The high-risk, high-reward business of moving oil through the Strait of Hormuz has gotten riskier and more rewarding.
Despite steady attacks from Iran, oil tankers and other commercial vessels have continued flowing through the narrow waterway. With protection from the U.S. military and help from pipelines bypassing the strait, Persian Gulf oil flows returned to prewar levels.
But seeking to reassert its leverage over the global oil chokepoint, Iran has stepped up drone and missile strikes on ships recently, including those outside the immediate vicinity of Hormuz.
While traffic has dipped in response, ships continue to cross, with many making shuttle runs in and out of the Gulf to unload oil cargoes via ship-to-ship transfers. Then other vessels deliver the barrels to customers.
For those onboard the ships willing to tolerate the risks in the Gulf, a hefty payday awaits. Tanker captains can earn $100,000 a month for transiting the strait, plus a $50,000 bonus for each trip, sources told the Financial Times.
That “danger money” is up from regular pay of about $15,000 a month, and is necessary for shipowners to keep their fleets crewed.
Meanwhile, sailors typically make at little as $1,500 a month. But trips through Hormuz can bump up earnings by at least four to six times their normal rates, the report said.
Other hot spots also offer hazard enhancements, albeit less than what’s available for Hormuz trips. According to the FT, captains and sailors get double pay in the southern Red Sea, where Houthis have been attacking Saudi ships, and in the Gulf of Oman, where many ship-to-ship transfers take place after Hormuz shuttle runs.
Because many ships and their crews are dedicated to the shuttle runs, they are in constant peril—allowing them to stack up all the bonuses and danger money for each trip.
A source told the FT that those brave enough to stomach the near-constant threat of attacks are “almost being viewed as mercenaries,” though some unwilling crew members are reportedly being pressured to stay onboard.
Since the Iran war started on Feb. 28, at least 93 ships have been hit, and 24 sailors have been killed, according to the International Maritime Organization.
In addition to the hazard pay for crews, shipowners are also paying for insurance, and the war risk can command 6%-10% of a ship’s value—translating to up to $20 million for a supertanker sailing through the Gulf.
All the added costs have made shipping expensive too. Freight rates for cargoes crossing the Strait of Hormuz hit a record high of $1.3 million per day, up from last year’s daily rate of $20,000-$50,000.
All the ships needed to get oil out of the Gulf have also contributed to a global tanker shortage that’s spiked freight rates around the world.
Shipbroker Gibson pointed out that hiring a tanker to travel from the U.S. to China costs about $80 million, more than the $74 million price tag for a standard SpaceX Falcon 9 launch. Brokerage SSY estimated that rates are now the highest since the advent of the supertanker in the 1960s, even after adjusting for inflation.
Shipping costs have become so extreme that oil producers and even commodities traders are looking to own their own tankers to control the expenses.
But if freight costs get too high, they could erase the margins that can be earned from oil and refined fuels. For instance, European refiner Repsol saw its margin drop from $36 per barrel in the third quarter to $15 in October, according to analysts at RBC. Further reduction in margins could eventually force refiners to reduce how much crude they process.
The hazard premium could get worse in the Persian Gulf. Analysts have warned the Iranian regime, facing an existential threat to its rule, could re-escalate the war and take back its grip on the oil trade.
Esfandyar Batmanghelidj, founder and CEO of the Bourse & Bazaar Foundation think tank, pointed out recently that Iran can still destroy regional oil infrastructure, such as drilling and refining capacity, and can escalate if President Donald Trump rejects diplomatic off-ramps.
“Iran did not wage a scorched earth campaign—but it may yet do so if the current situation persists for too long,” he posted on X late last month. “That is what everyone who actually follows this region and its dynamics is worried about.”
