India’s Reliance Industries has agreed to pay a record $23 million to $25 million to charter a supertanker for transporting Iraqi crude oil, highlighting soaring shipping costs and a severe shortage of vessels willing to operate in the Gulf amid heightened security risks.
What does the charter deal involve?
Reliance booked the tanker to load 2 million barrels of Iraqi crude at 1,200 World Scale, roughly 12 times the benchmark freight rate. Before the US-Iran war began in late February 2026, similar voyages typically cost around $2 million, or 0.8 to 0.9 times the benchmark rate, underscoring how dramatically freight costs have escalated since the conflict began. The vessel will be supplied by South Korea’s Sinokor, one of the few shipowners continuing to operate through the Strait of Hormuz despite growing security risks.
Why have freight rates surged so sharply?
Shipping companies have grown increasingly cautious about sending vessels through the Strait of Hormuz, resulting in a sharp reduction in available tanker capacity. The dramatic rise in freight costs is directly linked to security concerns following attacks on commercial shipping in the region, leaving charterers like Reliance facing steep premiums to secure vessels willing to make the voyage.
How does Reliance expect to offset the elevated freight cost?
Despite the record charter expense, shipping sources said Reliance is still expected to save millions of dollars overall, since Iraq’s state oil marketer SOMO is offering crude at discounts of $25 to $30 per barrel against Dubai benchmarks to encourage buyers to lift cargoes from terminals in the Hormuz region. The steep discount is designed to offset the risk premium buyers now face when arranging shipping for Iraqi crude.
What does this mean for global oil shipping and energy markets?
The record freight payment reflects the broader disruption facing tanker markets since the outbreak of the US-Iran conflict, with charterers increasingly forced to weigh elevated shipping costs against crude discounts when sourcing oil from Gulf terminals. As security risks persist in the Strait of Hormuz, similar dynamics are likely to continue shaping freight economics for refiners dependent on Middle East crude supplies.
