The tanker market is currently experiencing significant fluctuations due to the ongoing tensions between Israel and Iran. Reports indicate a notable increase in war-risk premiums for vessels operating in these regions.
For instance, the cost of insuring a VLCC (Very Large Crude Carrier) from Ras Tanura to Ningbo saw a rise from USD 0.25 per barrel to USD 0.70-0.80 per barrel in just one day. Additionally, several shipping contracts for July have already been repriced mid-journey, highlighting the increasing volatility as freight rates and margin calls evolve.
The impact is not limited to oil tankers but extends to the gas market as well. Qatar’s liquefied natural gas (LNG) exports, representing 18% of global supply, and those from the UAE pass through the Strait of Hormuz, making them vulnerable to disruptions.
China, which relies heavily on these supplies, could face increased costs should disruptions occur. This situation would likely lead Pacific buyers to seek LNG from the Atlantic basin, pushing market prices higher.
Even though physical infrastructure appears stable, with Iran claiming operational pipelines, the markets are wary of potential future disruptions. Analysis suggests a brief closure of the Strait could cut approximately 6 million barrels per day from the market, significantly affecting global oil stocks and driving prices up.
Moreover, heightened security concerns have resulted in extended voyage times and increased operational risks for shipping fleets navigating these waters. Despite these tensions, it is worth noting that Iran cannot easily close the Strait without severe repercussions for itself, as most of its oil exports still depend on the Kharg terminal.
Consequently, while investors hedge their bets amid these uncertainties, the market remains volatile, responding to geopolitical developments as they unfold. Until diplomatic negotiations yield noticeable results, the situation is expected to continue fluctuating.