The impact of the Iran war on shipping

1. Vital Chokepoint: The Functional Closure of the Strait of Hormuz

While Iran has not officially declared a total blockade, the surge in security risks has rendered the strait semi-paralyzed:

• Plummeting Traffic: Monitoring data shows daily commercial vessel transits have dropped from over 50 to single digits.

• Vessel Staging: Currently, between 150 and 170 vessels (including tankers, LNG carriers, and container ships) are anchored or seeking safe harbor outside the strait.

• Military Interference: Reports of GPS jamming and warnings from the Islamic Revolutionary Guard Corps (IRGC) have effectively deterred neutral commercial traffic.

2. Reactions from Shipping Giants and Route Diversions

Major carriers (e.g., MSC, Maersk, CMA CGM, Hapag-Lloyd) have implemented emergency protocols:

• Suspension of Bookings: Most major lines have indefinitely suspended bookings and transit services entering or exiting the Persian Gulf.

• Red Sea Avoidance: Plans to return to the Suez Canal in 2026 have been scrapped due to potential spillover attacks from Houthi rebels.

• Cape of Good Hope Diversion: Vessels traveling between Asia and Europe are forced to reroute around the southern tip of Africa.

  • Time Cost: Adds approximately 10–14 days to transit times.

  • Capacity Strain: Prolonged detours are absorbing global vessel capacity, significantly reducing overall supply chain efficiency.

3. Surge in Operational Costs

• War Risk Surcharge: Insurers have either canceled coverage or hiked premiums for the region. Premium rates have jumped from 0.1% to 0.5%–1% of hull value, adding hundreds of thousands of dollars to a single VLCC (Very Large Crude Carrier) transit.

• Emergency Surcharges: Carriers have begun imposing “Emergency Conflict Surcharges,” with some routes seeing additional fees ranging from $2,000 to $4,000 per TEU.

4. Supply Chain Disruptions of Key Resources

• Energy Outflow Bottlenecks: LNG exports from Qatar and oil exports from Saudi Arabia are heavily disrupted. Saudi Aramco has temporarily shuttered some East Coast facilities following drone debris impacts.

• Port Congestion: Transshipment hubs in Oman (Salalah), Sri Lanka, and Malaysia are bracing for severe congestion as vessels divert and reschedule.

5. Macroeconomic Chain Reactions

• Inflationary Pressure: Rising freight rates coupled with surging oil prices (already exceeding $80/bbl, with forecasts hitting $100/bbl) will pass directly to end-consumers.

• Sectoral Hits: Trade routes from India to Europe and SE Asia to the Middle East are suffering direct blows, particularly in perishables, chemicals (e.g., urea), and automotive parts.