cme-commodities
Physical Flow and Price: The Breaking Point
The Strait of Hormuz, with a minimum width of 54 km, serves as a mandatory passage for approximately 90% of oil exports from the Persian Gulf. In 2025, an average flow of 20 million barrels per day (mb/d) transited through this artery, according to the IEA. The ongoing conflict has reduced traffic to only 35-45% of pre-conflict levels, as detected by analysis from the International Trade Center (ITC). This physical contraction has translated into an exponential acceleration in prices: ULSD diesel reached $4.6773/gallon on the CME market on August 2, 2026, marking the second highest historical peak for this commodity. The operating mechanism is simple: the physical transit capacity cannot be replaced in real time by alternative logistics.
The price reached is a direct indicator of tension in energy flows. Unlike crude oil, middle distillates such as diesel are less easily replaced with alternative routes due to the specialization of regasification infrastructure and the repair times for terminals. The marginal cost of diverting routes — which requires 35-70 days for large tankers — has generated a structural contango, where the forward price significantly exceeds the spot price.
Node Architecture and Physical Vulnerabilities
The Strait of Hormuz consists of navigable channels, each 3.7 km long for inbound and outbound traffic, with a 3.7 km buffer zone. This physical configuration drastically limits maneuverability and increases the risk of chain accidents. The presence of strategic facilities such as the Fujairah terminals in the United Arab Emirates and storage structures in Kuwait is not sufficient to compensate for the loss of flow, since the exportable volumes from these areas do not exceed 15% of the regional total. The lack of flexible regasification capacity in coastal countries has rendered much of the strategic reserves unusable.
Alternative routes, such as those via Suez or through India, require transit times exceeding 35 days for 200,000-ton tankers, with an additional cost estimated between $18 and $24 per barrel in terms of fuel, insurance, and delays. The infrastructure is not designed to handle flows higher than 65% of the original capacity; overloading generates congestion in intermediate ports, such as Jebel Ali or Singapore, with waiting times exceeding seven days.
Who pays and who benefits: a microeconomic analysis
The additional costs of diesel are not distributed evenly. European shipping companies, such as Maersk and MSC, recorded an average 19% increase in fuel costs between July and August 2026, resulting in higher container shipping rates. This had an impact on final consumers in Germany, Italy, and France, where the average price of diesel exceeded $4.5/gallon. Conversely, US energy companies such as ExxonMobil recorded a 28% increase in revenue from the middle distillates sector in the second quarter, thanks to their ability to convert part of production from crude oil to diesel.
The country that benefited most is India: with its Kandla port and storage network in Gujarat, it was able to increase imports from the Persian Gulf through alternative routes. According to sources from the Indian Ministry of Energy, between July and August 2026, India imported 31% of its diesel needs from non-traditional sources, saving an estimated $48 million in transportation costs. However, this advantage is temporary: local storage capacity reaches only 250,000 barrels per day, compared to the 1.2 million needed to cover the weekly deficit.
Trajectory and Structural Limit
The current crisis is not temporary: the physical capacity of the Strait of Hormuz will remain below 0% of pre-conflict levels for at least the next six months, according to Econovis estimates. Repairing alternative routes requires investments exceeding $12 billion and timeframes longer than three years. The structural limit is physical: there are no sufficient alternatives to replace the original flow in a timely manner.
The critical data point to monitor in the coming months is the contango index for ULSD diesel, which currently stands at +$0.32/gallon compared to the spot price. If it exceeds $0.50, a phenomenon of forced release of strategic reserves will occur among countries with greater storage capacity. Otherwise, the global logistics system will experience a permanent contraction in flows of heavy products.
Photo by Planet Volumes on Unsplash
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