Freight market participants are choosing to remain cautious about the announcement that a deal between the US and Iran to reopen the strait of Hormuz has been reached, preferring to seek clearer assurances on the safety of ships transiting through the strait first, they told Argus today.
This comes after a series of false starts around similar developments in recent months.
US president Donald Trump said on 14 June that an agreement with Iran was "now complete", as he ordered an end to the US naval blockade against Iran in conjunction with what he said would be the reopening of the strait of Hormuz.
The critical waterway, where a quarter of the world's seaborne oil trade travelled through before the war, remained largely shut since the war started on 28 February, as Iran tightened control by restricting vessel movements and using access as leverage.
Beyond the disruption to global trade flows, security risks also escalated as commercial shipping became increasingly targeted. There have been 57 recorded incidents affecting vessels operating in and around the Mideast Gulf, the strait of Hormuz and the Gulf of Oman since 28 February, according to the UK Maritime Trade Operations as of 11 June.
Freight market participants so far remain doubtful that a sustained and meaningful return of ships through the strait will happen anytime soon, with most citing the fragility of earlier ceasefire announcements.
The risk of repositioning a ship to the Mideast Gulf for potential cargoes still significantly outweighs any advantage from the move given that the situation can change quickly, a tanker shipowner said. Shipowners have adapted and found new trade routes in the absence of Mideast Gulf cargoes as a result of economies turning to more distant alternative oil supplies.
Shipowners are also unlikely to benefit from any "first-mover advantage" by positioning their ships in the region ahead of any clear rebound in vessel demand, a freight analyst said. Shipowners can only weigh whether freight rates are sufficiently attractive to return to the Mideast Gulf if cargoes from the region appear again.
Shipowners will simply remain in lower-risk regions out of the Mideast Gulf should freight rates remain unattractive, the analyst added.
A sustained recovery in cargo volumes from the region could eventually raise freight rates over some time, and shipowners that have chosen to wait and observe how the market reacts may benefit from higher freight rates when they choose to re-enter the market later.
The situation is likely to remain volatile given that a full and final agreement between the US and Iran has not yet been reached, a shipowner said. This is in addition to mines in the area which pose a threat to ships and will hinder vessel transits in or out of the strait, the shipowner added.
A gradual return to the region is possible if security conditions stabilise and cargo flows resume, with any recovery expected to be measured instead of immediate, some market participants said.
The Mideast Gulf remains the world's largest oil-producing region, and global demand will underpin the return of ships back to the region over time, a shipbroker said.
Coordination between governments and maritime bodies will also be critical, another shipowner said, as the industry ultimately seeks clearer assurances on security conditions in the Mideast Gulf that would restore confidence and accelerate a broader return of vessels to the region.
