Media: Middle East conflict sparks surge in oil shipping costs, raises supply concerns

Charter rates for large oil tankers navigating the critical Strait of Hormuz have more than doubled following Israel’s recent military action against Iran, reflecting heightened risk aversion among shipowners and escalating regional tensions.

Data from Clarksons Research indicates that the daily charter rate for a very large crude carrier (VLCC), capable of transporting approximately two million barrels of oil from the Gulf to China, surged from $19,998 on June 11—two days prior to Israel’s strike—to $47,609 on June 19. This increase significantly outpaces the broader 12 per cent rise in the Baltic Dirty Tanker Index, which tracks crude oil tanker rates globally over the same period, Caliber.Az reports per foreign media.

Shipowners are deliberately holding back from deploying vessels through the Strait of Hormuz, anticipating “higher earnings in their future” as charter rates climb further, explained Joakim Hannisdahl, founder of Gersemi Asset Management, a shipping hedge fund manager.

Similarly, rates for chartering a large long-range 2 tanker carrying refined oil products from the Gulf to China escalated from $21,097 per day on June 11 to $51,879 on June 19, according to Clarksons.

Richard Fulford-Smith, head of investment firm Eden Ocean, attributed the spike partly to concerns about Iran’s ability to sustain its crude exports amid ongoing conflict. Due to international sanctions, Iran’s exports rely heavily on a so-called “dark fleet” of vessels that operate outside conventional insurance and safety regulations. However, market speculation suggests that some buyers are shifting to oil from other exporters using mainstream, compliant tankers, driving up demand—and charter costs—for those vessels.

“If you take away the Iranian ships completely, you’re going to be needing more ships from the regular fleet,” Fulford-Smith said.

Lars Barstad, CEO of Frontline—the world’s largest publicly listed oil tanker company—recently said he expected the conflict to accelerate the shift away from Iran’s dark fleet towards Gulf exporters employing legitimate vessels.

Nonetheless, Stephen Gordon, managing director of Clarksons Research, noted there is no clear evidence that Israeli attacks have materially affected Iran’s oil export capabilities. “Tanker freight rates on routes out of the Middle East have risen sharply over recent days, with some owners wanting to avoid the region, or demand higher risk premiums to operate in the area,” he said. “However, oil flows from the region have continued.”

The risks associated with transiting the Strait of Hormuz were underlined on June 17 when Frontline’s VLCC Front Eagle collided with a dark fleet tanker shortly after leaving the strategic waterway. Fortunately, there were no casualties.

By Vafa Guliyeva