Iran’s Strait of Hormuz Warning Jolts Oil and Shipping
Iran‘s Revolutionary Guards declared “complete control” over the Strait of Hormuz, issuing a warning that ships in the area could come under attack.
Oil and gas prices surged after a slowdown in tanker traffic left Gulf producers hurriedly searching for alternatives. The Strait of Hormuz is a critical energy route, with about 20% of the world’s oil and LNG moving through it. This week’s fighting squeezed supplies and sent prices higher, with Brent crude popping 4.7% to finish Tuesday at $81.40 a barrel.
Global Impact of Disruption
Analysts warn that Asia and emerging markets could take the hardest hit if the disruption persists. Countries like Thailand, South Korea, Vietnam, Taiwan, and the Philippines are particularly vulnerable due to weaker currencies and ballooning trade deficits. According to ING, these countries are at risk of facing significant economic consequences.
Shipping Data Reveals Notable Drop in Vessel Traffic
Shipping data points to a notable drop in vessel traffic. The Suezmax tanker Pola slipped through the Strait of Hormuz on Tuesday, making a rare passage. The ship switched off its AIS transponder as it neared the strait, only to pop back up on tracking systems off Abu Dhabi. Two trade sources told Reuters that the Pola was going to load Murban crude, with Thailand as its destination.
Gulf Producers Search for Workaround Routes
Gulf producers are hunting for workaround routes, but spare capacity remains scarce. Saudi Aramco has directed some customers to pick up cargoes at the Red Sea’s Yanbu port to sidestep Hormuz entirely. Richard Bronze, co-founder of Energy Aspects, flagged “logistical trade-offs” – not least, the speed at which Yanbu can get tankers moving.
Pricing Systems Feel the Impact
The disruption is now hitting the core pricing systems for oil trading. S&P Global Platts announced it will look at different routes for Middle East freight assessments – benchmarks critical to physical oil contracts. The company also pulled the plug on bids and offers for some Middle East crude, refined products, and LNG assessments that usually depend on Hormuz passage.
Economic Fallout
Outside the energy sector, economists are eyeing the potential fallout for investment and central bank moves. JPMorgan’s Joseph Lupton flagged the danger: “This nascent recovery is now at risk.” For Tim Duy at SGH Macro Advisors, the conflict is “a wild card” for both inflation and what the Federal Reserve decides to do.
US Response
US President Donald Trump said he has directed the U.S. International Development Finance Corporation to back maritime trade in the Gulf with political risk insurance and financial guarantees. He again floated the idea of naval escorts, posting on social media, “No matter what, the United States will ensure the free flow of energy to the world.” Shipping sources, however, cast doubt on whether escorts can actually reduce risks as long as fighting persists.
Original Article: Iran’s Strait of Hormuz warning jolts oil and shipping — which countries could get hit first — Ts2