Newer US-Iranian tensions have resulted in tankers taking extra measures to avoid the Strait of Hormuz. This increased awareness is a product of how bad things have gotten in the area. This strategic waterway links the Persian Gulf states to the rest of the world through the Arabian Sea. It constitutes one of the planet’s most strategic oil choke points. According to reports, at least six vessels had avoided crossing the Straits by the middle of this week. They retreated from an important maritime chokepoint that handles roughly one-fifth of daily global petroleum liquids consumption.
The Strait of Hormuz remains key to the international energy market. In 2023, oil flows through this waterway averaged a record 20.9 million barrels per day. It is a lifeline for dozens of other countries that rely on oil exports. This is particularly the case for Iran, where oil exports constitute a large percentage of its economy. The current geopolitical conflicts have sparked fears that this important pipeline of commerce could come under attack.
On Sunday, reports from Iran’s state-owned Press TV revealed that Iran’s parliament voted to block the Strait of Hormuz, leading to heightened fears of an escalation in hostilities. Jakob Larsen, head of security at Bimco, expressed concerns that Iran could attempt to disrupt commercial shipping in the area through attacks on merchant vessels. Such moves would severely disrupt world energy markets and supply chains.
Meanwhile, oil exports are lifeblood for Iran’s economy. Analysts caution that even for Iran, closing the Strait of Hormuz would be catastrophic. In fact, the country mainly relies on this route for its oil exports. Closing traffic access to any large bridge would have severe negative economic impacts. Others caution that if cornered, Iran would resort to extreme measures. These measures would inflict massive economic suffering on other countries.
Together, Jebel Ali and Khor Fakkan ports support one of the most crucial arteries of global shipping in that region. This brings to the forefront the continuing importance of protecting free passage through the Strait of Hormuz. Without alternative routes, closing this waterway will significantly increase the cost of shipping. It will lead to huge disruptions in international supply chains worldwide.
Those are indications that, as we’ve seen in recent vessel movements, operators are already becoming more cautious. Just recently, six vessels altered their routes. Within this group were two very large crude carriers, three chemical tankers, and one international refined products carrier. Of these, three have since changed course a second time and are now returning to the vicinity of the Strait of Hormuz.
Experts are closely monitoring these developments. As the top industry analyst in the world, Lipow notes that China has denounced the U.S. war against Iran. He asserts that China has provided Iran nothing more than rhetorical support. He underlined that some tanker owners should think China is putting pressure on Iran. Since China is already purchasing 90 percent of Iranian crude oil, this new influence might be powerful enough to thwart any threats to shipping.
The situation is made worse by skyrocketing insurance costs to operate in the Strait. Lipow added that, “Combined with growing insurance costs, some owners will just stay away from the area—like [Frontline].” This avoidance may create a domino effect in the market as fewer vessels sail this important pathway.
To Larsen’s credit, he pointed out that the placement of sea mines is a big threat. He said he was skeptical about Iran’s intent due to possible repercussions for any such actions. Any such action would endanger both commercial shipping and vessels affiliated with Iran. It significantly threatens the environment.
As anxiety and strain only continue to heighten, it is important to understand this weekend’s events in a larger frame. Torikata underscored this point of view by adding, “This mini long weekend event should be looked at more widely.” As the geopolitical landscape continues to change at breakneck speed, analysts find themselves caught up in speculation about how these new dynamics will affect global energy markets.