The renewed conflict between Israel/US and Iran, marked by ongoing attacks and retaliations at the time of going to press, has left the global shipping industry apprehensive about the days ahead.
Just as shipping lines were cautiously resuming operations in the Red Sea—with the Houthis’ adhering to a ceasefire—the resurgence of hostilities has thrown projections and assumptions into disarray. Compounding the uncertainty is the looming possibility of a closure of the Strait of Hormuz, widely regarded as the world’s most critical oil transit route, raising fears of a daunting scenario for global trade.
Analysts note that rerouting via the Cape of Good Hope, a practice that has steadily grown since mid-December 2023, will likely continue and even expand in volume. For now, stakeholders across the industry remain watchful, hoping the crisis does not escalate further.
Meanwhile, BIMCO has put out an FAQ-style explainer on the situation and its impact on shipping:
* How will shipping react to the attacks on Iran?
The US/Israeli attack on Iran dramatically increases the security risk to ships operating in the Persian Gulf and adjacent waters. Ships with business connections to US or Israeli interests are more likely to be targeted, but other ships may also be targeted
deliberately or in error.
Ships already in the area are expected to seek refuge in territorial waters of countries such as United Arab Emirates or Qatar, and some ships may also want to try to leave the area entirely. Ships underway to the immediate conflict area are likely to stay away until the situation stabilises again.
* How will the insurance market react?
We expect insurance rates to increase manifold, and ships with business connections to US or Israel approaching the area are probably not going to be able to get insurance.
* Can Iran close the Strait of Hormuz?
The Iranian naval forces have capabilities designed to disrupt shipping in and out of the Persian Gulf. In the short term it is assessed that Iran will be able to coerce commercial shipping to decide against entering the conflict area.
It is assessed that within few days US air and naval superiority will eventually establish a level of security which will enable commercial shipping to resume transportation in and out of the Persian Gulf and adjacent waters.
* How will the Houthis respond?
The Houthis are allies of Iran and may well decide to ramp up attacks against commercial shipping in the Red Sea and Gulf of Aden. This will constitute a considerable security threat especially to ships with commercial ties to US and/or Israel. Other ships may also be targeted deliberately or incidentally. Following the previous Houthi campaigns against commercial shipping, maritime traffic through the Red Sea is far from pre-conflict levels. The current outbreak of hostilities exacerbates security threats to ships in the Red Sea and Gulf of Aden and will most likely cause some shipowners to reroute south of Cape of Good Hope. Others will still decide to go through in dialogue with their insurers and following a ship- and voyage-specific assessment of associated security risks.
* What have the US authorities advised shipping to do?
The US has established a maritime warning zone in the Persian Gulf, Gulf of Oman, North Arabian Sea and the Strait of Hormuz to protect against inadvertent targeting of neutral shipping. Commercial shipping is advised to navigate with caution and avoid navigation within this zone, if possible. This maritime warning zone is not intended to impede neutral or merchant shipping. Those vessels are free to navigate international waters. However, the establishment of the warning zone is intended to provide notice that dangerous military operations are taking place from within these locations and the US Navy cannot guarantee the safety of neutral or merchant shipping.
* How does shipping assess risks?
Shipowners assess several factors when assessing security risks to their ships. These factors include the intent, capability and possibility of an enemy to attack, and the vulnerability and impact to the crew, ship, cargo and environment of different kinds of attacks or security events. In response to this initial assessment, the shipowner evaluates the available mitigating measures, which include for example considerations on manning, watchkeeping, damage control readiness, the ship’s routing, and liaison with military forces in the conflict area. The final decision on risk mitigation includes in some cases a decision to stay away completely. This depends on the risk acceptance level of the company and the ship’s crew. The risk acceptance level varies from company to company and is shaped by the company culture.
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