diff --git a/x/tunnel/keeper/helper.go b/x/tunnel/keeper/helper.go
index 204e03f93..524d80601 100644
--- a/x/tunnel/keeper/helper.go
+++ b/x/tunnel/keeper/helper.go
@@ -4,6 +4,7 @@ import (
 	"math"
 
 	sdkmath "cosmossdk.io/math"
+	storetypes "cosmossdk.io/store/types"
 
 	feedstypes "github.com/bandprotocol/chain/v3/x/feeds/types"
 	"github.com/bandprotocol/chain/v3/x/tunnel/types"
@@ -72,3 +73,15 @@ func calculateDeviationBPS(oldPrice, newPrice sdkmath.Int) sdkmath.Int {
 
 	return newPrice.Sub(oldPrice).Abs().MulRaw(10000).Quo(oldPrice)
 }
+
+// IsOutOfGasError checks if the error object is an out of gas or gas overflow error type
+func IsOutOfGasError(err any) (bool, string) {
+	switch e := err.(type) {
+	case storetypes.ErrorOutOfGas:
+		return true, e.Descriptor
+	case storetypes.ErrorGasOverflow:
+		return true, e.Descriptor
+	default:
+		return false, ""
+	}
+}
diff --git a/x/tunnel/keeper/keeper_packet.go b/x/tunnel/keeper/keeper_packet.go
index 24e7f812b..d515ad43f 100644
--- a/x/tunnel/keeper/keeper_packet.go
+++ b/x/tunnel/keeper/keeper_packet.go
@@ -175,9 +175,13 @@ func (k Keeper) CreatePacket(
 func (k Keeper) SendPacket(ctx sdk.Context, packet types.Packet) (err error) {
 	defer func() {
 		if r := recover(); r != nil {
-			ctx.Logger().Error(fmt.Sprintf("Panic recovered: %v", r))
-			err = types.ErrSendPacketPanic
-			return
+			if isErr, _ := IsOutOfGasError(r); isErr {
+				// We panic with the same error, to replicate the normal tx execution flow.
+				panic(r)
+			} else {
+				ctx.Logger().Error(fmt.Sprintf("Panic recovered: %v", r))
+				err = types.ErrSendPacketPanic
+			}
 		}
 	}()