Iran conflict reshapes shipping landscape, as many product tankers transform into crude oil carriers.

More and more product tankers that were originally used to transport diesel, gasoline, and other fuels are transforming into crude oil tankers, as the impact of the Iran war makes this transition more economically viable. Data from the ship tracking platform Signal Ocean shows that about 68 Long Range 2 (LR2) oil tankers have been converted for transporting crude oil so far this year, compared to only 49 for the entire year of 2025. LR2 oil tankers are the largest type of ships built for product oil transportation, with a capacity similar to that of Aframax crude oil tankers, the smallest type of crude oil tanker that can carry up to 800,000 barrels of crude oil. This trend of conversion started to emerge at the end of last year. As more floating storage facilities are put into use and the oil tanker market consolidates, the demand for crude oil tankers has increased, leading to higher freight costs for these vessels. The closure of the Strait of Hormuz has accelerated this trend as buyers of crude oil are seeking alternative sources, lengthening the voyages of crude oil tankers and weakening the demand for product tankers. More and more LR2 oil tankers are shifting towards transporting crude oil. Georgios Sakellariou, a chartering analyst at Signal Maritime, which is affiliated with Signal Ocean, stated that the significant decrease in crude oil production and refining capacity in the Persian Gulf means that the main loading hubs for LR2 oil tankers are no longer available. He commented on the wave of vessel conversions: "The scale of the conversion numbers is remarkable and has already reshaped the global tanker capacity landscape." Signal's data shows that there are currently about 296 LR2 oil tankers transporting crude oil, accounting for two-thirds of the global LR2 oil tanker fleet and the highest proportion since records began in 2019. The main reason for this transformation is the difference in time charter rates between Aframax and LR2 oil tankers. In March, the profitability of Aframax oil tankers increased significantly compared to LR2 oil tankers as crude oil buyers rushed to secure oil supply and major refineries reduced fuel exports. Among the numerous converted vessels, LR2 oil tanker "Proteus Philippa" loaded diesel from the Middle East to Europe in February. After the outbreak of the Middle East conflict, the vessel arrived in Houston in early March and loaded West Texas Intermediate (WTI) crude oil. A large number of LR2 oil tankers entering the Aframax crude oil tanker market has caused a shortage of product tanker capacity, leading to higher product tanker freight rates and weakening the economic benefits of conversion. The number of conversions has decreased in recent weeks. Whether this trend will reverse remains to be seen. While converting product tankers to crude oil tankers is relatively easy, reverting back is more time-consuming and costly.