The Middle East situation may further increase the risk premium for oil transportation. Attention is drawn to the VLCC daily rental rate trend.

Cailian Press, March 1st (Reporter Hu Haoqiong) The tense political situation in the Middle East may further increase risk premiums. Recently, the oil shipping market has been booming amid geopolitical turmoil, with VLCC daily charter rates soaring past $200,000 per day. “Geopolitical factors make it difficult for market freight rates to effectively correct,” said Wu Jialu, Chief Analyst at CITIC Futures. He noted that ongoing attention should be paid to the tension and persistence of the situation between Israel and Iran, as well as whether the Strait of Hormuz can maintain normal passage.

According to data from the Baltic Exchange, as of February 26th, the BDTI (Baltic Dry Index for crude oil transportation) VLCC TD3C route TCE (Time Charter Equivalent) was $209,000 per day, reaching a new high since April 2020.

Wu Jialu analyzed that, on one hand, overall demand remains steady, with good demand for long-haul routes. The expectation of rising oil prices may accelerate import demand, but high oil prices could also have a negative impact on demand. On the other hand, supply-side factors include slow growth in VLCC capacity and aging ships in the medium to long term, as well as the continued increase in sanctioned oil tankers and high storage capacity in the short term, which marginally reduces market supply.

Regarding market capacity from the supply side, Clarkson Research data shows that by early 2026, about 20% of the global VLCC fleet will be over 20 years old, and 42% will be over 15 years old. The fleet deliveries in 2026 are expected to increase compared to 2025, with a year-on-year growth of 3.2%.

Meanwhile, driven by hot freight markets and active trading, second-hand oil tanker prices continue to rise. By the end of February, Clarkson Research’s oil tanker second-hand price index had increased about 9% since the beginning of the year, with 10-year-old VLCC second-hand prices rising over 20% year-to-date.

As a result, the market value of A-share oil shipping companies COSCO SHIPPING Energy Transportation (600026.SH) and China Merchants Energy Shipping (601872.SH) has surpassed 100 billion yuan each, with the former rising 21.4% since the Spring Festival and the latter up 33.2%.

It is worth noting that there are current concerns about the Strait of Hormuz being blocked. For details on its potential impact, see:

Oil shipping freight rates rise in the off-season, another maritime “throat” blocked?

In addition to the oil shipping market, the container shipping market also expects prices to rise due to the impact of Middle East tensions, according to industry insiders and freight forwarders interviewed by Cailian Press.

Meanwhile, there are reports that the Houthi armed group will resume attacks on the Red Sea route. On February 27th, Maersk, a major shipping giant, announced that due to unpredictable operational restrictions in the Red Sea region, some voyages of the ME11 and MECL routes will be temporarily adjusted to detour via the Cape of Good Hope. Earlier, in mid-January, Maersk had announced the return of the MECL route to the Suez Canal.