The cost of freight for Mideast Gulf-origin very large crude carrier (VLCC) voyages could increase after Israeli air and missile strikes hit Iran in the early hours of today, 13 June.
The VLCC market is exposed to volatility as around 65pc of all shipments in that class are from the Mideast Gulf. In October 2024, when Iran launched more than 200 missiles against Israel, the Argus-assessed rate for the Mideast Gulf to China route increased by more than 13pc, to $14.10/t, in three days.
So far is appears there is no disruption to oil flows through the Mideast Gulf and the strait of Hormuz, and remains unclear as Iran's oil infrastructure was unscathed by the Israeli air and missile strikes according to Iran's state news agency Irna and Argus sources.
But some shipowners have become increasingly cautious of the region, with some market participants suggesting more risk-averse owners might avoid the area until the conflict de-escalates. This could encourage some owners to increase their offers as the risk of transiting the area mounts, and discourage some from visiting the region at all.
Charterers made multiple cargoes available to the Mideast Gulf market today, but most remained unfixed.
But the rise in crude prices today — front month Ice Brent is trading around 5.5pc higher having rise as much as 13pc earlier — could discourage China, the largest importer of Mideast Gulf grades, from purchasing more crude. This could curtail any jump in freight rates and perhaps create a ceiling to cap the increase.
