Geopolitical wildcard returns as Israel bombs Iran nuclear facilities
AS IF the shipping industry hadn’t weathered enough geopolitical storms, Israel has now struck Iran’s nuclear facilities.
Tehran has vowed revenge after one of the country’s most powerful military commanders and top nuclear scientists were confirmed killed in the attacks. Fears of a major Middle East war breaking out are mounting.
Asian shipping stocks — particularly those tied to tankers and containerships — immediately surged, with investors all but reflexively betting that every new conflict spells good news for the industry. Most of them held on to their gains at the close, albeit with some paring back.
In fact, US tanker shares had already begun to climb a day earlier, tracking the spike in oil prices after US President Donald Trump hinted that an Israeli strike “could very well happen” and ordered the evacuation of some American diplomats from the region.
According to a Thursday report from Pareto Shipbrokers, about 135 very large crude carriers are dedicated to hauling Iranian oil that is under US sanctions. With an average age approaching 20 years, these vessels would struggle to find alternative employment.
“Consequently, a drop in seaborne crude oil exports of around [1m barrels per day] from Iran would possibly boost demand for ‘legitimate’ VLCCs by about 3%-4%, depending on the region,” it added.
However, concerns over a potential Strait of Hormuz blockade — which threatens 20% of global oil and gas flows — have reignited as tensions escalate.
Tanker rates are expected to soar in the near term as panic takes hold, but if a closure really does choke off supply, what starts as a boom could quickly turn into a bust.
Meanwhile, the logic behind the rally in container shipping stocks and futures is much shakier.
The sector is already facing a severe glut of vessels. Right now, bullish sentiment seems to be driven less by fundamentals and more by investors’ knee-jerk belief that any external disruption will somehow lift freight rates.
Undeniably, the pandemic, Red Sea crisis and, most recently, US tariffs have all brought market booms, albeit to varying extents. But the core driver was them causing, at least temporarily, a massive loss of capacity and/or cargo surge.
It is unclear if Iran-Israel tensions will yield similar effects yet.
“I do not see any incremental impact yet from the Middle East conflicts on container shipping,” says Johnson Leung, co-founder of Linerlytica. “Rates will only increase if there’s simply more cargo than ships.”
Certainly, carriers now have another convenient justification to prolong the rerouting around Africa that started from the end of 2023, preventing another 9%-10% capacity from swamping an already oversupplied market.
But this does not constitute a bullish catalyst on its own, Leung adds. Rates have been weak since last December, with the expectation of the recent tariff-driven yet short-lived rebound on transpacific trade.
Besides, it’s still anyone’s guess whether Tehran, under intense US pressure, will actually hit back hard or simply stage another token response, as it did last time. At this point, debating whether the Israel-Iran conflict will ultimately be a boon or a blow for Red Sea shipping maybe still a little early.
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