Middle Eastern LPG exports fall by 20% as freight spikes on conflict escalation

Middle Eastern LPG shipments sharply declined in the week ended June 18 as freight rates continued to surge due to the Israel-Iran conflict, risking shortages for key buyers including China and Iran.

LPG exports from the Middle East dropped by more than 20% on June 15 and 16 compared with the previous week's levels, according to S&P Global Commodities at Sea data. Since June 15, there have been no LPG exports from Iran, and only one to two VLGC-sized cargoes per day have departed the region.

The slump in activity comes as markets responded to a jump in shipping costs to transit the Persian Gulf, an increasingly critical supply source for China and other Asian markets.

After an Israeli attack on Iran June 13 sparked fears of a wider regional fallout, Middle Eastern LPG flows have been paralyzed by soaring risk premiums and uncertainty over further price movements. As a result, tankers have been piling up ahead of the Strait of Hormuz, leaving future flows in limbo.

Shipping economics

In the aftermath of attacks between Israel and Iran, LPG freight rates for Persian Gulf-Japan routes jumped by roughly 15% and later shot up to one-year highs of $77/mt June 16, according to assessments by Platts, part of S&P Global Commodity Insights.

As insurers and tanker operators have continued to raise their war risk premiums, costs have continued to soar, prompting major tanker operators to pause shipments.

Nineteen LPG tankers were anchored off Oman June 18, according to CAS data, most mid-voyage on ballast routes to load supplies in the Gulf.

Tankers operated by EMC Gas, Mitsui subsidiary MOL India and SABIC were among the ships stationed in Omani waters. Only a handful now display end destinations at locations inside the Persian Gulf, and around June 15 several switched their stated destinations to nearby locations such as Fujairah.

None of the companies was immediately available for comment.

"Shipowners are not going to go in there at the moment until they're paid more AWRP [additional war risk premium]," one LPG source said.

"Assuming the situation doesn't get better in the next couple of months, AG-China is going to get insanely high and US-China is going to come off massively," a second trader said.

As tanker operators await further guidance on transit via the Strait of Hormuz, many have slowed down en route to the region, while US-bound voyages gained speed.

BW Loyalty, an Indian-flagged tanker inbound for the UAE's Ruwais refinery, dropped its speed from around 14 knots before the first airstrikes to roughly 7 knots over recent days, when it was seen tentatively cruising toward the strait, CAS data showed.

Pressure on Chinese, Indian buyers

Although Iranian refineries have so far avoided damage from attacks, stubbornly high freight rates and tanker rerouting could put pressure on Asian buyers.

Middle Eastern producers had promised to cushion Chinese buyers from the impact of US tariff shocks, spurring a spike in exports over recent months.

US LPG supplies to China declined 35% month over month in May to 1 million mt, and dropped again in the first half of June, according to CAS data.

Meanwhile, supplies to China from the Middle East have progressively overtaken US volumes, jumping from 1 million in January to 1.8 million in May. Iran supplied 935,000 mt, making it a critical supplier for Chinese petrochemical facilities.

India could also feel the pinch of lower export volumes, having typically accounted for roughly half of Middle Eastern LPG exports. To date, in 2025, India imported around 8.5 million mt of LPG from the Middle East, though volumes have dipped in recent months due to seasonal demand weakness.

As a result, buyers could quickly be forced to look to alternative supply sources if the situation deteriorates, trade sources said.

For now, markets remain in a wait-and-see mood to determine where freight rates will settle. As missiles continue to fly, some 2.2 million b/d of refining infrastructure in Iran also remains on close watch for potential damage.

"The shipping industry is monitoring the situation closely, with a growing hesitance to load vessels from the area noted throughout this week," S&P Global Commodity Insights analysts said in a note June 18. "Should the unrest persist in the coming days, this reluctance could intensify, prompting more vessels to redirect toward other regions, particularly the US."