Key takeaways:
- European diesel prices have risen sharply since the Iran conflict began.
- Traffic through the Strait of Hormuz remains far below normal levels.
- Freight forwarder Baxter Freight says some shippers are moving cargo away from vulnerable sea routes towards air and rail.
- Baxter believes the upheaval could influence freight pricing for 12–24 months.
For European hauliers, the latest oil shock may turn out to be about considerably more than the price displayed at the diesel pump. Disruption to shipping routes around the Middle East is reshaping cargo flows at the same time as shortages of refined fuels push road transport’s own operating costs higher. The combination raises the prospect of higher transport prices spreading through several modes simultaneously.
Nottingham-based forwarder Baxter Freight argues that one of the most immediate risks is cargo being moved away from threatened maritime routes and into already constrained air and rail networks.
“Oil price headlines are about the pump. In freight, the first thing that moves is the map,” Sarah Powell, associate director of air freight at Baxter Freight, said.
The company says shippers are reconsidering routing through the Middle East rather than waiting to see whether normal shipping conditions return.
Its warning comes against a backdrop of continuing disruption in the Strait of Hormuz, one of the world’s most important energy shipping routes.
Hormuz traffic remains heavily disrupted
Less than 20 commodity vessels crossed the Strait of Hormuz over the weekend of 22–23 August, according to shipping data reported by Reuters. On Tuesday, only around five vessels were recorded passing through, compared with a pre-war average of approximately 15.
There are signs that the immediate pressure could ease. Oil prices fell sharply this week after Iran and Oman resumed talks over a possible temporary navigation corridor and mine clearance in the strait.
Brent crude, which had remained above $90 a barrel earlier in the week, fell towards $86 on Wednesday.
That drop, however, does not mean freight and fuel markets have returned to normal.
The larger problem for road transport is increasingly the availability of refined products rather than crude oil alone.
Reuters reported last week that European diesel prices had risen by more than 70% since the conflict began in February, with significant Middle Eastern refining capacity offline. Disruption to Russian refining has added further pressure.
Russia is also expected to extend restrictions on diesel exports into September as it deals with domestic shortages and reduced refinery output. For road freight operators, that creates a direct cost pressure even before wider supply-chain effects are taken into account.
Cargo shifts could squeeze other transport modes
Baxter Freight argues that businesses concerned about unreliable sea freight are already looking towards alternative routes.
That does not mean entire container ships will suddenly be replaced by aircraft or trains. Air and rail have only a fraction of maritime freight’s capacity, meaning even comparatively small volumes of high-value or time-critical cargo switching modes can have an outsized effect on prices and available space.
“Space gets scarce, rates climb, and cargo that always flew gets bumped by cargo that suddenly needs to,” Powell said.
There is evidence that Middle East disruption has already affected air freight.
The Baltic Exchange said the air cargo market carried a substantial Middle East-related price premium during April, May and June.
The picture is not one of continuously rising prices, however. Its July figures showed global air freight rates falling by 8.6% month on month as capacity recovered and airlines adapted to disruption.
That makes Baxter’s warning about another capacity squeeze plausible, but not yet evidence that air freight rates are entering a fresh sustained surge.
Rail presents a similar problem. Europe’s rail freight system is already being asked to absorb additional traffic from elsewhere. Low water levels on the Rhine, for example, prompted DB Cargo this month to make around 400 additional wagons available for customers seeking alternatives to inland waterway transport.
Further international cargo switching onto rail would therefore arrive in a market dealing with competing capacity pressures of its own.
A freight-rate reset lasting two years?
Baxter Freight goes considerably further than warning about short-term disruption. The company argues that elevated fuel costs, changed cargo flows and constrained transport capacity could result in freight rates resetting for between 12 and 24 months, turning what initially looks like a spot-market disruption into a longer-term budgeting issue.
That prediction should be treated cautiously. There is clear evidence that energy and freight markets remain under substantial pressure. Reuters analysis published on Wednesday found that traders expect several energy markets to remain tight into 2027, with refining constraints, geopolitical risks and elevated transport costs among the reasons.
But the eventual effect on freight rates will depend heavily on how quickly shipping through Hormuz normalises, how much refining capacity returns and how much cargo actually migrates between transport modes.
A reopening of the strait could relieve some pressure relatively quickly. Damage to refineries and depleted inventories may take considerably longer to unwind.
