Hormuz Strait: Oil Tankers Halt Passage After US-Israel Strikes on Iran

Oil Tankers Divert from Strait of Hormuz Amidst Escalating West Asia Tensions

Oil and gas tankers are increasingly rerouting away from the critical Strait of Hormuz following recent strikes impacting Iran, with numerous vessels pausing outside the waterway and some already in transit reversing course. The situation reflects heightened anxiety in the region and potential disruption to global energy supplies. While official communication from Iran regarding the strait’s status remains absent, reports indicate a perceived ban on transit, prompting a cautious response from shipowners worldwide. The United States has also issued warnings to shipping, advising vessels to maintain a distance of 30 nautical miles from its military assets in the Middle East.

The immediate impact is a slowdown in traffic through one of the world’s most strategically important chokepoints for energy. Tracking data reveals tankers altering course, and at least one shipowner has reportedly decided against sending vessels through the strait in response to reported Iranian naval broadcasts. Despite the growing caution, some ships continued to transit the waterway, with seven observed exiting and six entering after the warnings were issued, according to data compiled by Bloomberg.

This disruption marks the first tangible sign of market impact from the recent actions, though the duration of the slowdown remains unclear. Approximately 20% of the world’s seaborne oil and liquefied natural gas (LNG) passes through the Strait of Hormuz daily, making it a focal point during periods of regional tension. While Tehran has previously threatened to block the strait, it has never fully done so.

A Cautious Response from Global Shipping

The initial reaction has been widespread caution across the global shipping industry. Japanese shipping giant Nippon Yusen KK has instructed its fleet to avoid the Hormuz strait, and Greece has advised its merchant fleet to reassess passage plans. Some shipowners are interpreting the US advisory as an effective closure of the waterway. Several owners have reportedly received broadcasts instructing ships not to proceed, declaring the strait “banned for all ships.”

The situation is further complicated by the closure of oil futures markets on Saturday and Sunday, limiting immediate insight into how traders are pricing risk. However, early indications from retail trading platforms present West Texas Intermediate (WTI) crude oil pricing as high as $75.33 per barrel, a significant increase of up to 12% from Friday’s close.

Disruption to LNG and Crude Oil Shipments

The impact extends beyond crude oil, with disruptions also affecting LNG shipments. At least three gas tankers bound for or originating from Qatar – the world’s second-largest LNG exporter, accounting for 20% of global supply in 2023 – have paused their voyages to avoid the strait. These shipments are crucial for supplying energy to markets in Asia and Europe.

Tankers are now accumulating on both sides of the strait. Three vessels have halted journeys exiting the Persian Gulf, while at least eight tankers have been building up outside the Gulf of Oman over the past two weeks. Several shipowners are even considering canceling already-booked voyages into the Middle East, citing war clauses that allow them to do so in the event of hostilities involving countries like the US and Iran. This could tighten vessel supply in the region, potentially driving up freight rates, which are already at multi-year highs.

Specific Vessel Movements Reflect Growing Concerns

Specific vessel movements illustrate the growing concerns. The KHK Empress, carrying Omani crude, made a U-turn while transiting the strait and altered its destination from Basra, Iraq, to New Mangalore, India. Similarly, the Eagle Veracruz, laden with 2 million barrels of Saudi crude, and the Front Beauly, carrying a comparable amount of Iraqi and Emirati crude, have both halted their journeys at the western approach to the strait. The Suezmax tanker Front Shanghai, transporting approximately 1 million barrels of Iraqi crude to Rotterdam, has also paused off the coast of Sharjah.

The supertanker Mitake, en route to Ras Tanura in Saudi Arabia, came to a virtual standstill east of Oman following news of the strikes, joining a growing number of idling tankers outside the Gulf of Oman.

Historical Context: The Strait of Hormuz and Regional Security

The Strait of Hormuz, a narrow waterway connecting the Persian Gulf to the Gulf of Oman and the Arabian Sea, is a vital artery for global energy supplies. Its strategic importance has made it a consistent flashpoint in regional conflicts. The strait is only 21 miles wide at its narrowest point, and international shipping lanes are even closer to Iranian waters.

Historically, Iran has threatened to close the strait in response to perceived threats or sanctions. In 2019, following the reimposition of US sanctions, Iran briefly seized a British-flagged tanker in the strait, escalating tensions. The US Navy maintains a significant presence in the region to ensure freedom of navigation, and has been involved in several incidents with Iranian forces in recent years. The Times of Israel provides further background on the strait’s significance.

What Happens Next?

The immediate future hinges on several factors. The duration of the current disruption will depend on the evolving security situation and any further actions taken by Iran or the US. A prolonged closure of the strait, even partial, could lead to significant increases in oil prices and disruptions to global energy markets.

Shipowners will continue to assess the risks and adjust their routes accordingly. The potential for Iranian retaliatory strikes and the impact on port operations remain key concerns. The situation is highly fluid and requires close monitoring. Bloomberg offers ongoing coverage of the developing situation.