Will concerns become reality? Strait of Hormuz oil tanker transportation stalls

Caixin News, February 28 (Editor: Niu Zhanlin) According to CCTV News, on Saturday (February 28) local time, real-time data from the international oil tanker traffic monitoring system shows that the speed of oil tankers around the Strait of Hormuz has generally dropped to zero, indicating that shipping in the area has come to a halt.

Earlier that day, the United States and Israel launched strikes against Iran, targeting its leadership. This move has plunged the Middle East into a new round of conflict. Market concerns are that these attacks could lead to the closure of the vital energy transit route, the Strait of Hormuz, in the coming days.

Iran responded by firing missiles at Israel. Meanwhile, explosions were reported in several Gulf countries, which stated that after Iran warned that any attack would be met with retaliation, they successfully intercepted missiles from Iran.

At the same time, several European governments have issued urgent orders to oil tankers flying their flags en route, forbidding passage through the Strait of Hormuz to avoid security risks from the escalating situation.

Multiple trade sources said on Saturday that, with the US and Israel striking Iran and Iran retaliating, some international oil giants and major traders have suspended oil and refined product shipments through the Strait of Hormuz.

A senior executive at a major trading firm said, “Our ships will remain stationary for several days.” Real-time tracking shows that many supertankers have stopped before entering the Strait of Hormuz.

The Greek Shipping Ministry issued a maritime safety alert on Saturday, advising ships flying the Greek flag to stay on high alert and avoid entering the Persian Gulf, Oman Gulf, and the Strait of Hormuz, indicating that the situation has significantly impacted regional navigation safety.

The alert states, “The developments have affected navigation safety across a broader area including the Persian Gulf, the Strait of Hormuz, the Gulf of Oman, and the northern Arabian Sea.” It recommends that ship management companies implement maximum security measures in these waters and at Israeli ports until further notice.

The alert also notes that, given the connection between Iran and its supported Houthi forces, the current crisis could potentially escalate further into the Red Sea and the Gulf of Aden.

Additionally, the notice urges ships to remain vigilant against potential missile or drone attacks, port facility strikes, harassment during navigation, electronic interference, and possible disruptions to electronic navigation systems.

Jorge Leon, Head of Geopolitical Analysis at Rystad Energy, said, “If there are no signs of de-escalation over the weekend, risk premiums could push Brent crude prices up by $10 to $20 per barrel on Monday.” Despite concerns about oversupply, oil prices have already risen about 19% this year amid fears that the US might strike Iran.

Bridget Payne, Head of Energy Forecasting at Oxford University, stated that disruptions to shipping through the Strait of Hormuz could reduce vessel traffic by 50%, pushing oil prices up to $84 per barrel. If transportation is completely halted for a week, prices could soar to $140 per barrel, with impacts comparable to the outbreak of the Russia-Ukraine conflict.

Data from energy analytics firm Vortexa shows that last year, over 20 million barrels of crude oil, condensate, and refined products passed through the strait daily.

Most crude oil exports from OPEC member countries—Saudi Arabia, Iran, the UAE, Kuwait, and Iraq—are shipped through the Strait of Hormuz, mainly to Asian markets. Qatar, one of the world’s major liquefied natural gas exporters, also transports nearly all of its LNG exports via this route.

Iran’s Supreme Leader previously warned that if the US attacked Iran, a “regional war” could erupt in the Middle East. Iran also stated that completely closing the Strait of Hormuz is within its capabilities.

This would be an extreme measure, which Iran has never fully implemented, but it remains one of the scenarios most feared by global financial markets.

While OPEC members Saudi Arabia and the UAE have some capacity to bypass the Strait of Hormuz via pipelines, closing the strait would still cause significant disruptions to energy exports and lead to a sharp rise in international oil prices.

Many analysts believe that Iran is unlikely to blockade the Strait of Hormuz for a long period, and is more likely to undertake smaller-scale actions, such as harassing passing ships.

During last year’s conflicts with Israel and the US, nearly 1,000 ships near Iran’s coast had their GPS signals interfered with daily, leading to the collision of one oil tanker. Laying mines has also been a long-standing threat Iran has used to hinder shipping activities.