Houthis impose Red Sea ban as Israel and Iran exchange missile strikes
Renewed Middle East conflict lifts Brent crude and clouds the outlook for tanker markets tied to the Strait of Hormuz
Tensions across the Middle East have escalated sharply after Israel launched strikes on Iran, raising fresh concerns for shipping markets already contending with disruption in the Strait of Hormuz and renewed threats in the Red Sea.
The Israeli military said it had hit a petrochemical plant in southwestern Iran, along with military targets in the west and centre of the country, in retaliation for Iranian missile attacks on northern Israel. Iranian state media reported explosions in Tehran, Isfahan, Tabriz and other cities, though authorities in Isfahan said there were no casualties.
The exchange marks the first direct military confrontation between the two countries since the ceasefire brokered in April, and follows an Iranian missile barrage launched in response to Israeli strikes on Hezbollah targets in Beirut.
The conflict has quickly fed back into maritime markets. Brent crude jumped almost 5% to around $97 a barrel as traders weighed the risk of further disruption to Middle Eastern oil exports.
The renewed hostilities cap a week of mounting pressure on Iran. On Friday, US forces boarded the sanctioned tanker Davina in the Indian Ocean - a vessel previously blacklisted by Washington for carrying Iranian crude to China.
At the same time, Yemen's Houthi movement declared what it called a "full navigation ban" on Israeli shipping in the Red Sea, warning that vessels linked to Israel would be treated as military targets. Maritime security firm Vanguard said the move did not amount to a blanket ban on commercial traffic but urged operators to stay vigilant and step up affiliation screening.
Attention has again turned to the Strait of Hormuz, through which roughly a fifth of global oil supplies normally passes. Iranian lawmaker Mohsen Zanganeh claimed Tehran collects between $1.5m and $2m from each vessel transiting the waterway, via cash transfers, barter arrangements and, in some cases, cryptocurrency.
Shipbroker Braemar said the tanker outlook hinges on when normal traffic can resume through Hormuz. "An early opening of the Strait of Hormuz would support freight rates," it said, arguing that risk premiums and stock rebuilding would generate extra tanker demand once exports recover.
The broker nonetheless sees prolonged disruption as the more likely scenario. "Should Hormuz remain closed to all but a handful of tankers, which right now seems to us the most likely outcome for the next six months or so, demand destruction will quickly replace stock draws as countries look to preserve a depleted supply buffer." A brief reopening followed by another lengthy closure, it added, could pressure freight markets further by lifting vessel supply outside the Gulf as demand weakens.
Product tanker markets are being reshaped too. Poten & Partners estimates around 5m barrels per day of refined product exports from the Gulf have been disrupted, while some 3m bpd of refining capacity has been knocked offline during the conflict. The US has emerged as the key replacement supplier, lifting refinery runs and shipping cargoes to markets that would normally source from the Middle East or Asia.
US exports have spread beyond traditional Latin American buyers to countries such as Australia, Turkey and Namibia, driving a sharp rise in tonne-mile demand. That initially triggered record product tanker earnings as vessel dislocations tightened tonnage, though Poten noted freight gains have since eased as trade routes adapted.
The next move, the broker said, depends largely on the Middle East. "A delayed opening will eventually strain global refined product stocks, limit availability of products and spike prices to force demand destruction. This is bearish for product tanker rates. Conversely, a speedy reopening will bring the market back on the path of normalcy and support the freight market."
