VLCC freight rates on key routes have fallen sharply since a ceasefire between Israel and Iran was announced on 24 June, with the Mideast Gulf to China route dropping 50pc in just three days.
Rates on the Mideast Gulf to China route — a bellwether for the VLCC market — surged to a 2.5-year high of WS110 ($25.70/t) on 23 June, following US strikes on three nuclear facilities in Iran the previous day.
Charterers remained active during the spike, securing vessels at elevated levels. Kuwait's KPC booked two ships for Asia-Pacific delivery — one at WS110 and another at WS120 — but both deals failed to hold after the ceasefire was announced.
Since then, rates on the route have fallen by at least WS10 ($3.50/t) a day, settling at WS55 ($12.85/t) on 26 June. The pace of decline may slow as rates approach pre-conflict levels. With no direct impact on crude supply or infrastructure, freight rates are likely to revert to previous market levels.
A similar pattern emerged in October last year, when Iran launched more than 200 missiles at Israel. Rates on the same route rose by over 13pc to $14.10/t within three days, according to Argus assessments, before easing back to just above pre-conflict levels as tensions subsided.
Before the latest escalation, the Mideast Gulf to China route was nearing a year-to-date low, weighed down by weaker Chinese crude demand during refinery maintenance season. Higher official formula prices for Saudi crude also curbed buying interest, prompting Chinese refiners to turn to Latin American alternatives — freeing up tonnage in the Mideast Gulf.
