Oil shipping has largely paused in the Strait of Hormuz that links the oil-rich Persian Gulf to the open seas after the US and Israel bombed Iran, with Iranian media saying the waterway is “practically closed.”
Ships reported hearing a radio broadcast purporting to come from the Iranian navy announcing that transit through the waterway was banned. There’s been no formal announcement from Tehran about the status of the strait, which is crucial for the flow of oil and gas, but several tankers that had been heading toward Hormuz turned around in recent hours. A large number had already paused to wait near the entrance to the waterway after the bombing started.
The disruption is impacting everything from crude oil tankers to container ships that carry furniture. The Strait of Hormuz is a crucial chokepoint for energy markets, because a fifth of the world’s seaborne oil and liquefied natural gas typically passes through each day. It’s unclear how long the disruption may last, and some vessels are continuing to sail through, though far fewer than would be normal.
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Iran’s semi-official Tasnim news agency, describing the waterway as effectively shut, said the country’s Revolutionary Guard warned ships that transiting Hormuz is not safe. German container liner Hapag-Lloyd AG subsequently said it is suspending transits through Hormuz due to its “official closure.”
Despite a slowdown in traffic, some oil and gas carriers did appear to be continuing their journeys on Saturday afternoon, according to vessel tracking data compiled by Bloomberg. By 8 pm London time, automated tracking systems showed one large oil tanker leaving the Persian Gulf through the Strait of Hormuz and another one making the passage in the opposite direction.
Traffic had already reduced significantly in the wake of the attacks, and Bloomberg reported earlier that tankers were piling up both inside and outside of the entrance into the strait. The US issued a warning to shipping that vessels in the region should stay 30 nautical miles away from its military assets.
Japanese giant Nippon Yusen KK earlier told its fleet not to navigate Hormuz, while Greece told its vast merchant fleet to reassess passage, according to a circular seen by Bloomberg. One owner had said they interpreted the US advisory as effectively closing the waterway.
The warning from Greece’s shipping ministry also told ships to be ready to use “conventional” navigation methods that don’t use electronics, citing the risk of interference while sailing in the region.
A prolonged disruption would be seismic for the global oil trade. Futures markets are closed on Saturday and Sunday, giving reduced insight into how traders are really pricing risk. However, a retail trading product, run by IG Group Ltd., was pricing West Texas Intermediate more than 8% higher on Saturday evening London time.
Traders are also watching for wider disruptions, including the impact of Iranian retaliatory strikes and whether any ports are being disrupted. Several said it was too early to say how the market would open next week, citing the uncertainty of the hours ahead.
Oil tankers are coming to a stop on both sides of Hormuz, with three vessels halting journeys out of the Persian Gulf and a small flotilla of at least 8 tankers building up over the past two weeks outside the Gulf of Oman. Others are aborting their voyages part way through the waterway.
ALSO READ: Oil Tankers Avoid Hormuz After Naval Warnings Follow US Strikes
Hormuz is also a vital transit rout for LNG. At least three gas tankers going to or from Qatar have paused voyages to avoid the waterway, according to ship-tracking data. Qatar is the world’s second-largest LNG exporter, making up 20% of supply last year, and the country’s shipments must pass through the Strait to reach buyers in Asia and Europe.
Several container ships have also either halted, or U-turned while transiting, ship tracking data showed.
Some shipowners were considering canceling already-fixed voyages into the Middle East, shipbrokers said, citing a war clause that gives them the right to do so should hostilities break out between a list of countries including the US and Iran. This could tighten the supply of vessels in the region, further supporting high freight rates that have recently soared to the highest level in years.
One tanker, Desh Abhimaan, appeared to U-turn midway through a transit through Hormuz on Saturday evening, instead turning away from the waterway. Still, other tankers appeared to be making their way toward Hormuz, despite naval warnings.
The supertanker Shaden came to a halt approaching the Strait of Hormuz to leave the region with a cargo of Saudi crude, while the Chinese-owned New Vision appears to be continuing its outward transit. However, the ship’s speed reported by its automated information system is erratic, veering between zero and 102 knots.
Earlier in the day the very large crude carrier KHK Empress was part loaded with Omani crude and heading through the Strait of Hormuz for Basra when it made a U-turn and headed back toward the Arabian Sea. The vessel’s destination was changed from Basra to New Mangalore in India, where it’s expected to arrive on Monday.
A build-up in vessels halting voyages toward Hormuz from the east had been going on for most of the week, tanker tracking data compiled by Bloomberg show.
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