Shipowners reroute from Strait of Hormuz as conflict escalates: report

Maritime traffic through the Strait of Hormuz is facing new disruption as shipowners reassess security risks in the wake of rising hostilities between Israel and Iran, as per a CNBC report.

Following Israel’s strike on Iranian military and nuclear sites on Friday, heightened regional tensions have triggered four days of escalation, prompting many shipping firms to consider rerouting vessels away from the area.

The Strait of Hormuz, a key oil and container shipping corridor, has already recorded a “modest drop” in vessel traffic, according to Bimco, the world’s largest international shipping association.

Middle East freight rates spike as ships divert routes

Data from commodity analytics firm Kpler shows freight rates for tankers travelling from the Middle East Gulf to China jumped 24% on Friday, reaching $1.67 per barrel.

That marks the sharpest one-day increase so far in 2025 and highlights the market’s quick reaction to perceived threats in the region.

Kpler analysts said the surge was driven by the sudden risk premium placed on transiting the Strait of Hormuz.

The Very Large Crude Carrier (VLCC) segment saw the most pronounced increase, bouncing from a quiet start to the month.

While freight costs have surged, war risk insurance premiums have so far held steady.

David Smith, head of hull and marine liabilities at McGill and Partners, confirmed insurance rates have not yet responded to the new military activity.

However, he noted that premiums could increase swiftly depending on how the situation develops.

War quotes in the area are only valid for 48 hours, allowing underwriters to make fast pricing changes based on real-time risk.

Strait of Hormuz chokepoint now seen as volatile

The Strait of Hormuz connects the Persian Gulf with the Arabian Sea and is one of the most strategically critical passages for global energy markets.

According to the US Energy Information Administration, average daily oil flows through the strait reached 20.9 million barrels in 2023, representing around 20% of total global petroleum liquids consumption.

Any temporary blockages or reductions in traffic through the strait could quickly affect oil prices, shipping costs, and global supply chains.

It’s not just oil shipments that face exposure. Major ports like Jebel Ali and Khor Fakkan rely on uninterrupted access to the strait to maintain their roles as transshipment hubs.

These ports are essential for container volumes moving between Dubai, South Asia, East Africa, and the wider global market.

Shipping analysts say some ocean carriers are already backing away from the area, even though no vessels have yet been targeted.

Peter Tirschwell, vice president for maritime and trade at S&P Global Market Intelligence, said in the report that recent shifts mirror what happened in the Red Sea during Houthi attacks, which pushed most of the container trade around the Cape of Good Hope.

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