Tanker Vessel Market Flashes Yellow as Middle East Burns

While global energy markets are not yet pricing in worst-case scenarios for the Israel-Iran war, oil tanker rates are providing a good real-time gauge of the escalating risks.

Geopolitical risk has spiked following Israel's surprise bombardment of the Islamic Republic last Friday and Iran's retaliatory ballistic missile strikes, leading to a rally in global energy prices, with Brent crude rising 8% to roughly $75 a barrel.

But markets and investors now appear to be in a holding pattern as the conflict unfolds, with possible scenarios spanning everything from an imminent ceasefire and strengthened nuclear deal to a joint U.S.-Israel effort to destroy Iran’s nuclear program and potentially bring about regime change.

For oil markets, the central risk remains the blocking or disruption of maritime traffic through the Strait of Hormuz, a narrow waterway between Iran and Oman through which one-fifth of the world's oil and gas consumption flows.

Iranian strikes on energy infrastructure in Saudi Arabia or the United Arab Emirates – both U.S. allies – would represent another major escalation.

Current oil prices suggest the market is still largely discounting such extreme scenarios, but trends in the oil tanker market show that oil shipping activity is being impacted even