Oil tanker rates hit record highs following attacks

Oil tanker rates have surged to record highs this week, driven by a series of attacks on shipping vessels in the Middle East since the U.S.-Iran war began in late February. The cost for super tankers, or very large crude carriers (VLCCs), loading oil from the Gulf of Oman for delivery to China reached approximately 450 on the Worldscale, which equates to roughly $11.50 per barrel. This rate is the highest since the indicator was introduced earlier this year following the U.S.-Israeli conflict with Iran.

The spike in rates highlights how the Middle East conflict is spilling over into the wider economy. Persistent elevated shipping costs could exacerbate inflationary pressures and further increase costs for businesses and consumers, who are already grappling with uncertainty from the escalating conflict. Iran confirmed on Wednesday that it had targeted ten ships near the Strait of Hormuz following the U.S. sinking of five Iranian oil tankers.

Meanwhile, Yemen's Iran-aligned Houthis managed to seize the strategic island of Perim in the Bab el-Mandeb Strait on Friday, according to Yemeni government sources. This development could potentially tighten their hold on one of the world's crucial shipping routes. The heightened risk of operating in and around the Middle East Gulf is also contributing to the rise in freight rates across the region, as shipping companies fear Iranian retaliation.

This increased risk is thinning the available tankers in the area, according to Vortexa analyst Ioannis Papadimitriou.

The ongoing military escalation in the region is having far-reaching consequences, as VLCC rates on the West Africa to Asia route have also reached record highs.