Shipping Through Hormuz Drops Sharply as Tensions Rise

Shipping through the Strait of Hormuz experienced a significant drop this week due to rising tensions between the U.S. and Iran, according to Reuters. In just four days, 33 vessels passed through the key oil and LNG chokepoint, a decrease from 50 vessels during the same period last week, as reported by Reuters. On Thursday, the market had anticipated a draft Iran-Oman proposal for managing the Strait, but only four vessels made the transit, per Kpler data.

Only six crude oil tankers managed to pass through the Strait of Hormuz outbound this week, according to Kpler's analysis cited by Reuters. The drop in vessel traffic was also attributed to a Houthi claim of hitting a Saudi oil tanker in the Red Sea and hopes for an Iran-Oman deal on jointly managing Hormuz. Analysts at security and vessel-tracking firms stated that the threats to shipping in the Gulf and Red Sea have reached the worst safety situation since the Iran war began.

The hopes of U.S.-Iran talks and an Iran-Oman deal for Hormuz management seem to be fading by the end of the week. Iran's proposal for a more restrictive regime for vessel traffic, including a ban on U.S. and Israeli ships, and a potential compensation for nations deemed harmful by Tehran, have also contributed to the deteriorating situation.

Despite recent signs of progress, the current state of diplomacy and mistrust between the U.S. and Iran could lead to further deterioration, according to ING's commodities strategists Warren Patterson and Ewa Manthey. On Friday, oil prices surged with Brent Crude reaching $83 per barrel, following the latest strike by Iran-aligned Houthis in Yemen, which killed 11 civilians in Saudi Arabia's southern province of Najran.