Hormuz crude flows return to pre-war levels, yet oil may still stay at $90–$100 | Here's why

Crude oil is once again moving through the Strait of Hormuz at roughly pre-war levels as US military escorts have boosted shipments and pipelines have redirected flows.

As per data published by Kpler, a firm that tracks tankers and global trade flows, Crude transiting Hormuz reached a seven-day average of 13.5 million barrels per day as of Monday, which matches a prewar baseline for shipments through the strait

In fact, sometimes crude oil shipments from the Middle East, including the Persian Gulf and the Red Sea, are even higher than prewar levels. “The region reached a seven-day average of 19.5 million bpd as of Monday, surpassing a prewar baseline of about 17 million bpd.”

Yet the return of crude flows through Hormuz has not translated into an immediate easing in diesel and gasoline supplies or prices. Kpler data cited in recent reports shows refined-fuel shipments through Hormuz remain far below pre-war levels, leaving a mismatch between the availability of crude and the availability of fuels that consumers actually use.

That distinction is crucial for oil prices.

“Oil prices depend on a couple of key factors. The first is the amount of physical oil available in the market. The second is whether there is a free flow of oil to all countries,” said Madan Sabnavis, chief economist at Bank of Baroda.

The third factor is restrictions or embargoes, while the fourth is sentiment, he said. “Every time there is news of an escalation or de-escalation of the war, we have seen oil prices react accordingly.”

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Even with crude physically available, getting it to refiners and markets remains expensive and complicated. Tanker insurance and freight costs have risen, while attacks and security risks across the region continue to put pressure on shipping routes. Alternative routes and ship-to-ship transfers have helped restore flows, but they also add costs and complexity.

“At present, uncertainty is playing a major role. Sentiment is one of the biggest factors supporting oil prices, while the movement of physical oil is another,” Sabnavis said.

When will oil prices fall?

The return of crude flows means prices could eventually ease, but Sabnavis cautioned against expecting an immediate collapse.

“Honestly, nobody can say with certainty when prices will normalise. Any forecast at this point would be a calculated guess,” he said.

For the next six months, through March, Bank of Baroda assumes crude will normalise around $90–$100 a barrel, rather than the $80–$90 range it had earlier expected after the ceasefire.

“There is no strong fundamental basis for that estimate. It is an assumption based on what we have seen historically,” Sabnavis said, adding that crude prices typically do not stay at extremely high levels for long when there are no fundamental problems with extracting oil and bringing it to market.

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Impact on India

For India, however, the impact could be more persistent.

“Oil prices in India are likely to remain relatively higher,” Sabnavis said. India’s procurement price has tended to be above Brent since the war began, partly because of higher insurance and freight costs.

When conditions normalise, India’s crude procurement price should move closer to Brent, he said. But importing crude from sources farther away than the Gulf automatically raises transportation costs.

India is already seeing more Middle Eastern crude return to its import basket: West Asian supplies rose to 2.10 million bpd in September, accounting for 39.5% of India’s crude imports, according to data reported by Financial Express.

So, while Hormuz is flowing again, the oil shock is not over. Consumer relief will depend on factors like shipping costs falling, refineries recovering, refined-fuel supplies normalising and the geopolitical risk premium finally disappearing.