Strait of Hormuz Is Open, But…
With the two-week ceasefire between the U.S. and Iran, Iran has reopened the Strait of Hormuz, but shipping traffic through it is reportedly at a trickle.
According to a Reuters article by Jonathan Saul and Ahmad Ghaddar, today’s ship traffic through the strait is “well below 10% of normal volumes.” There’s some variance on how much ship traffic is actually going through the Strait of Hormuz, but most news outlets put the figure at 10% or below of normal levels.
How Safe Are the Waters for Ships?
While Iran did declare the strait open, it also warned of potential mines in the water, telling ships they have to coordinate with Tehran for safe passage through the waters.
It’s not only mines ships are at risk of when moving through the Strait of Hormuz. Greg Knowler reported in the Journal of Commerce (JOC) of a container ship being warned vessels without Iranian permission to transit the strait woud be attacked:
… underscoring the sensitivity around transits, a container ship near the strait received a message Wednesday from the Iranian navy warning that operators needed permission from authorities or vessels would be targeted and attacked, according to a source close to the matter who didn’t want to be identified.
Iranian Toll Scheme
The biggest thing Iran seems to be attempting with the Strait of Hormuz is to monetize it with a toll. With it hard to splice truth from fiction with Iran, some think the mine warnings are more about pushing ships into paying a toll to get through the strait than actually avoiding mines in the water.
Chris Summers reported in the Epoch Times:
In a post on X on April 9 local time, the Iranian Consulate in Mumbai warned of “possible anti-ship mines” and shared a map showing a mined area in the main channel of the strait.
It encouraged ships to take two alternative corridors further north, one of which is what became known as the “tollbooth” lane, north of Larak Island.
Knowler’s JOC article gave a little bit of detail on the kind of tolls Iran is proposing right before the excerpt above about the Iranian navy warning ships they’d be attacked if the vessels didn’t get permission to cross:
Complicating matters is that Iran has proposed a toll system for Hormuz passage, with Tehran suggesting it would charge vessels $2 million for transiting and split the fee with neighboring Oman.
Ocean Carriers Waiting and Watching
Ultimately, this all has carriers waiting and watching transit through the Strait of Hormuz. And that’s what really stands out in Knowler’s article:
“In the next couple of days, we will have to see what really happens and how many of the ships can go in and out, and then we’ll have to stay close to that situation to judge what’s going to happen after those 14 days,” Hapag-Lloyd CEO Rolf Habben Jansen told customers in a briefing Wednesday.
As negotiations between the US and Iran get underway, the top priority from ocean carriers is to remove an estimated 170 container ships representing 450,000 TEUs, or about 1.5% of global capacity, that have been stuck in the Persian Gulf since the Middle East conflict began on Feb. 28. Hapag-Lloyd has six ships comprising a total of 25,000 TEUs in the Gulf.
But the two-week window is too short and too uncertain for carriers to make long-term plans for reestablishing disrupted Middle East networks, Habben Jansen noted.
Thus, not only are carriers watching what happens with transit through the Strait of Hormuz over the next two weeks, but how things continue after this initial ceasefire.
Oil Prices Drop, Freight Rates Rise
Meanwhile, oil prices dropped back under $100 per barrel after the announcement of the ceasefire. That’s good news for shippers and lines up well with Universal Cargo’s post about rising optimism on oil prices from a couple weeks ago.
Not so great for shippers is carriers’ GRIs, surcharges (including fuel ones), and war risk premiums going into effect increased freight rates this week after their short-lived stability. That’s no surprise for shippers who read our blog on freight rates last week. I wrote in its conclusion that I expected freight rates to increase in the upcoming weeks before they, and oil prices, would start coming back down.
We’ll have to watch oil price behavior post their initial drop of around 13% after the announcement of the ceasefire. Oil tankers need to flow through the Strait of Hormuz at a greater level than we’re currently seeing for oil prices to continue to come back down.
Of course, ship movement through the Strait of Hormuz is a high priority for President Trump and his administration as they continue to deal with Iran. It’s also a priority for the other countries and economies of the world.
China actually played a role in getting Iran into talks and agree to the two-week ceasefire. Catherine Yang reported in an Epoch Times article about President Trump confirming China’s involvement. While China is an enormous exporter of goods, it’s a big-time importer of oil. 20% of the world’s oil being cut off from export is a big problem for the world’s second largest economy, behind only the United States.
