The ongoing Iran war is causing significant disruption in the global shipping industry, primarily due to the near-total closure of the Strait of Hormuz, which is a critical chokepoint for the supply of bunker fuel. This heavy, sludge-like fuel powers 80% of globally traded goods by sea. The conflict has led to fears of fuel shortages, pushing up shipping costs and likely contributing to higher consumer prices worldwide.
Asia, heavily reliant on Middle Eastern oil, is feeling the immediate impact. Singapore, the world's largest bunker fuel refueling hub, is experiencing tightening reserves and rising prices. The European Federation for Transport and Environment estimates the war is costing the global shipping industry around €340 million per day. Shipping companies are attempting to mitigate this by slowing vessels, revising schedules to save fuel, and exploring alternative fuels like LNG.
While conventional tracking data showed little change, a growing number of tankers are employing "dark transit" tactics by turning off transponders to navigate the Strait of Hormuz, a method historically used by Iran to evade sanctions. This, coupled with US military oversight, has allowed more oil, estimated at 2 million barrels a day, to flow out of the Gulf than initially thought, helping to prevent a full price surge. The number of non-Iranian dark transits rose from 17 in March to 70 in May, accounting for over two-thirds of non-Iranian vessel movements through the strait.
Before the war, roughly 20 vessels carrying crude oil, fuels, and LNG transited Hormuz daily. In May, this dropped to less than six or seven vessels per day. The cost of shipping crude oil from the Middle East to China surged from around $130,000 per day to over $500,000 at the peak of bombing activities, now settling around $390,000 per day. Fuel tanker rates have also more than doubled on many key routes, contributing to global inflationary pressures.
Around a quarter of the large oil tankers trapped inside the Persian Gulf at the war's outbreak, specifically 29 out of 109 vessels, have managed to escape through the Strait of Hormuz. These vessels, capable of hauling 700,000 barrels or more, have been making cautious, often stealthy, crossings. Despite these efforts, approximately 90 large tankers remain trapped inside the Gulf, indicating that the flow of oil is still substantially below pre-war levels.
