Strait of Hormuz disruption sends tanker and LNG shipping rates to records as U.S.-Iran tensions spike
Global oil and gas shipping costs surged to fresh records as traffic through the Strait of Hormuz slowed to a near standstill after Tehran targeted vessels transiting the key waterway, according to shipping data and industry sources. The choke point between Iran and Oman carries roughly one-fifth of the world’s oil and significant volumes of liquefied natural gas.
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The strikes on ships, part of Iran’s retaliation to U.S. and Israeli military actions, have triggered precautionary shutdowns at energy facilities across the Middle East and stoked fears of a prolonged disruption. Oil and European natural gas prices jumped, with Brent crude futures up nearly 10% this week amid multiple shutdowns and rerouted cargoes.
Freight for very large crude carriers (VLCCs) leaving the Middle East bound for China hit an all-time high in the latest session, with the benchmark TD3 route assessed at Worldscale 419, equivalent to $423,736 per day, LSEG data showed. The Worldscale system is the industry standard for calculating tanker rates.
Pressures spread rapidly to gas shipping. Daily freight rates for LNG carriers leapt more than 40% after Qatar halted production, according to Spark Commodities. Atlantic basin LNG rates climbed to $61,500 per day, up 43% (or $18,750) from Friday, while Pacific rates rose to $41,000 per day, up 45% (or $12,750).
“Vessel availability for the rest of March is considered weak as cargo operators try to work through the backlog created by weather disruptions during February,” said Fraser Carson, principal analyst for global LNG at energy consultancy Wood Mackenzie. He said spot daily LNG shipping rates could top $100,000 this week on tight supply, adding: “There will be very strong competition for any available vessels.” Until safe passage through the Strait of Hormuz can be assured, shipping will remain idle, Carson said.
Confusion over the status of the strait intensified risks. An Iranian Revolutionary Guards senior official said the waterway is closed and that Iran will fire on any ship attempting to pass, Iranian media reported. The U.S. military’s Central Command countered that the Strait is not closed, Fox News reported. In the Gulf, several shipowners have suspended operations indefinitely, making it “very difficult to assess” real-time rates, an oil shipbroker said, declining to be named due to company policy.
Corporate and government responses gathered pace. South Korean shipping firm Hyundai Glovis said it is preparing contingency plans, including securing alternative routes and ports. South Korea’s maritime ministry issued a notice urging domestic shippers with vessels in the Middle East to refrain from operations in the region, an official told Reuters, and convened a meeting to discuss further safety measures following Iran’s threat to attack any ship transiting the strait.
The rate spike underscores how exposed global energy supply chains remain to the bottleneck at Hormuz. With VLCC earnings at unprecedented levels and LNG carriers in short supply, charterers face steep premiums to move crude and gas out of the Gulf, while insurers and risk managers reassess exposure. Freight markets are likely to remain elevated until vessel safety is assured and regional production is restored.
By Abdiwahab Ahmed
Axadle Times international–Monitoring.
