Shipping unhindered in Strait of Hormuz despite Israel-Iran war risks

Owners monitor security as higher risk pushes up insurance costs

Destruction at the site of an Iranian missile attack in Beersheba, southern Israel. AFP

Ships are continuing to travel through the Strait of Hormuz, but leading companies say they are closely monitoring the Israel-Iran conflict, and safety is a priority.

“So far, our operations across the region continue without interruption,” a spokesperson for German shipping company Hapag-Lloyd told The National in a statement.

The company added that it is closely monitoring the “geopolitical developments” in the Middle East and the “safety of our seafarers and vessels as well as the cargo of our customers” are its priority.

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Ships carry about 20 million barrels of crude and refined products daily through the key waterway between Iran and Oman to various destinations from Gulf producers and from Iran and Iraq.

This week, two ships collided in the Gulf of Oman near the Strait of Hormuz after a “navigational misjudgment” by one of the vessels.

The UAE Energy Ministry did not blame the accident on the current conflict but it highlighted the risk of navigating through the water channel as the conflict continues.

Closing down the waterway is one option Iran could take to respond to its enemies, said Behnam Saeedi, a member of the Iranian parliament's national security committee.

Shipping major Maersk said it will continue to use the Strait of Hormuz but will pause calling at the Israeli port of Haifa following Iran’s bombardment of the coastal city this week.

The Strait of Hormuz is a key waterway for ships carrying crude oil and refined products. Getty Images

“We will closely monitor the situation and will be ready to reassess this as soon as feasible," Maersk said.

The conflict began on June 13 when Israel launched a wave of strikes across Iran, killing senior military officials and hitting nuclear sites.

Iran launched retaliatory missile strikes on Israel, hitting a number of targets. The conflict is continuing with both countries hitting each others targets.

Some LNG vessels en route to Qatar to load are holding back near Oman, maritime research consultancy Drewry Shipping said.

Dry bulk imports of grain and agri-products, including soya beans and sugar, to Iran are also stalled at the moment, Rahul Sharan, deputy director of bulk research at Drewry, told The National. “Similarly, Iran’s exports of iron ore, cement and clinkers, steel products and urea are also stalled,” he said.

About 20 per cent of the world's oil consumption passes through the Strait of Hormuz, which is the only entry point to the Arabian Gulf.

Impact on oil and trade

Energy companies have also expressed concern about the war's impact on trade and oil shipments.

A blockage of the Strait of Hormuz could deliver a substantial shock to global trade, Shell chief executive Wael Sawan said at the Japan Energy Summit and Exhibition in Tokyo on Thursday.

“If that artery is blocked, for whatever reason, it has a huge impact on global trade,” Bloomberg reported quoting Mr Sawan as saying. “We have plans in the eventuality that things deteriorate.”

Oil prices are trading higher on supply related concerns. Prices surged as much as 13 per cent on the first day of the conflict and analysts are expecting oil to touch $150 per barrel if the Strait of Hormuz is shut.

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“What is particularly challenging right now is some of the jamming that’s happening,” said Mr Sawan, referring to the interference with navigation signals in and around the Arabian Gulf. Shell is “being very careful” with shipping in the Middle East due to the conflict, he said.

“A sustained disruption in the Strait could lead to congestion, and reduced reliability in trade flows, impacting not only energy exports but a wide range of industries reliant on timely shipping,” Carl Sykes, chief executive of Neptune P2P Group, an international private security company specialised in maritime security, said.

“Stability in the Strait is therefore critical not only for geopolitical reasons but for maintaining economic continuity across the region and beyond.”

Rising shipping costs

Another impact of the war has been on shipping costs, which have gone up for vessels travelling through the region, including through rising insurance premiums, according to analysts and insurers.

“The price to charter a very large crude carrier from the Gulf to China reportedly more than doubled from about $20,000 a day a week ago to about $47,600 on Wednesday,” Philip Damas, managing director and head of Drewry Supply Chain, said.

Insurance rates have also gone up for cargo vessels sailing in the Red Sea, Arabian Gulf and travelling to or from Israeli ports, according to Marcus Baker, global head of marine and cargo at Marsh McLennan.

“All quotes are now valid for 24 hours from most leaders, as opposed to 48 hours previously,” Mr Baker said.

There is also a slight rise in war risk insurance rates for the Red Sea and Arabian Gulf and ports in Israel, he added.

“We are now seeing a modest drop in the number of ships sailing through the area,” Jakob Larsen, chief safety and security officer at Bimco shipping association, told The National.

He added that US authorities reported no indications of a threat from Iran towards commercial ships other than those with links to Israel.

However, Iran might expand their threats "to also take aim at ships without links to Israel,” if the tension mounts, he added.

“Iranian forces are highly skilled in asymmetric warfare and have prepared for decades for a scenario involving attacks against shipping through the Strait of Hormuz and adjacent waters,” he said.

Last year, Iran's Revolutionary Guard seized a container ship with links to Israel in the strait.