London - The recent escalation in the unrest between Iran and the US has raised fears of a wider war in the Middle East, writes research firm Drewry in its latest report. Already heightened geopolitical tensions in the region have resulted in a surge in oil prices, with Brent surpassing the $69 per barrel mark.
Geopolitical tensions in the region have mounted after the killing of Iranian Revolutionary Guard General Qassem Soleimani in an airstrike by the US at Baghdad airport on 3 January. In retaliation, Iran launched a ballistic missile attack at two Iraqi bases which house US troops on Wednesday. More than a dozen missiles struck the al-Asad airbase, but there were no casualties reported.
Although tanker freight rates have not so far reacted to events, any increase in chartering activity to secure cargo supply will help to underpin rates in the short term. For the moment, the time charter equivalent for VLCCs employed on the benchmark AG-China route (TD3C) is hovering around $103,000pd since the beginning of the year.
Traffic through the Strait of Hormuz, which accounts for more than 30% of the global seaborne crude trade, is unlikely to be disrupted by Iran because it requires smooth transit through the narrow passage for selling its oil. However, a full-scale war between the US and Iran has the potential to disrupt oil supplies through the Strait of Hormuz, thereby denting the oil and tanker markets.
Even in the absence of full-scale war, any naval clashes between the Iranian forces and the US will also pose a risk to tankers in the region. Indeed, the risks to vessels carrying US cargo and the vessels connected to the US have certainly increased in recent days and accordingly, risk and insurance premiums are set to rise for vessels willing to transit the region.