- Tensions and GPS Interference Spark Major Congestion in Strait of Hormuz.
- Freight Rates Spike as Persian Gulf Traffic Slows to 16-Hour Window.
- Navigation Chaos in Persian Gulf Raises Collision, Communication Fears.
Shipping in the Persian Gulf is currently grappling with significant congestion. This is largely due to widespread GPS jamming and rising regional tensions, which have compelled vessel operators to limit their movements to daylight hours only. As a result, there’s a backlog of nearly 1,000 ships as of June 23, according to those in the market, reports S&P Global.
Navigation Disrupted, Transit Limited to Daylight Hours
The root of this disruption lies in electronic interference that has impacted GPS systems and communication channels. Consequently, many shipowners are opting to avoid sailing at night.
“There are not only concerns that the ships may get attacked, but the immediate problem is how to get recent loadings out of the Persian Gulf,” said a source with a tankers’ owner whose two laden ships recently moved out, and another is being loaded. “Only a window of 16 or 18 hours is being used for movement, instead of the usual 24 hours, causing this congestion of ships,” the source said.
Strait of Hormuz Bottleneck Poses Global Risk
This vital maritime route links the Persian Gulf to the Arabian Sea and is responsible for transporting around 20 million barrels of crude oil, condensate, and refined fuels every day, not to mention nearly 11 billion cubic feet of LNG daily. If there’s a major disruption here, it could have serious consequences for energy markets globally.
Communication Blackouts Compound Risks
Other market participants have highlighted the severity of the GPS interference and its broader effects on safety and logistics. “The lack of connectivity is becoming very frequent. Many ships are not contactable,” said a shipping executive whose company has faced this problem.
Even in the absence of direct attacks, the risk of vessel collisions is rising. Disrupted navigation and the inability to track nearby ships are creating a volatile operating environment. “Even if there is no direct attack on ships, the possibility of collisions cannot be ruled out because when the GPS gets jammed, locating other ships in the vicinity becomes extremely difficult, and the navigation gets disrupted,” the executive said.
Recent Collision Highlights Growing Dangers
On June 17, a VLCC chartered by Unipec, named the Front Eagle, collided with a Suezmax called the Adalynn, just off Khor Fakkan, near the eastern entrance to the Strait of Hormuz. Both ships caught fire as a result. In light of this incident, authorities have issued new warnings about electronic interference in the area, especially with the rising tensions in the Iran-Israel conflict. The exact cause of the collision is still under investigation.
“It is mandatory for the onshore operations team of any ship to be in touch with the crew onboard 24/7 and this is not happening at the moment,” sources said.
Freight Rates Surge Amid War Risks and Delays
The ongoing congestion has already taken a toll on freight rates. As of June 20, VLCC rates on the key Persian Gulf–China route jumped to w80, a significant increase from w48 just a week prior, according to Platts. Meanwhile, clean tanker rates on the Persian Gulf–North Asia routes have hit their highest levels of the year.
Tanker brokers are cautioning about two potential scenarios for freight rates, depending on how the situation unfolds. If the Strait of Hormuz gets shut down, we could see a collapse in freight markets as tankers sit idle. On the flip side, if it stays open, shipowners might start asking for hefty premiums to operate in what essentially becomes a conflict zone.
War Risk Premiums Remain Stable Despite Unrest
Despite rising tension, the additional war risk premiums have not seen major spikes. “The Strait of Hormuz enables significant cash flow for Iran because the oil-rich country exports crude to countries such as China, despite the US sanctions.”
“The additional war risk premium for a seven-day transit through the Persian Gulf has remained mostly unchanged since the latest conflict began, around $30,000–$40,000 for LR1 tankers, and the bigger amounts being quoted in the market are highly exaggerated,” sources said.
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Source: S&P Global
