VLCC daily hire rates have climbed above $1 million as Persian Gulf crude producers shift ship-to-ship transfer operations out of war-zone waters and into the Gulf of Kutch, off India's western coast, vessel-tracking data compiled by Bloomberg and Vortexa shows.

Two supertankers discharged cargoes onto other very large crude carriers in the Gulf of Kutch over recent days. Receiving vessels are now headed east, signaling Singapore and South Korea as next stops. At least two more VLCCs are currently conducting STS transfers in the same area.

These are the first eastbound Gulf crude cargo transfers observed off Gujarat since the Iran war began seven months ago. The pivot underscores how saturated STS infrastructure near the Strait of Hormuz has become, driving operators to scout alternative anchorages farther down the maritime supply chain.

Why Gulf producers are moving STS work

The seven-month war-driven contraction of Hormuz flows has forced key Middle East exporters to keep exports moving by shuttling cargoes covertly through the choke-point, then decanting them onto other vessels in safer zones near Oman or the UAE. Evasive routes near the strait are now crowded, and locally-available infrastructure is straining. Day rates for supertankers have responded by pushing past $1 million, putting upward pressure on delivered crude and refined-fuel prices.

Houthi attacks on Red Sea shipping have tightened the squeeze in recent weeks. Saudi Arabia is being forced to ship greater crude volumes back through Hormuz, adding more tonnage to an already-congested corridor and its satellite STS lanes off Oman and the UAE.

How tight is STS capacity near Hormuz?

Vortexa estimates the Gulf's STS capacity has effectively reached its limit. Time-to-completion for a fully-laden VLCC transfer has grown to five or six days, the consultant reports — a sharp rise from pre-war norms and now the dominant source of shipping delays in the area.

"This bottleneck has become the main source of shipping delays in the area," Emma Li, Vortexa's lead China oil market analyst, said in a report last week. Transfers off India's west coast could also give operators a security buffer, cutting the odds of vessels being caught in sporadic attacks targeting Hormuz transit, Li added.

What it means for charterers and VLCC owners

A fully-laden VLCC that previously completed STS in three days now spends six days at anchor, burning roughly $6 million of additional charter cost per transfer cycle at current day rates. That cost flows straight to the delivered price paid by Asian refiners in Singapore and South Korea.

VLCC owners are enjoying premium returns but taking on greater exposure to conflict risk should Tehran follow through on warnings that the war could expand toward the Indian Ocean. For charterers tendering Gulf-to-East Asia cargoes, longer voyages will require additional buffer days in nomination windows, and freight forwarders should expect insurance and war-risk surcharges to be revisited.

Where this goes from here

Ship operators should plan for the Gulf of Kutch to absorb a growing share of regional STS transfers as Hormuz-area congestion worsens, keeping VLCC hire rates above the $1 million mark through the next quarter at minimum. Any Iranian move to strike Indian Ocean shipping would deepen the squeeze on global tanker capacity and push day rates further still, exposing refiners in North Asia to persistent freight-cost inflation.