Oil and gas shipping is the sector hit hardest as a US–Israel–Iran war chokes the Strait of Hormuz

Freight rates soar as routes, insurance and fleet ownership all tighten

Oil and liquefied natural gas (LNG) transport has emerged as the single most disrupted sector in the outbreak of hostilities between the United States, Israel and Iran. Freight rates for very large crude carriers (VLCCs) and LNG tankers have surged to multi‑year and, in some cases, record highs as the Strait of Hormuz — a chokepoint carrying roughly one‑fifth of global oil and LNG flows — becomes effectively impassable for many operators. Why is shipping feeling the shock more than commodity markets? Because ships, insurers and charterers can avoid risk in ways barrels and contract oil cannot.

A constellation of structural and cyclical factors has pushed rates higher: rising demand from East Asian buyers (notably China), longer voyage distances as cargoes are rerouted, sanctions that have shrunk the pool of eligible tonnage, and a wave of fleet consolidation. It has been reported that large commercial moves by operators including Korea’s Sinokor and Mediterranean Shipping Company (MSC) have tightened available VLCC capacity — with some market participants saying roughly 120 vessels are now under concentrated control — a shift brokers and owners say is changing spot and time‑charter pricing dynamics. Analysts such as Tsvetana Paraskova and brokers at Fearnleys and Kpler have flagged the increased volatility and the jump in multi‑month chartering.

Insurance pulls back; Strait closure claims escalate market anxiety

Geopolitics deepened the squeeze in March when insurers reportedly stopped underwriting war risk for tankers, and Iranian authorities publicly threatened to block transit through the Strait. It has been reported that Iran’s Revolutionary Guard warned it would “attack and set alight” any vessel attempting to pass; the U.S. Central Command has denied an effective closure and a U.S. officer told media there was no evidence of minefields. Still, the threat alone has pushed daily VLCC earnings to unprecedented sums: Lloyd’s List and Baltic indices showed daily rates ranging from roughly $281,000 to more than $420,000 on peak days, and brokers said available VLCCs in the Gulf had fallen to single‑digit numbers for immediate booking.

Sanctions and shifting trade policy have amplified the problem. Recent punitive measures on Russian energy exporters, fresh U.S. limits on Venezuelan oil, and market participants’ reluctance to risk sanctioned cargoes have all redirected flows through the Persian Gulf to Asian refiners, increasing voyage lengths and tonnage needs. The result is a short supply of compliant, insured ships at a moment of heightened demand — a toxic mix for global refiners and national energy security planners. How long can global energy logistics absorb such shocks without feeding through to wider economic pain? That question now hangs over Beijing, other major importers in East Asia, and the carriers that move their fuel.