Hormuz traffic drops off as vessel attacks raise fresh concerns

[SINGAPORE] Commercial traffic through the Strait of Hormuz persisted at a reduced level after attacks on two ships raised fresh concerns about the ability and willingness of shipowners to traverse the waterway.

A handful of vessels made open transits over the weekend, according to tracking data. Among them, two very large crude carriers (VLCCs) made their way into the Persian Gulf without cargoes, while a French-flagged container ship and two laden oil tankers left the inland sea, the data shows.

Despite the drop in observed transits over the weekend, traffic was still higher than for most of the US-Iran war. That trend – of more shipowners being willing to pass through the Strait of Hormuz – has picked up since Washington and Tehran on Jun 17 agreed on an interim plan to reopen the strait.

Global investors, shipowners and insurers are zeroed in on activity in the chokepoint, which stands as a litmus test of whether the peace deal will endure and whether heavily disrupted supply chains can start to normalise. Following the two vessel attacks, there were tit-for-tat strikes between the US and Iran over the weekend that tested their fragile truce, though the two sides have since agreed to halt their assaults before negotiations resume this week.

Last week, a Singapore-flagged container ship was hit. Then on Saturday (Jun 27), the Kiku, which was carrying Qatari oil, was attacked in the strait. Following the strikes, the Joint Maritime Information Center – which liaises between navies and merchant shipping – raised its threat level in the region to substantial.

At present, the picture remains mixed among shipowners, with varying degrees of confidence in attempting transits. Some vessels that recently abandoned crossings, including two laden VLCCs and an inbound Qatar-owned gas carrier, have not made fresh attempts following the attacks. In addition, some shipowners had told Bloomberg News that they put exit plans on pause.

Still, of note for energy traders is the noticeable inbound traffic. That’s because the ability to dispatch empty vessels via Hormuz into the Persian Gulf stands to be crucial for regional energy producers as they seek to restart output after months of shut-ins. To do so, they’ll need empty vessels for loadings.

Aside from the two inbound VLCCs, a Norwegian-flagged products tanker, a US-sanctioned tanker and a liquefied-petroleum-gas carrier made their way into the gulf after the attack on Kiku. In the other direction, meanwhile, in addition to the three vessels, a products tanker and a US-sanctioned crude tanker sailed through.

Some observed ships have taken varied routes, with an Aframax tanker u-turning after it sailed into the channel separating Iran’s Qeshm and Larak islands to then move to the middle of the strait. The shift came despite the United Nations’ International Maritime Organization warning Friday that there are about 80 mines in historic, central lanes of the strait.

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The strait connects the Persian Gulf to global markets and it is the world’s most important energy chokepoint. During the war, which erupted on Feb 28, traffic collapsed to a trickle, with both the US and Iran imposing blockades. The partial reopening has driven a collapse in oil prices. BLOOMBERG