Hormuz Premium Lifts Energy Prices

The tankers are still moving through the Strait of Hormuz. That is the point worth holding on to. This is not, at least for Europe, a story about empty forecourts or rationing.

It is a story about the cost of keeping the route open. Roughly 20 million barrels of oil per day pass through Hormuz, about a fifth of global petroleum consumption (EIA). Every extra charge attached to that journey now travels on with the cargo. By July, Eurostat’s flash estimate had euro-area energy prices 10.0% higher than a year earlier (Eurostat). Europe has fuel. What it does not have is cheap fuel.

Why cheap oil isn't reaching the pump

Brent crude, the main international benchmark, has dropped well below the peaks seen in the spring. In ordinary times, that would be expected to show up at the pump. These are not ordinary times.

The first cost is insurance. War-risk cover is the premium shipowners pay when they sail through conflict zones. It has risen sharply around Hormuz. A Lloyd’s-market clause warned that paying a proposed Iranian transit fee could void a vessel’s cover entirely, leaving the route open in theory but unusable for normal insured trade (GCC Freight).

The second cost sits inside refining. Refining margins are the difference between what refineries pay for crude and what they charge for finished fuels such as diesel and petrol. The ECB, the European Central Bank that sets interest rates for the eurozone, said on 31 July that refineries had added more on top of already elevated crude costs, magnifying the shock before fuel reached consumers (ECB).

Freight costs and sanctions-compliance checks add more layers. Across the EU, fuel prices for personal transport were 13.7% higher in June than a year earlier (Eurostat). Italian consumer group Assoutenti put the problem plainly: with Brent back around early March levels, Italian diesel was still €0.38 per litre higher than it had been at the same crude price months earlier (Assoutenti). The barrel got cheaper. The road from barrel to driver did not.

Who pays, who gains

Drivers feel it first. Codacons, the Italian consumer group, estimated that motorists spent €370 million more over the first August travel weekend than in 2025, with a typical diesel fill costing about €22 extra (ANSA). Rome answered with a diesel-tax cut and a tax credit for hauliers.

Governments pay after that, by giving up tax revenue to soften the blow. In Ireland, diesel now costs about €9.50 more for a 50-litre fill than it did in early July. Taoiseach Micheál Martin said removing the current 30 cent excise cut would push prices to about €2.25 per litre (RTÉ). Minister for Finance Jack Chambers said the cuts could be extended if prices stayed high (Irish Examiner). Every extra month of relief is revenue Dublin cannot put into housing, health or other services.

There are winners too. Croatia’s JANAF pipeline has signed a take-or-pay contract with Hungary’s MOL to transport 2.05 million tonnes of crude in 2026 (HRT). Take-or-pay means MOL pays for the capacity whether it uses all of it or not. An Adriatic route into central Europe becomes more valuable when Gulf shipping becomes riskier. Refineries with wider margins may also benefit, though they still face higher input costs.

Why prices stay high even with buffers

Europe is not about to run out of fuel. EU law requires emergency oil stocks covering at least 90 days of net imports (Council Directive 2009/119/EC). Saudi and UAE pipelines can move about 2.6 million barrels per day around Hormuz (EIA).

But stocks and bypass routes deal with supply, not price. Rystad Energy estimated that the disruption removed 14.5 million barrels per day from the market at its peak, leaving gaps that emergency releases did not fully fill (Rystad Energy). Qatar’s LNG, liquefied natural gas chilled and shipped by tanker rather than piped, has no land bypass at all. The EIA warned last week that disrupted trade patterns may not return to pre-conflict levels until early 2027 (EIA).

The ECB kept rates unchanged on 23 July, describing energy prices as "highly volatile" and "well above pre-conflict levels" (ECB). Its worry is whether a supply shock stays as a once-off price rise or works its way into wages and wider business costs. A separate ECB analysis on 7 August warned that large energy disturbances become persistent when they change how firms set prices and how workers negotiate pay (ECB).

The strait remains open. The premium Europe pays to use it is still moving through the system.