PRESIDENT Trump said on Sunday that the US intends to sustain its assault on Iran for “four to five weeks”, if necessary.

Iran has so far shown no interest in negotiations to speed up that timeline.

How long the Strait of Hormuz remains effectively shut to mainstream traffic matters.

Disrupting the 18m barrels of crude and refined products and 20% of global LNG (principally Qatari) that transits through this global chokepoint daily, comes with consequences.

Right now, very little is moving. As of Monday, we have recorded an 81% collapse in traffic and Iran seems intent on making traversing the strait harder. But that is not expected to hold for long.

Up until Monday evening the closure was largely self-imposed by the shipping and oil industries, in part responding to the withdrawal of war risk. That will be swiftly renegotiated at a significant hike, but it will be available.

After the Islamic Revolutionary Guard Corps (IRGC) stepped up its threats against shipping passing through the Strait, saying that Iran will “set fire to anyone who tries to pass through”, the risk become more direct.

But tankers will get fixed.

Risk premiums are already sparking interest from some Greek owners who are pricing suezmaxes. It is just a question of timing.

Chinese and Iranian ships are likely to move first.

A selective access is the most likely scenario, where Western-affiliated (specifically US and Israeli-affiliated tonnage) remains locked out initially, but others start to move.

The question is when.

In theory an extended closure remains unlikely, not least because it hurts Iran as much as everyone else. The theory holds that pressure will build on Iran from its own allies and benefactor countries to prevent that situation.

Hormuz has never really been closed to maritime traffic for extended periods, even during the Iran-Iraq war in the 1980s.

Choking it off would antagonise China, which buys nearly all of Iran’s oil and receives 37% of its seaborne crude imports through the strait.

For now, though, theory has been overtaken by an escalating conflict where Iran’s strategy is to raise the costs of conflict for the US and its allies, interfering with shipping and energy flows, and striking at neighbours to regionalise the conflict.

How long this situation lasts directly affects the outcome.

The mere threat of Iran reactivating its proxies has already pushed back the Red Sea return for shipping into next year at the earliest.

Nearer term, the disruptions will prove extremely positive for energy-carrying ships and extremely negative for everyone else. There is already talk of VLCCs fixing at over $500,000 a day.

Such suggestions even last week would have been unthinkable, but rates from the Middle East Gulf to China were up over $200,000 a day from Friday.

We are living in unprecedented times.

Richard Meade
Editor-in-chief, Lloyd’s List

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