Tanker flows shift away from Hormuz to the Atlantic

• Ceasefire optimism is ‘misplaced’
• Ships moving west as exports decline
• Crude tanker rates down 20-30%

The US blockade will steer more tankers towards the Atlantic as ships avoid the Strait of Hormuz, said global shipbroking firm BRS.

Now in its seventh week, the Iran war is threatening to reshape global oil shipping flows, with tanker movements shifting away from the Gulf. 

BRS said a “wave” of ballast vessels – tankers sailing empty to pick up new cargoes – is “starting to arrive in the Atlantic basin” due to a slump in Middle East crude and refined product exports.

Optimism that a ceasefire and US-Iranian talks in Pakistan would restore flows had been misplaced, the broker noted. 

It said that a return to normality now appears “more distant than it did one week ago”, particularly given that the US navy has “started a blockade of traffic entering and exiting Iranian ports”.

“Ceasefire? What ceasefire? Talks in Islamabad failed and dragged down the hope to see traffic through the Strait of Hormuz increase this week,” BRS said in its weekly tanker report.

The disruption has triggered a shift in positioning, with ships moving west as exports decline and uncertainty over access and security persists.

“The future remains very uncertain, and we continue to see the bulk of owners heading for WAFR instead,” it added, referring to West Africa.

“All told, it is anticipated that there will be little or no commercial traffic in the strait for the foreseeable future,” BRS said.

The build-up of vessels in the West is starting to weigh on freight markets, with BRS reporting that “Atlantic crude tanker rates have dropped by 20-30 percent since the last week of March”.

Neil Quilliam, a Middle East and North Africa expert at Chatham House, said traffic through the Red Sea had struggled to recover after Houthi attacks on shipping and warned Hormuz could follow a similar pattern.

“Tanker traffic will choose to re-route flows,” he said.

“Even if an uneasy peace is reached, it is unlikely to be sustained given the difference between the two sides, so vessel owners, operators and crews will choose the Atlantic or other routes and pass on the cost.”

Further reading:

• Oil prices fall as Trump says 34 ships passed Hormuz
• Maritime access restrictions begin in the Gulf
• Saudi crude sales to China forecast to halve in May

On the second day of the US blockade of Iranian ports, the BBC reported that four “Iran-linked ships” had crossed the strait by 15:30 GST on Tuesday, following the start of the operation.

BRS acts as an intermediary between shipowners and charterers in global shipping markets. It warned that the “most worrisome outcome” from the conflict is the risk of a global recession and a collapse in demand.

“Oil demand destruction is unequivocally starting to rear its ugly head … higher prices are also starting to hit demand,” it said.

“The longer Hormuz remains closed, the more demand destruction will be required to balance the global market.”