Confidence among shippers in Asia and Europe regarding the resumption of transit through the Strait of Hormuz is expected to take weeks to rebuild, despite a recent agreement between the U.S. and Iran aimed at reopening the critical waterway. With safety assurances yet to be fully established, navigation will not resume immediately. The deal, which is set to be formalised with a memorandum of understanding on Friday, has already had an impact on global oil prices, which fell by approximately 5% on Monday.
The Context of the Agreement
The conflict that erupted on February 28, following U.S.-Israeli strikes, significantly disrupted shipping routes that account for around 20% of the world’s oil and liquefied natural gas supply, as well as products like aluminium and urea. Although there has been hope of renewed activity in the strait, shippers are exercising caution.
President Donald Trump announced via Truth Social that oil-laden vessels are beginning to make their way out of the strait, referring to the route as the “Southern Highway,” which he asserted is “totally safe, secure, and pristine.” Despite this optimistic viewpoint, vessel-tracking data indicated minimal tanker activity on Monday, aside from a single LNG carrier. However, reports suggest that some ships have been operating discreetly along Oman’s coast, navigating “dark” with the support of the U.S. Navy.
Cautious Optimism Among Shippers
While the news of the agreement has been met with a degree of relief by shipping associations, many remain hesitant to react hastily. Haider Anjum, an analyst at Jyske Bank, noted in a client report that there was no significant surge of ships heading towards Hormuz, reflecting a cautious approach.
“The shipping companies probably want to wait until it is clear that the agreement holds, as we have already had Hormuz ‘open’ for a very short time twice before,” Anjum commented. The shipping association BIMCO has labelled transit through the strait as highly risky, with mines posing a serious threat. Jakob Larsen, BIMCO’s chief safety and security officer, emphasised that shipowners need reassurance that navigating the strait is not only permitted but also safe.
Limited Traffic and Future Expectations
Despite the turbulence, there have been some signs of activity. India’s Petronet successfully navigated the LNG tanker Disha through the strait on Monday—the only notable shipment recorded. This vessel had loaded its cargo at Qatar’s Ras Laffan and is expected to reach India’s Dahej terminal on June 18, according to an official from the Indian federal shipping ministry.
However, as various shipping associations express cautious optimism, many are still waiting for more concrete details about the agreement, especially concerning the clearing of mines. Stefano Messina, head of the Italian shipowners’ association Assarmatori, acknowledged the positive nature of the announcement but reminded that previous ceasefires had not led to lasting peace or action.
Japanese maritime stakeholders echoed similar sentiments, expressing the need for caution before resuming operations. Nippon Yusen, Japan’s largest shipping company, voiced hopes for a swift return to normalcy, while Mitsui O.S.K. Lines stated they would only recommence navigation once safety is unequivocally confirmed.
The Path Ahead
As of June 15, approximately 155 tankers, carrying oil and chemicals, were recorded in the Gulf area, a decrease from 201 at the end of May, according to ship-tracking data by Kpler. The logistics of normalising operations are complex; Anoop Singh, global head of shipping research, suggested that if unrestricted navigation were allowed, it could take 8 to 10 days to resolve the traffic backlog on either side of the strait.
However, the restoration of meaningful traffic could take weeks, owing to the necessity for de-mining and adjustments to insurance rates. David Jorbenaze, global oil market leader at ICIS, provided a sobering forecast, noting that a return to pre-conflict shipping volumes is a long-term prospect, likely not materialising until 2027, contingent on the agreement’s stability and a swift recovery in production.
Why it Matters
The situation in the Strait of Hormuz represents a critical juncture for global trade and energy security. With a significant portion of the world’s oil supply passing through these waters, any disruption can have far-reaching consequences for prices and availability. As shippers navigate the uncertain waters of this newly brokered agreement, the nuances of safety and operational viability will play a crucial role in determining the future of maritime commerce in this vital region.