The Daily View: Rising lion, hidden risk
IN THE long list of potential risks being prepared for in the Middle East, a complete shutdown of the Strait of Hormuz is reassuringly low down in the ranking of assumed scenarios.
Shutting out 18m barrels of daily, roughly a quarter of the world’s seaborne trade, would certainly send a message, if that was Tehran’s desire. But the consequences would hurt Iran as much it would anyone else.
As most of our security colleagues have repeatedly pointed out already, such a scenario is only likely if the regime believes that it is existentially threatened. The indiscriminate nature of the tactic that Iran would likely deploy in attempting to fully prevent access through the strait would trigger an unwanted major response from the Gulf Arab states, whose trade would be severely affected.
There is also the minor matter of the US navy to deal with. China, which buys almost all of Iran’s oil exports, wouldn’t welcome a massive spike in energy prices either.
So, if we discount the extreme playbook for now at least, the question remains, what risk to shipping?
Well, sadly there is plenty of opportunity.
Iran’s proxies have already proven how fragile maritime chokepoints are to disruption and, given that much of their playbook was written in Iran, there is every possibility of ships getting targeted.
US- and Israeli-affiliated vessels are clearly the targets, but perceived risk does not need to match reality to have an impact.
For all the security analyst punditry regarding calibration of attacks, this is a point at which ships are in danger of being hit and seafarers are at risk of getting in the firing line.
Currently, the immediate impact on traffic is negligible, but the industry is once again in wait-and-see mode and no reputable owner is going to be fixing tankers in a such a volatile market situation.
Where the market goes from here will depend on how Iran responds.
Meanwhile, with the naval assets in the region now fully focused on responding to the escalating threats around Hormuz, any last vestiges of hope that Red Sea transits may be about to return have now fully evaporated.
While there may be some temporary upside to rates as a result of this disruption, this is about managing risk rather than taking opportunities.
Older readers will remember the tanker wars of the 1980s, when vessels of all flags were caught in the crossfire of the Iran-Iraq War but were earning hefty risk premiums as a result.
This time it is different.
Iran has since developed an asymmetric offensive naval system, meaning any serious assault on the Hormuz Strait would likely include deployment of floating sea mines, limpet mines attached to target vessels and swarm measures using groups of small fast boats to surround a target to either detain or destroy it.
We must remind ourselves who will pay the true price if shipping is once again targeted.
Four seafarers have lost their lives since the Houthis began attacking shipping in the Red Sea.
Precisely none had any control over the routes their vessels took, or over the foreign policy of their governments.
Richard Meade
Editor-in-chief, Lloyd’s List
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