Key Takeaways:
Iran allowed 25 vessels to transit the Strait of Hormuz in a single recent day, according to state-affiliated media Tasnim, as the fragile ceasefire between Tehran and Washington opens the door to a potential normalization of shipping through the world's most important oil chokepoint.
"The low crossing count shows that the absence of fresh attacks has not translated into a normalization of traffic," said Ana Subasic, trade risk analyst at MarineTraffic. "Vessel movement remains narrow, route-dependent and heavily conditioned by Iranian clearance practices."
WTI crude futures fell more than 4 percent to above $92 a barrel Tuesday on the weekend's news of a potential U.S.-Iran deal, though a return to pre-war supply levels would take months even if oil began flowing freely. The two crossings confirmed Monday by MarineTraffic both used the "Larak Corridor" route established by the Islamic Revolutionary Guard Corps that loops around Larak Island closer to the Iranian coast — the dominant passageway through the strait throughout May.
The Strait of Hormuz carried roughly 20 million barrels per day of oil in 2024, equal to about 20 percent of global petroleum liquids consumption, according to the U.S. Energy Information Administration. About one-fifth of global LNG trade also moved through the waterway last year, primarily from Qatar. Asian markets absorbed 84 percent of crude and condensate flows and 83 percent of LNG shipments, with China, India, Japan and South Korea together accounting for 69 percent of crude volumes.
Shipping congestion builds as reopening expectations rise
More vessels are bunching near the Persian Gulf side of the strait in anticipation of a reopening, according to Judah Levine, head of research at Freightos. "When the strait does re-open, ships will rush to exit, but out of concern over getting closed in again, carriers may not be as eager to return to regular Gulf port calls until they are convinced that the region is stable," Levine said. A reopening could trigger congestion at Far East ports when unscheduled vessels begin arriving.
The ocean freight rate bump initially catalyzed by bunker fuel spikes continues to accelerate amid signs of an early peak season on the Asia-to-Europe trade lane. Drewry's World Container Index rose 6 percent to $2,712 per 40-foot container, driven by double-digit spikes from Asia to Europe. Shanghai-to-Rotterdam rates surged 15 percent to $2,773 per 40-foot container, while Shanghai-to-Genoa rates jumped 10 percent to $4,082.
Container tracking data from Vizion showed China-to-Mediterranean cargo increased 48 percent in the two weeks through May 20 to 82,372 20-foot equivalent units, while China-to-Northern Europe volumes rose 37 percent to roughly 140,000 TEUs. Carriers are responding with new peak season surcharges: CMA CGM added $500 per TEU on Asia-to-Northern Europe containers, and Maersk added $300 for Northern European and Mediterranean-bound boxes.
Pipeline bypass capacity remains limited
Alternative routes offer only partial relief. Saudi Arabia's East-West pipeline has a nominal capacity of 5 million barrels per day, temporarily expanded to 7 million in 2019, while the UAE pipeline to Fujairah can handle about 1.8 million barrels per day. Iran's Goreh-Jask system has an effective capacity of around 300,000 barrels per day but has seen limited actual export use. The EIA estimates only about 2.6 million barrels per day of available pipeline capacity could bypass the strait during a disruption.
Secretary of State Marco Rubio said Tuesday that the Strait of Hormuz must be opened for unrestricted navigation "one way or the other," calling Iran's self-imposed tolling system "unacceptable" and "unsustainable for the world." Iran's foreign ministry spokesperson Esmaeil Baghaei said the Islamic republic is "not seeking to collect tolls" for passage but added that certain navigational services would "require the collection of certain fees," namely for environmental protection — a distinction that could form the basis of a negotiated settlement.
The last time a comparable disruption hit the strait, during the Iran-Iraq war in the 1980s, the Tanker War period saw oil prices spike more than 50 percent over 18 months before a UN-brokered ceasefire restored normal flows. The current crisis has already pushed ocean freight rates to multi-month highs and forced carriers to reroute or delay Gulf port calls, with war-risk premiums and insurance costs adding to the expense of every transit.
This article is for informational purposes only and does not constitute investment advice.
