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Global shipping not disrupted by Israel-Iran conflict for now, but impact likely nuanced

by Yurie Miyazawa
in Leadership
Global shipping not disrupted by Israel-Iran conflict for now, but impact likely nuanced
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[SINGAPORE] The Israel-Iran conflict has not disrupted global shipping – for now – but the likely impact on the industry might be more nuanced.

Pacific International Lines (PIL), which focuses on China, Africa, the Middle East, Latin America, Oceania and the Pacific Islands, said that its sailings are continuing notwithstanding the escalated tensions in the Middle East.

Abhishek Chawla, PIL’s chief marine officer, told The Business Times: “At present, we continue our sailings with utmost consideration to the evolving situation while ensuring the usual safety and security of our vessels and crews. We exercise constant risk management assessment and strategic anticipation.”

Maersk has also not had disruptions caused by the Israel-Iran war and is continuing its scheduled operations in the area. “Our aim is to keep our customers informed and help them with alternative solutions if needed,” the Danish shipping heavyweight said.

Israel launched an attack on Iran on Friday (Jun 13), triggering barrages of ballistic missiles from Iran in retaliation.

The Joint Maritime Information Center (JMIC), an international naval task force monitoring the Iran-linked Yemeni Houthi rebels’ attacks on merchant vessels, has assessed that the maritime threat level remains significant and elevated in its latest update on Monday.

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It flagged the possibility of the military operations spilling beyond the bilateral hostilities into the wider region. The Strait of Hormuz – located between Oman and Iran, and connects the Persian Gulf with the Gulf of Oman and the Arabian Sea – remains open and commercial traffic continues to flow, according to JMIC.

However, it noted a slight drop in the number of cargo-carrying vessels of at least 1,000 gross-tonnage transiting the Strait of Hormuz since Israel’s attacks on Iran.

The strait is the world’s most important oil choke point, through which nearly 20 million barrels – or about one-fifth of global consumption – flow each day.

A blockade of the highly strategic Strait of Hormuz could send prices of the commodity soaring past US$100 a barrel.

As much as 3.4 per cent of global container volumes could also be hit if the strait closes, estimated Tan Hua Joo, container industry analyst at data provider Linerlytica.

“The United Arab Emirates will be the worst hit in such an event as the 21.7 million twenty-foot equivalent units (TEUs; a unit of measurement used to determine cargo capacity for container ships) that its ports handle account for the majority of the 33.2 million TEUs of total container volumes in the region.”

The impact of the conflict on shipping charges could be more nuanced.

Chawla of PIL commented that freight costs could rise as a result of the increase in the bunker prices sparked by the tensions. Global crude oil prices surged 7 per cent on the day that strikes between Iran and Israel took place.

Lars Jensen, the chief executive officer of Vespucci Maritime, told BT that insurance companies might be re-assessing risk and charging war-risk premiums. “Also, shippers to and from the region might be re-assessing the risk and potentially altering their shipments if this is possible.”

HSBC Global Research commented that the escalating Middle East tensions mean that a return to the Red Sea any time soon is less likely, but this may not ease the concerns on capacity ramp-up and the softer spot container rates in the transpacific lane.

Tags: ConflictDisruptedGlobalImpactIsraelIrannuancedShipping
Yurie Miyazawa

Yurie Miyazawa

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