Tanker rates for routes through the Strait of Hormuz have more than doubled since Israel began bombing Iran. This dramatic increase is attributed to the growing reluctance of shipowners to navigate through the critical chokepoint amidst the escalating conflict.
Shipping Costs Surge
The escalating tensions in the Middle East, particularly around the Strait of Hormuz, are having a tangible and significant impact on global shipping costs, most notably in the tanker and insurance markets.
Data from Clarksons Research, a prominent maritime analysis provider, highlights a dramatic increase in freight rates for Very Large Crude Carriers (VLCCs). The daily rate for a VLCC chartered from the Gulf of China (presumably meaning from the Persian Gulf to China) jumped from $19,998 last Thursday to over $47,600 this week. This more than doubling of rates underscores the immediate market reaction to heightened risk in a critical energy transit chokepoint.
The insurance sector is also responding swiftly to the deteriorating security environment. The Financial Times reported this week that premiums for vessels traversing the Strait of Hormuz have increased by as much as 60%. To put this into perspective, the insurance cost for a $100-million ship has risen from $125,000 to $200,000.
Marcus Baker, the global head of marine and cargo insurance at Marsh McLennan, explained the rationale behind these soaring premiums: “We’ve not yet seen a missile fired at a ship in the Arabian Gulf, so what it represents is the market saying, look, there’s definitely a heightened level of concern about the safety of shipping in the region.” This indicates that insurers are pricing in the risk of potential incidents, even if direct attacks on commercial shipping in the Arabian Gulf have not yet occurred. The increased volatility is also reflected in the reduced validity periods for insurance quotes, now often cut to just 24 hours from a previous 48 hours.
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Source: Oil Price
