect that expectation.— Adi Imsirovic, lecturer in energy systems, University of Oxford

The second force is the soaring cost of actually moving oil. Shipping lines have improvised a shuttle system to navigate the Strait of Hormuz: smaller boats carry crude through the strait's most dangerous waters and transfer it to larger tankers waiting in safer zones. In August, more than 70 percent of crude crossing the strait moved via ship-to-ship transfers, according to Kpler. According to London Stock Exchange Group data, freight costs have climbed to nearly $40 per barrel in recent weeks — close to ten times the normal rate — with elevated insurance premiums compounding the logistical complexity. Tanker rates for moving crude from the Persian Gulf to China have set a record above $1.2 million a day, Times Now News reported.

So barrels are moving, but neither smoothly nor reliably. That should not be read as a sign of normalisation. Delivering a barrel has become far more expensive.— Isabel Figuerola-Ferretti, oil markets expert, Comillas Pontifical University, Madrid

As of Friday, the UK Maritime Trade Operations (UKMTO) had logged 32 incidents against commercial vessels, making October the month with the highest number of such attacks since the war began.

The third force is depleted stockpiles. The International Energy Agency reports that global inventories shrank by 10 million barrels in September alone, putting the world's stockpile 509 million barrels below its pre-war level. According to Bloomberg, consulting firm Energy Aspects places global inventories at roughly 4.3 billion barrels, a figure more than 400 million barrels below the level recorded in March — the first full month of the war — and the lowest in five years. At the same time, demand has recovered: after falling sharply when prices first spiked, global oil consumption has climbed back to around 104.8 million bpd, up 6.5 million from the wartime low in May, according to Energy Aspects data.

The fourth force is a shortage of refined fuels. More crude reaching the market does not automatically translate into more diesel or petrol. The Middle East and Russia are two of the world's largest refining centres, and both are still producing less finished fuel than before the war. Exports from many Russian refineries have been cut off as a result of Russia's conflict with Ukraine. With those supplies gone, refiners in other parts of the world are operating at their limits to fill the gap, heightening the risk of unplanned shutdowns and pushing them to secure crude at virtually any price.

The fifth force has nothing to do with physical barrels at all. With central banks warning that costly fuel is feeding inflation and bond yields rising, traders have turned to oil as an inflation hedge, according to Times Now News citing Bloomberg. That financial demand can lift prices independently of real-world supply and demand.

Producers have shown considerable ingenuity in keeping oil flowing. As of September, 40 percent of Gulf exports were bypassing the Strait of Hormuz entirely — up from 17 percent before the war — via Saudi Arabia's East-West pipeline to the Red Sea port of Yanbu and the UAE's Habshan-Fujairah pipeline, which is now pumping up to 1.8 million bpd, a nearly 40 percent increase from pre-war levels, according to maritime intelligence company TankerTrackers.com. The strait's share of the region's crude exports has fallen to 63 percent, compared with 83 percent before the war.

But this resilience is also not cheap. The same one barrel that is coming out of this region is coming at a much higher cost.— Carole Nakhle, CEO, Crystol Energy

There is a darker implication to the Gulf's adaptability. Nakhle warned that the demonstrated ability to keep crude flowing may be reducing the international urgency to end the war. "I'm not seeing a global rush to end the conflict any time soon," she said. Geoffrey Miller, geopolitical analyst and editor of the Gulf States Insights newsletter, echoed that view, arguing that traders seem to have priced in the conflict as a "new normal" — a development that weakens the incentive for any party to come to the negotiating table.

Questions also remain about whether the supply recovery is as complete as headline export figures suggest. Pavel Molchanov, an investment strategist at Raymond James & Associates, pointed to IEA production data showing OPEC Gulf output at 15.8 million bpd in September — 75 percent of the pre-war baseline, the highest since the war began but still well short of full recovery. In Molchanov's view, output is unlikely to surpass 85 percent of pre-war levels without a lasting diplomatic resolution.

Once the political groundwork is in place, the next steps will be logistical: Demining Hormuz, bringing shipping crews back to work, and resuming production at currently shut-in oilfields.— Pavel Molchanov, investment strategist, Raymond James & Associates

Meeting on Sunday, OPEC+ left December production targets unchanged, with no policy changes anticipated until next year as the group continues to grapple with export disruptions. Times Now News reported that a G7 pledge of up to 100 million barrels of emergency oil and diesel left prices unmoved. On October 15, the IEA governing board reported that roughly 330 million barrels had been released under its March 2026 collective action, with approximately 100 million barrels of releases still to come.

Brent futures for delivery in October 2027 were trading above $90 a barrel on Friday, a sign from the market itself that traders are not counting on a swift return to normal conditions. Figuerola-Ferretti was direct about the conditions needed for a genuine price recovery: "It would need durable de-escalation, a return to normal transit and shipping conditions through Hormuz, rebuilt inventories and freight costs back to normal." Should the conflict stretch deep into 2027, the IMF's worst-case scenario puts oil at $130 a barrel.

Why it matters — Oil above $110 a barrel feeds directly into fuel, transport and food costs worldwide — and the five structural forces keeping prices high show no sign of resolving without a diplomatic end to the US-Iran war.

Sources differ on Whether Gulf supply has genuinely returned to pre-war levels: Exports of 24.6 million bpd in the week of Oct 18 exceed pre-war averages, per Kpler export data (aljazeera.com) vs IEA production data shows OPEC Gulf output at only 75% of pre-war baseline in September, per Raymond James analyst Pavel Molchanov (aljazeera.com)

Reported by aljazeera.com, cnbc.com, timesnownews.com, agbi.com