Hormuz Premium Hits European Fuel

The Strait of Hormuz carries roughly 20 million barrels of oil a day, about a fifth of global petroleum consumption (EIA). The tankers have not stopped. What has changed is the price of getting through.

That cost is now visible in Europe’s inflation data. Eurostat’s July flash estimate put euro area energy prices 10.0% higher than a year earlier (Eurostat). For Malta, which imports its fuel and feels energy costs quickly through transport, freight and everyday prices, this is an affordability shock rather than a shortage.

Why cheap oil isn't reaching the pump

Brent crude, the international benchmark used to price oil, has fallen well below its spring peaks. In normal conditions, that would work its way through to diesel and petrol prices. This time, the route from barrel to pump has become more expensive.

The first cost is war-risk insurance, the premium shipowners pay to sail through conflict zones. A Lloyd’s-market clause warned that paying a proposed Iranian transit fee could void a vessel’s cover entirely. That leaves Hormuz technically open, but commercially difficult for insured trade (GCC Freight).

The second cost is refining. Refining margins are the difference between what refineries pay for crude and what they charge for diesel and petrol. The ECB, the European Central Bank which sets interest rates for the eurozone, said on 31 July that refineries had added more on top of already-elevated crude costs, pushing the shock further along before fuel reached consumers (ECB).

Freight costs and sanctions-compliance checks add another layer. 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 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 oil became cheaper. The chain that turns it into fuel did not.

Who pays, who gains

Drivers pay 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 next, because cushioning prices means giving up tax revenue. In Ireland, diesel costs about €9.50 more per 50-litre fill than in early July. Taoiseach Micheál Martin calculated that removing the current 30 cent excise cut would push prices to about €2.25 per litre (RTÉ). Finance Minister Jack Chambers said the cuts could be extended if prices stayed high (Irish Examiner).

That is the trade-off Malta also knows well from energy policy: relief at the pump or on the bill does not make the cost disappear. It moves it onto the state’s books, where it competes with spending on housing, health and infrastructure.

Some gain from the disruption. Croatia’s JANAF pipeline signed a take-or-pay contract with Hungary’s MOL, meaning MOL pays for pipeline capacity whether it uses all of it or not, to transport 2.05 million tonnes of crude in 2026 (HRT). An Adriatic route into Central Europe becomes more valuable when Gulf shipping carries more risk. Refineries with wider margins may also benefit, although they are carrying higher input-cost risk.

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 reroute about 2.6 million barrels per day around Hormuz (EIA).

Those buffers help with supply. They do less for price. Rystad Energy assessed that the disruption removed 14.5 million barrels per day from the market at its peak, leaving gaps that emergency releases did not fully replace (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, calling energy prices "highly volatile" and "well above pre-conflict levels" (ECB). Its concern is whether this jump, caused by disrupted supply rather than stronger demand, remains a one-off rise or feeds into wages and broader costs.

A separate ECB analysis on 7 August warned that large energy shocks become persistent when they change how firms set prices and how workers negotiate pay (ECB). That is where a shipping risk in the Gulf becomes domestic eurozone policy: in wage rounds, transport charges, supermarket prices and government budgets.

The strait is open. The premium Europe pays to use it is still with us.