Strait of Hormuz reopening offers limited relief for shipping
Conflict in the Strait of Hormuz. Image courtesy of ABC News (Australia) footage
The United States and Iran have agreed to a two-week ceasefire that includes a limited reopening of the Strait of Hormuz, in theory offering a narrow window for shipping despite uncertainty over the reliability of the deal.
The deal was reached shortly before a Tuesday deadline set by US President Donald Trump, who had threatened large-scale strikes if Iran did not allow maritime traffic through the waterway.
Under the arrangement, Washington will suspend planned attacks in exchange for Tehran permitting controlled transit through the Strait, a crucial shipping channel. Trump described the move as a “double sided CEASEFIRE!” and called for the “COMPLETE, IMMEDIATE, and SAFE OPENING” of the strait.
Iran’s foreign minister Abbas Araghchi said in a statement that vessels would be able to pass during the two-week period “via coordination with Iran’s Armed Forces and with due consideration of technical limitations.” The strait, which carries about a fifth of global oil flows, has been heavily restricted for weeks after Israel and the United States began a series of strikes against Iran in late February.
For shipowners, the announcement provides some relief but no immediate clarity. More than 800 vessels remain inside the Persian Gulf, with over 1,000 waiting on either side of the strait near hubs such as Dubai. The shipping traffic in the Strait remains far below typical levels of around 135 daily passages.
“The ceasefire may create transit opportunities, but it does not yet provide full maritime certainty and we need to understand all potential conditions attached,” a spokesperson for Maersk told Bloomberg.
Many companies are now weighing whether to move vessels during the window. Any restart is, understandably, expected to be gradual rather than immediate.
“You don’t switch global shipping flows back on in 24 hours,” Jennifer Parker, adjunct professor at the University of Western Australia Defence and Security Institute, tells Bloomberg. “Tanker owners, insurers and crews need to believe the risk has actually reduced – not just paused.”
Around 20,000 seafarers are still on vessels unable to leave the Gulf, facing supply shortages and fatigue, according to the International Maritime Organization.
Rolf Habben-Jansen, chief executive of Hapag-Lloyd, told clients during a call this morning that it was too early to gauge recovery, according to Euronews, adding that restoring a normal network could take at least six weeks.
There are also indications that transit may involve new fees, with Iran and Oman expected to charge vessels, adding to higher insurance costs and potentially causing further delays.
Initial movements in the area since the announcement have been limited, with only a small number of ships attempting to reposition.
“It’s good to see that the market is reacting the way it is, but this is day one of a tentative ceasefire,” Michael Pregent, a former US intelligence adviser, told Bloomberg Television. “We are likely to see the regime control who moves through, who is charged what, and who is denied.”
Access through the Strait of Hormuz is expected to remain tightly managed, with talks set to continue.
Thomas A. Kazakos, Secretary General of the International Chamber of Shipping, welcomed the development.
“We welcome the conditional ceasefire between the United States and Iran and hope this signals a beginning of a return to stability in the region,” he says in a statement.
“This news will be a relief to the 20,000 seafarers who have been at the forefront of this crisis. Our thoughts remain with those civilians and seafarers who have already been injured or sadly lost their lives.
“An immediate return to freedom of navigation is now essential, and states should work with shipping to ensure orderly and unimpeded transits through the Strait. This will require coordination between industry and nation states from both inside and outside the Gulf region, and ICS is willing to assist this process in any way we can.”
Ceasefire comes with ‘dose of reality’ for carriers
Analysts at Xeneta – an ocean and air freight intelligence platform – expect carriers to take a cautious approach to the ceasefire. Alternative routings into the Gulf region, such as landbridges from Khor Fakkan, Sohar and Jeddah, will remain in place while carriers simultaneously carry out individual test voyages via Strait of Hormuz.
Peter Sand, chief analyst at Xeneta, says: “The ceasefire should come with a dose of reality because there is unlikely to be a rapid return to normality for container shipping in the Middle East. Strait of Hormuz transits are likely to increase but how this transition is managed is yet to be seen because two weeks is a very short window of opportunity and there is no guarantee the ceasefire will hold.
“The conflict has displaced 250,000 TEU of weekly container shipping capacity and carriers have put a lot of effort and expense into establishing alternative routings to allow goods to flow into the region. You do not suddenly toss that out of the window because there is a two-week ceasefire.”
Closure of the Strait of Hormuz and alternative land routings have caused severe congestion and disruption at ports in the Middle East and neighbouring regions.
Destine Ozuygur, senior analyst at Xeneta, says: “Weekly capacity to Jeddah and King Abdullah port has increased 19 per cent as carriers introduce new services to connect the landbridge into the Gulf region.
“Even with alternative routings, there is huge schedule disruption at ports like Mundra, Nhava Sheva, and Khor Fakkan — and that is not going to go away overnight. This ceasefire does not resolve that capacity displacement — it simply creates a brief opportunity to move the most urgent freight.
“The priority will be clearing frustrated cargo that has accumulated at alternative ports — Nhava Sheva in particular — shipping it to Jebel Ali and getting out as quickly as possible. Carriers will be aware they risk ships becoming trapped in the Gulf once again if there is a sudden deterioration in the security situation.”
Ozuygur also warns that control of the Strait of Hormuz will have a long-term impact on container shipping in the region.
“There are huge operational question marks over a return to the Strait of Hormuz if it effectively turns into an Iranian tollbooth,” she says. “How much will it cost? How will transits and payments be managed and will this delay carriers returning services to the region? Could some ships be denied transit even if they are willing to pay? This kind of uncertainty is not good for supply chains.”
Keeping supply chains moving comes at a cost, with shippers transporting goods from China to Jebel Ali, the Gulf’s largest container port, facing potential average spot rate increases of more than 270 per cent compared to end of February.
Even on the trade from China to US West Coast, which transits the Pacific thousands of miles from the Middle East conflict, spot rates have increased 37 per cent, partly due to congestion in the Middle East spreading to major Asia transshipment hubs such as Singapore, Tanjung Pelepas and Port Klang.
Sand adds: “I would expect short-term rates to go a bit higher, simply because there is a two-week window of opportunity and everybody is in a rush.
“Falling oil prices should take some of the heat off fuel costs and put a cap on further emergency bunker surcharges from carriers, but this remains a critical situation and shippers should expect freight rates to remain elevated.”
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