The Daily View: Shipping paralysed with no endgame in sight

AS THE Third Gulf War entered its fourth week it was simultaneously winding down and escalating, while the Strait of Hormuz remained both open and closed.

Looking past the rhetorical gymnastics being touted by the belligerents, shipping remains in a state of paralysis, unable to plan for an unknown endgame with no predictable schedule.

Political pragmatism has encouraged a small uptick in state-negotiated transits through the Strait of Hormuz over the past few days, but do not mistake this for a step change in the security situation.

Iran remains highly capable of damaging shipping transiting the Strait of Hormuz.

Right now, Iran is using calibrated maritime attacks in the strait to signal a credible capacity to disrupt transit without full closure, increasing global oil price volatility, shipping risk premiums, and responding to US and Israeli actions.

Yes, Iran has allowed some vessels — particularly those perceived as neutral or allied, such as those trading in Chinese yuan — to pass while blocking others. But keeping the strait closed and inflicting prolonged economic damage remains Iran’s only real leverage, meaning that the sustainability of a Tehran-approved toll booth is politically unpredictable and limited.

Making any assumptions on public statements or viewing this new trend as a route to be imminently normalised, should be considered a significant risk for shipping.

What happens next is far from clear, but even the best-case scenarios now contain an assumption that shipping will take months to return to some semblance of normalised trading patterns even after the fighting stops.

At that point, security is going to be required and given that the US has made it clear that will be a responsibility for others to take on, the limited diplomatic discussions are starting to focus on what that looks like.

Much is yet to be decided but the beginnings of an international plan is underway with industry involvement.

That will not get sign off until the major military operations have ended, and even then shipping is going to be reluctant to start moving until owners see several days free of attacks before attempting to exit.

Until that happens the statements about what happens next mean very little.

Richard Meade
Editor-in-chief, Lloyd’s List

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