Ships have been instructed to avoid passing through the Strait of Hormuz by the Iranian Navy, according to industry operators, after the US and Israel carried out coordinated military strikes against Iran on Saturday, which subsequently saw an escalation of tension in the region and Iran declaring the strait effectively closed to navigation.
The Strait of Hormuz in the Arabian Gulf is vital to US allies and global energy markets.
“Some ships have been advised on VHF by the Iranian Navy to hold position and avoid transiting the Strait of Hormuz at this time,” Farhad Patel, director of Dubai-based Sharaf Shipping Agency told The National.
“We are closely monitoring the situation in co-ordination with relevant maritime authorities and awaiting further clarification before normal transit resumes.”
Iran sits on the northern shore of the Strait of Hormuz and controls key approaches to the waterway, giving Tehran significant power over the channel through which much of its oil exports flow.
About 20 per cent of the world's oil passes through the strait and it is critical to global oil supply.
“The US-Israeli attack on Iran dramatically increases the security risk to ships operating in the Arabian Gulf and adjacent waters,” said Jakob Larsen, chief safety and security officer at Bimco shipping association.
“Ships with business connections to US or Israeli interests are more likely to be targeted, but other ships may also be targeted deliberately or in error.”
Mr Patel said operators are proceeding with heightened caution.
“Any prolonged restriction through the Strait of Hormuz could have implications for tanker scheduling, freight rates and insurance exposure, given the volume of global energy flows through the corridor.”
Greece's shipping ministry advised crews of Greek-flagged vessels on Saturday to exercise maximum vigilance and avoid the Arabian Gulf, the Gulf of Oman and the Strait of Hormuz following the strikes against Iran, according to a Reuters report.
UKMTO (UK Maritime Trade Operations) also advised vessels to move with caution amid reports of multiple radio transmissions warning that the strait was closed and increased military activity in the region.
“Mariners should note the potential for elevated electronic interference, including disruption to AIS [automatic identification systems] and other navigational or communications systems,” it said.
Earlier this month, Iran closed parts of the strait for a few hours due to “security precautions” while its Islamic Revolutionary Guard Corps conducted military drills.
“Ships already in the area are expected to seek refuge in territorial waters of neutral states in the area such as the United Arab Emirates or Qatar, and some ships may also want to try to leave the area entirely,” Mr Larsen said. Ships currently bound for the conflict area are likely to stay away until the situation stabilises again, he added.
Why is Strait of Hormuz so critical?
Around 12 million barrels a day of crude oil pass through the strait, more than 80 per cent of it bound for Asia. Including refined products, the total volume can reach up to 20 million barrels a day.
Are there any other alternatives to transport oil?
Saudi Arabia and the UAE have spare pipeline capacity to bypass the strait but the capacity is limited.
Saudi Arabia’s East-West pipeline and the UAE’s Habshan-Fujairah pipeline can support in transport of oil to global markets if Strait of Hormuz is closed.
Can Iran close Strait of Hormuz?
The Iranian naval forces have capabilities designed to disrupt shipping in and out of the Arabian Gulf, according to Bimco. Iran is expected to coerce commercial shipping to decide against entering the conflict area in the short term.
However, “US air and naval superiority will eventually establish a level of security which will enable commercial shipping to resume transportation in and out of the Gulf and adjacent waters”, Mr Larson said.
How will Iran allies Houthis respond to disrupt shipping?
The Houthis, allies of Iran, have already said they will use missile and drone attacks against commercial shipping in the Red Sea and Gulf of Aden in support of Iran, especially against ships that have ties to the US or Israel. Other ships may also be targeted deliberately or incidentally.
“The current outbreak of hostilities exacerbates security threats to ships in the Red Sea and Gulf of Aden and will most likely cause some shipowners to reroute south of Cape of Good Hope,” Mr Larson said.
How will the insurance market react?
Insurance rates are expected to increase manyfold, and ships with business connections to US or Israel approaching the area are probably not going to be able to get insurance as safety risks rise due to the war.
