Iran Attack Risks Rise for Tankers as Iran Vows to Block More Hormuz Routes

• Risks to tanker traffic through the Strait of Hormuz have intensified, after Iran recently warned regional countries that attempts to establish alternative oil-export routes would be considered hostile. The warnings follow the highest number of tanker attacks since the conflict began, contributing to a sharp decline in vessel transits through the strategic waterway.
• The heightened security risks are adding further pressure to an already fragile global oil market, with attacks involving missiles, drones and other projectiles raising concerns that the conflict could expand beyond the Strait to shipping approaches around Qatar, Bahrain, Saudi Arabia, Kuwait and Iraq.
• The disruption is also increasing shipping and transportation costs, as operators become more reluctant to transit the Strait and seek alternative routes and security measures. Maersk, for example, has raised its emergency fuel surcharge for inland transportation in the UK and Ireland, reflecting the broader impact of elevated fuel costs.
• At the same time, global oil-market buffers are becoming increasingly constrained, with governments and energy companies drawing down stockpiles to offset supply disruptions linked to both the Middle East conflict and the war in Ukraine. Industry executives have warned that accessible inventories are running low, leaving the market more vulnerable to further supply shocks and upward price pressures.
• The escalation also raises the risk of a broader global economic spillover, as sustained energy and transportation cost pressures could feed into inflation and weigh on economic activity. With the conflict already costing the US an estimated US$3bn per month, further escalation could intensify pressure on governments and central banks.
• Overall, the outlook for energy markets has become increasingly dependent on developments around the Strait of Hormuz, with prolonged disruption likely to keep oil prices and freight costs elevated and increase volatility across global markets. As one Royal Navy official noted, the conflict demonstrates that “a war at sea does not remain at sea.”

(Source: Reuters)