Iran conflict disrupts shipping globally as tankers become stranded and damaged
The insurance companies have canceled war risk coverage on vessels in the Gulf due to the increasing conflict with Iran. This has caused at least four damaged tankers, two deaths of seafarers and 150 stranded ships around the Strait of Hormuz. The shipping through the Strait of Hormuz between Iran and Oman has come to a halt as Iran responded to U.S., Israeli and other strikes. Oil and European Natural Gas prices have risen due to the disruption and the fear of a prolonged closure. Brent crude futures are up by more than 8%, as the conflict has triggered several oil and gas shut downs in the Middle East.
Shipping data revealed on Sunday that at least 150 vessels, including oil and LNG tankers, had anchored in the Strait of Hormuz as well as surrounding waters.
Iran announced that it had closed the vital waterway for navigation, prompting Asian government officials and refiners to review their oil stocks.
According to data gathered by the MarineTraffic platform, the tankers clustered off the coasts major Gulf oil producers including Iraq and Saudi Arabia as well as LNG giant Qatar.
The latest incident involved the U.S. flagged products tanker Stena Imperative being damaged by "aerial impact" while it was berthed at the Middle East Gulf. A shipyard worker died as a result of the impact.
A projectile struck the Marshall Islands flagged product tanker MKD VYOM on Sunday and killed a crewmember as the vessel was sailing off the coasts of Oman. Two other tankers also suffered damage.
Peninsula's manager said in a press release that a projectile also hit the Gibraltar flagged?oil-bunkering tanker Hercules Star on Sunday off the coast of the UAE. Peninsula said that the tanker returned safely to Dubai's anchorage on Sunday morning.
INSURERS CANCEL WAR RISK COVERS
In response to the incidents, maritime insurers have canceled war risk coverage on vessels. Oil shipping rates will also increase.
According to notices posted on their websites dated March 1, companies such as Gard, Skuld and NorthStandard would be cancelling their memberships starting March 5.
According to the notices, war risk coverage will not be available in Iranian waters as well as Gulf and adjacent water.
Skuld also added that it is working to provide new coverage?under new terms.
The MS&AD Insurance Group of Japan announced that it has suspended the underwriting of several insurance policies covering risks of war in the water around Iran, Israel and neighboring countries.
Oil shipping costs will rise further. The cost of shipping oil to Asia from the Middle East - which is already at a six-year-high -?will continue to increase as the growing conflict in Iran discourages shipowners to send vessels to the area, according to market sources and analysts.
Spot shipping rates - from the Middle East to 'Asia. Also known as TD3C
The spot rate to hire a very large crude ship on the Middle East-China route was 4% higher on Monday than it was on Friday. It is near W225, the Worldscale Industry Measure, or at least $12 Million.
Emril Jamil is a senior LSEG Analyst. He said that "TD3C prices?were increasing exponentially before the attack and will continue to be elevated as countries scrambled to meet their needs for energy."
A shipbroker stated that there is still uncertainty about the final rate for Monday, but all Middle East loading route are expected to remain stable. The shipbroker declined to name them as they were not authorized to speak to media.
A shipping company source said that the market would need more ships for longer voyages to transport crude oil from the U.S.
(source: Reuters)
