The growing use of Ship-to-Ship (STS) oil transfers in the Gulf of Oman is attracting significant interest, but also generating quite a few misunderstandings. Some view this mechanism as a new way to bypass the Strait of Hormuz and reduce reliance on it. However, this is a flawed interpretation. STS transfers do not bypass Hormuz, nor do they solve the problem of a blockade. They are primarily designed to address the sharp rise in insurance and shipping costs, as well as the reluctance of shipping companies to enter the high-risk zone.
Under normal circumstances, a tanker can load oil at a Saudi terminal, pass through the Strait of Hormuz, and proceed directly to India, China, or another destination. Under current wartime conditions, however, many shipping companies are unwilling to send their tankers into the Gulf, while others demand exceptionally high risk premiums. Insurers, too, are limiting coverage or raising its cost substantially.
This is where the STS transfers come in. Instead of having a single tanker make the entire journey, a tanker willing to take the risk crosses Hormuz, enters the Gulf of Oman, and transfers its cargo to another tanker waiting outside the risk zone. The first tanker can then return to the Gulf to load another shipment, while the second proceeds to its final destination without ever needing to cross the strait.
The advantage is not necessarily fewer crossings through Hormuz. It is the separation of the dangerous, costly leg from the rest of the standard international voyage. Gulf states pay a high premium to operators willing to risk the passage, but they do not have to find a single tanker whose owners and crew are willing to sail the entire route through the conflict zone. This expands the pool of tankers available to carry oil to market and concentrates the risk within a defined segment of the supply chain.
It does not mean the risk disappears or that costs necessarily go down. STS transfers themselves are expensive, require complex logistical coordination, and carry additional risks. Furthermore, a tanker making repeated trips through Hormuz also faces repeated exposure to threats. This is therefore a partial solution whose economic viability depends on freight rates, insurance premiums, and vessel availability.
Strategically, this phenomenon highlights a critical point: Iran does not need to execute a hermetic shutdown of Hormuz to disrupt Gulf oil exports. Merely generating a military threat sufficient to deter a large share of shipping companies and insurers is enough, making passage exceptionally dangerous and costly. Gulf states, for their part, are trying to maintain exports through logistical adjustments and by absorbing a larger share of the costs associated with the risk. This mechanism does not eliminate dependence on the strait; rather, it demonstrates just how deep that dependency remains, even as the global oil market finds ways to adapt to the disruptions.
The growing use of Ship-to-Ship (STS) oil transfers in the Gulf of Oman is attracting significant interest, but also generating quite a few misunderstandings. Some view this mechanism as a new way to bypass the Strait of Hormuz and reduce reliance on it. However, this is a flawed interpretation. STS transfers do not bypass Hormuz, nor do they solve the problem of a blockade. They are primarily designed to address the sharp rise in insurance and shipping costs, as well as the reluctance of shipping companies to enter the high-risk zone.
Under normal circumstances, a tanker can load oil at a Saudi terminal, pass through the Strait of Hormuz, and proceed directly to India, China, or another destination. Under current wartime conditions, however, many shipping companies are unwilling to send their tankers into the Gulf, while others demand exceptionally high risk premiums. Insurers, too, are limiting coverage or raising its cost substantially.
This is where the STS transfers come in. Instead of having a single tanker make the entire journey, a tanker willing to take the risk crosses Hormuz, enters the Gulf of Oman, and transfers its cargo to another tanker waiting outside the risk zone. The first tanker can then return to the Gulf to load another shipment, while the second proceeds to its final destination without ever needing to cross the strait.
The advantage is not necessarily fewer crossings through Hormuz. It is the separation of the dangerous, costly leg from the rest of the standard international voyage. Gulf states pay a high premium to operators willing to risk the passage, but they do not have to find a single tanker whose owners and crew are willing to sail the entire route through the conflict zone. This expands the pool of tankers available to carry oil to market and concentrates the risk within a defined segment of the supply chain.
It does not mean the risk disappears or that costs necessarily go down. STS transfers themselves are expensive, require complex logistical coordination, and carry additional risks. Furthermore, a tanker making repeated trips through Hormuz also faces repeated exposure to threats. This is therefore a partial solution whose economic viability depends on freight rates, insurance premiums, and vessel availability.
Strategically, this phenomenon highlights a critical point: Iran does not need to execute a hermetic shutdown of Hormuz to disrupt Gulf oil exports. Merely generating a military threat sufficient to deter a large share of shipping companies and insurers is enough, making passage exceptionally dangerous and costly. Gulf states, for their part, are trying to maintain exports through logistical adjustments and by absorbing a larger share of the costs associated with the risk. This mechanism does not eliminate dependence on the strait; rather, it demonstrates just how deep that dependency remains, even as the global oil market finds ways to adapt to the disruptions.