Oil Transportation Costs Hit a Record High as Fed Rate-Hike Expectations Strengthen

Daily News

Summary:

Disruptions in the Strait of Hormuz send oil transportation costs soaring to an astonishing new high; Fed minutes show that most policymakers favored another rate hike before year-end...

【Highlights】

1. France to release 10 million barrels of diesel reserves to curb rising fuel prices

2. Ukraine is currently considering five different ceasefire mechanisms

3. Disruptions in the Strait of Hormuz send oil transportation costs soaring to an astonishing new high

4. Global gold ETFs attract a record $31 billion in inflows in the third quarter

5. Fed minutes: Most policymakers favor another rate hike before year-end

6. Iranian official says “illegal shipping lanes” in the Strait of Hormuz will be closed, disputing claims that oil exports have returned to normal

7. US prepares to resume large-scale military operations against Iran, with strikes potentially coming before the US midterm elections

【Details】

France to Release 10 Million Barrels of Diesel Reserves to Curb Rising Fuel Prices

On the evening of October 7 local time, French Prime Minister Sébastien Lecornu announced that France would release 10 million barrels of strategic diesel reserves over the next three months to address the recent surge in fuel prices.

Lecornu said the diesel had been purchased before prices rose sharply and would be released onto the market at cost. The move is expected to lower diesel prices at filling stations by around €0.12 to €0.18 per liter.

Ukraine Is Currently Considering Five Different Ceasefire Mechanisms

On October 7 local time, Ukrainian Foreign Ministry spokesman Heorhii Tykhyi said at a press conference in Kyiv that Ukraine was willing to participate in trilateral peace talks involving Ukraine, Russia and the United States. He said Kyiv hoped the talks could take place in October.

Tykhyi also said Ukraine was willing to participate not only in a leaders-level meeting but also in trilateral talks at other levels.

He added that Ukraine was currently considering “five different ceasefire mechanisms,” including a full and unconditional ceasefire, as well as a Black Sea ceasefire proposal put forward by Türkiye and Egypt. Ukraine is also studying an energy-related proposal from India and a possible energy ceasefire previously discussed by the United States.

Disruptions in the Strait of Hormuz Send Oil Transportation Costs Soaring to an Astonishing New High

According to data released by the Baltic Exchange in London on Wednesday, the cost of chartering a very large crude carrier (VLCC) to transport US crude oil to Asia has risen to $77 million, compared with an average of $9.2 million in 2025.

Although the front-month crude oil futures contract is currently trading at around $100 a barrel, futures prices generally reflect the value of crude at the point of export. For a 2 million-barrel cargo, the freight cost translates into an additional delivery cost of approximately $38.50 per barrel.

The war involving Iran has disrupted crude export routes and transportation patterns across the Middle East. Although regional oil flows have recovered somewhat in recent weeks, transportation has become more complicated, delivery times have lengthened, and the effective availability of the tanker fleet has been significantly reduced, further driving up oil shipping costs.

In some markets, including West Africa, exporters have been forced to sell cargoes at discounts at the point of origin. The war involving Iran has caused widespread disruption in the tanker market, reshaping the way oil is transported out of the Middle East and significantly increasing transit times.

Although crude oil flows from the region have recovered in recent weeks, trading and shipping processes remain far more complicated than they were before the war, resulting in longer delivery times and effectively reducing available tanker capacity.

Global Gold ETFs Attract a Record $31 Billion in Inflows in the Third Quarter

According to the World Gold Council, global gold ETFs attracted $10 billion in inflows in September, bringing total inflows for the third quarter to a record $31 billion, led primarily by funds listed in Europe and North America.

Despite a decline in gold prices, global gold holdings increased by 67 metric tons to a record 4,256 tons. Total assets under management, however, fell 7% from the previous quarter to $574 billion.

Fed Minutes: Most Policymakers Favor Another Rate Hike Before Year-End

The minutes of the Federal Reserve's meeting showed that all 19 officials supported the rate hike at the September meeting, while most participants believed another rate increase before the end of the year could be appropriate. Participants cited a range of reasons for supporting further tightening.

Policymakers generally viewed inflation risks as tilted to the upside, with some participants saying those risks had intensified in the near term.

Some participants also believed that investment in artificial intelligence infrastructure could cause aggregate demand to exceed supply over the medium term, creating additional upward pressure on inflation.

Many participants noted that although long-term Treasury yields had risen recently, financial conditions still appeared supportive of economic growth.

The minutes also said that the Federal Reserve Bank of New York, acting on behalf of the US Treasury, intervened in the foreign exchange market.

Iranian Official Says “Illegal Shipping Lanes” in the Strait of Hormuz Will Be Closed, Disputing Claims That Oil Exports Have Recovered

An adviser to the commander of Iran's Islamic Revolutionary Guard Corps (IRGC) told the semi-official Fars News Agency on Wednesday that Iran believed the “illegal shipping lanes” in the Strait of Hormuz would soon be closed. The lanes refer to the southern passage running close to the coast of Oman.

The adviser, Mohammadreza Naqdi, said these “limited shipping lanes” had been created by blasting and damaging sections of rocky passages in the strait and were primarily used by small boats to smuggle oil and transfer it to tankers.

He cited this as evidence against claims that oil exports from the Gulf region had returned to pre-war levels. Naqdi said the Strait of Hormuz had already been closed and that Iranian armed forces had full control over the waterway. He added that the situation would continue until Iran's legitimate demands were met.

Preliminary data from Kpler showed that, as of September 30, the seven-day moving average of crude oil exports from the region stood at 18.3 million barrels per day. Exports exceeded pre-war levels on 14 days in September.

The figures include Persian Gulf crude transported through the Strait of Hormuz and the Red Sea, as well as crude shipped from terminals in the Gulf of Oman and through ship-to-ship transfers.

Although crude oil shipments increased in September, Iranian attacks on tankers and logistical restrictions remain in place, leaving the market uncertain about whether the increase in transportation can be sustained over the longer term.

US Prepares to Resume Large-Scale Military Operations Against Iran, With Strikes Potentially Coming Before the US Midterm Elections

According to Axios, US officials said the Pentagon had instructed US Central Command several days ago to prepare for a resumption of large-scale military operations against Iran.

The directive did not set a specific timeline for any potential strikes, and President Donald Trump has not yet made a final decision. However, US and Israeli sources said strikes could take place before the US midterm elections on November 3, and possibly even before Israel's election, which is scheduled to take place one week earlier.

The sources said that if large-scale military operations resume, they are expected to involve extensive bombing of Iranian energy infrastructure, other critical infrastructure and nuclear facilities.

If large-scale operations are resumed, they would likely be conducted jointly by the United States and Israel, with Israeli forces also participating.

【Today's Events】

16:05 (UTC+8) Swiss National Bank Vice Chairman Martin Speaks

17:15 (UTC+8) Bank of England Monetary Policy Committee Member Greene Speaks

18:00 (UTC+8) ECB Chief Economist Philip Lane Speaks

18:03 (UTC+8) Bank of England Chief Economist Huw Pill Speaks

19:30 (UTC+8) ECB Releases Minutes of Its September Monetary Policy Meeting

20:15 (UTC+8) Bank of England Governor Andrew Bailey Speaks

21:00 (UTC+8) Bank of England Deputy Governor Lombardelli Speaks

22:00 (UTC+8) US August Wholesale Sales MoM

01:40 (UTC+8) St. Louis Fed President Musalem Speaks

TBD (UTC+8) Reserve Bank of New Zealand Governor Breman Speaks

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