Tensions surrounding the Strait of Hormuz have escalated again, increasing uncertainty in the shipping market. International oil prices, which had dipped slightly on expectations of normalized passage, surged by more than 5% in a single day following clashes between the United States and Iran. Both freight rates and oil prices are expected to remain volatile in the near term, depending on developments in the Middle East.
According to data from the Shanghai Shipping Exchange as of the 28th last month, the Shanghai Containerized Freight Index (SCFI) stood at 3509.53, up 99.9 points (2.9%) from Jeonju. The index has risen for five consecutive weeks since July 31, reaching a new yearly high. SCFI freight rates on Middle East routes reached $6,139 per TEU, a 7.2% increase in just one week.
The tanker market is even steeper. According to the Korea Maritime Institute, as of the same day, the daily time charter equivalent (TCE) for ultra-large crude carriers (VLCCs) on the Middle East-China route was $656,168, an increase of $52,721 in one week. Since late February, passage through the Strait of Hormuz has been restricted, making it increasingly difficult to secure vessels capable of carrying Middle Eastern crude oil.
In this context, armed conflict between the United States and Iran has intensified again. On the night of the 31st (local time), two VLCCs carrying Saudi crude oil were hit by unidentified projectiles in waters near Musandam, Oman. The U.S. Central Command stated on the 1st that it targeted Iranian Islamic Revolutionary Guard Corps (IRGC) assets in response to attacks on civilian ships in the Strait of Hormuz, while Iran claimed it attacked a U.S. military base in Jordan, escalating the confrontation.
Passage through the strait is shrinking again. According to ship-tracking firm Kepler, only five vessels transited the Strait of Hormuz on the 31st last month, a sharp drop from the recent ten-day average of 14 ships. Oil transport volumes, which had recovered to half pre-war levels during periods with fewer attacks, are now likely to decline once more. With an attack occurring in the Omani corridor that shipping lines had used to avoid Iranian-controlled routes, doubts have grown regarding the safety of alternative passages.
Bottlenecks continue at ports and canals worldwide. According to KOTRA, 15 of the 24th major ports in six Gulf coastal countries are either located inside the strait or operate under restrictions, making them difficult to use. The alternative transshipment hub of Korpa Khan port has introduced a port congestion surcharge (PCS). The Panama Canal has reduced its daily transit capacity since July due to drought and is further cutting back on daily reservation slots and cargo-carrying capacity this month. As a result, freight rates on the Far East–Americas route have risen to $146 per 1FEU, recovering above the $10,000 mark for the first time in four years and two months since June 2022.
Rising oil prices have also increased cost burdens. On the 1st (local time), November-delivered Brent crude settled at $94.65 per barrel on the London ICE Futures Exchange, up $4.16 (4.6%) from the previous trading day. October-delivered West Texas Intermediate (WTI) crude on the New York Mercantile Exchange also surged 5.2% to close at $90.22 per barrel. These represent the highest closing prices for Brent since July 24 and for WTI since July 23.
An industry official predicted, "Even if resumption of negotiations or a ceasefire occurs between the U.S. and Iran, it could take weeks to months for traffic flow through the strait to normalize after confirming safe passage and repositioning tankers."
in INDUSTRY
