**Hormuz Shipping Recovery Slows Amid Ongoing Clashes**
The ongoing conflict in the Middle East has hindered the return of shipping through the strategically vital Strait of Hormuz, resulting in sustained war-risk premiums and delaying the full recovery of oil exports from the Arabian Gulf. Despite recent agreements between the United States and Iran to cease hostilities and engage in discussions regarding the Strait, recent escalations have underscored the fragility of this crucial maritime route.
Following an interim ceasefire, there were initial signs of recovery in shipping traffic through the Strait of Hormuz, with an increase in tanker departures from the Gulf and a gradual rise in crude oil loadings. However, the restoration of normal shipping operations has proven to be slow and inconsistent. Shipowners, charterers, and insurers continue to regard the waterway as a high-risk passage, which has hampered the full resumption of commercial shipping activities.
The International Maritime Organization (IMO) had initiated a phased evacuation plan for thousands of seafarers and numerous vessels stranded in the region, collaborating with coastal states and the maritime industry. However, this operation was subsequently paused following an attack on a vessel in the Gulf of Oman. The IMO stated that it needed to reconfirm safety guarantees before proceeding with the evacuation.
Adding to the uncertainty, disagreements have emerged over the designated shipping routes. Iran has indicated that safe passage would only be assured through approved routes, while the IMO-backed framework proposed temporary routes that included passages through Iranian and Omani waters. Consequently, the reopening of the Strait has not led to a complete restoration of commercial shipping, with tanker movements remaining selective and heavily influenced by security assessments.
Ship-tracking data reveals that crude oil exports from the Arabian Gulf were stable until mid-March, at which point they experienced a sharp decline, reaching a low of 3.31 million barrels per day on May 21. By June 24, exports had rebounded to 6.97 million barrels per day; however, this figure remained approximately 40 percent lower than the average for the 2023-2025 period.
Tanker traffic has mirrored this trend. Following the disruptions in March, west-to-east transits through the Strait were nearly nonexistent for about eleven weeks. Although crossings have resumed, the number of tanker transits was still around 58 percent below levels seen in the previous three years by the end of June. This disparity highlights the central issue facing the market: while a ceasefire may reopen the passage, it cannot restore confidence in shipping operations.
For shipowners, the decision to navigate through Hormuz is contingent upon security guarantees, the availability of insurance, crew safety, and the potential for renewed military action. Insurers, facing the renewed violence, find it challenging to accurately price risk. War-risk coverage remains accessible in parts of the market, but it is considerably more expensive than prior to the conflict. Reports earlier this year indicated that additional war-risk premiums for Gulf transits remained several times higher than pre-war levels, despite some easing from their March peaks.
This situation has increased the costs associated with transporting crude and refined products, discouraging some shipowners from sending vessels into the Gulf unless charter rates justify the associated risks. In response to the ongoing instability, oil-producing nations have increasingly relied on alternative routes that bypass Hormuz. Saudi Arabia continues to utilize its East-West pipeline, while the United Arab Emirates has turned to the Habshan-Fujairah pipeline to transport crude to the Gulf of Oman. While these alternative routes provide some flexibility for Gulf producers, they cannot fully replace the normal tanker flows through Hormuz.
The available pipeline capacity remains limited, indicating that simply increasing production will not suffice to restore exports. While Gulf producers may have the ability to raise output, they still require a safe, insurable, and commercially viable route to market.
The latest escalation in hostilities leaves the shipping market in a state of uncertainty. Oil loadings continue, and some tankers are operational, but the overall recovery remains incomplete. As the situation evolves, stakeholders in the maritime and oil industries will be closely monitoring developments to assess their impact on shipping operations and oil export levels from the Arabian Gulf.