Rules of the road are a term that is frequently used in shipping circles these days. Not in a metaphorical sense. The literal kind: who enters, who exits, and who guarantees that no one is shot during that time. The world’s tanker operators are still sitting outside one of the most important waterways on earth, engines idling, waiting for a response that no one seems to be able to provide, three months after Iran effectively closed the Strait of Hormuz and weeks into shaky ceasefire talks.
Even by the standards of a crisis that has already completely changed the oil market, the figures are astounding. More than 600 ships, including 325 tankers, are still stranded in the Gulf with no way out. There are about 20,000 seafarers trapped inside, some of whom are starting their fourth month away from home. They are missing weddings, births, deaths, and the everyday routine of life on land. Heidmar Maritime Holdings president Pankaj Khanna stated as much on Monday at the Posidonia conference in Athens, pointing out that his company’s ship has been stuck in the Gulf since March. Reading about a geopolitical crisis in a briefing note is one thing. It’s another to consider the man on that ship who used a video call to witness the birth of his child.
This year’s Posidonia gathering, a biennial shipping show that brings the biggest names in the industry to Athens, had a different vibe. Something heavier undercut the routine discussions about freight rates and vessel orders. IMO Secretary General Arsenio Dominguez spoke cautiously about a potential 60-day ceasefire, stating that an evacuation framework is prepared as soon as guarantees are received. However, the shipping industry lacks guarantees. Khanna put it simply: without a framework outlining the guidelines for entry and exit, even a signed peace agreement is meaningless. “That we don’t know as yet,” he stated.
It’s important to comprehend the depth of the hesitancy. Houthi attacks on ships in the Red Sea at the beginning of 2024 caused a significant decline in traffic. Ships on that route have not yet reached prewar volumes two years later. The Persian Gulf presents a much more complicated calculation, and the industry has a long memory for danger.
According to most accounts, Iran currently has de facto control over the strait. The Islamic Revolutionary Guard Corps, which is classified as a foreign terrorist organization under US law, may need to coordinate with Western commercial operators who sail through. Shipowners may be subject to sanctions violations if they coordinate with the IRGC. It’s a legitimate trap disguised as a route for navigation.
Pre-war transit volumes through Hormuz might already be the historical peak for the foreseeable future, according to Helima Croft, head of global commodity strategy at RBC Capital Markets. That’s a startling statement about a waterway that, up until February, transported about a fifth of the world’s seaborne oil, including between 12 and 14 percent of Europe’s LNG and a third of China’s crude. Brent crude briefly reached $126 per barrel as a result of the disruption, which has already caused the biggest monthly increase in oil prices in history. While the shipping industry is typically pragmatic, markets are more forward-thinking. Pragmatism says, “Wait.”
In Athens, Capital Maritime founder Evangelos Marinakis declared that the conflict ought to have ended “yesterday.” Most likely, he is correct. However, he also admitted—with a hint of weary realism—that the industry might wait a few more weeks if doing so would result in a long-lasting agreement. The industry as a whole believes that a poor peace agreement that gives Iran structural control over trade without accountability procedures could be worse than a protracted halt.
Vasilis Kikilias, Greece’s minister of shipping, made the clear observation that conflicts are extremely difficult to resolve without making any predictions about when the conflict will end. He sounded pessimistic. It’s difficult not to feel the same as you watch this industry navigate a crisis where the military, diplomatic, and legal aspects are all unresolved at once.
