Experts in maritime space broke down the implications if tensions were to affect vessels passing through the Strait of Hormuz.
Image: Atta Kenare
Tensions continue to rise in the Middle East as worry about the Strait of Hormuz grows. Experts in maritime space broke down the implications if tensions were to affect vessels passing through the Strait of Hormuz.
Malcolm Hartwell, director at Norton Rose Fulbright and a master mariner, said that the Strait of Hormuz is one of the most vulnerable bottlenecks in the world partly because, unlike other bottlenecks such as the Suez Canal, there is no alternative route in or out of the Arabian Gulf than through the Strait of Hormuz.
“In addition, the Strait can relatively easily be controlled by Iranian forces. As of Friday evening, Lloyds List Intelligence were reporting that there were 620 vessels over 10,000 tonnes trapped in the Arabian Gulf, and a huge number were gathering at the eastern entrance of the Strait waiting to enter the Gulf. The majority of those trapped were bulk carriers, oil and gas tankers, and container ships,” he said.
Hartwell added that a growing number of ships are transiting this Strait in both directions, but the vast majority of them are reported to be either members of the so-called shadow fleet carrying Iranian oil or are Chinese vessels, presumably given safe passage by the Iranian authorities.
“Despite President Trump’s promise to provide escorts, it is generally accepted that this is not a viable option. Although naval vessels are able to protect themselves, they cannot necessarily detect and destroy every single drone targeting an oil tanker. A strike on a single laden oil tanker would have catastrophic environmental consequences for the entire region,” he said.
Hartwell said that some of the shipowners appear to be willing to take the risk of sending vessels in and out of the Arabian Gulf, but the vast majority up until now have adopted a wait-and-see approach. George Procopiou of Dynacom has defied Iranian threats, and several of his empty and laden tankers have reportedly transited the Strait under cover of darkness and with their AIS systems disabled so they could not be tracked.
Hartwell added that one of the reasons the Strait is so important is that 20% of the world’s oil originates in the Arabian Gulf.
“Reports today reflect that the oil price reached $120 (R1953) a barrel, which was last seen several years ago. They have, however, now dropped dramatically to $85 (R1384) a barrel, apparently on the back of President Trump’s statement saying that the conflict is almost over. Clearly, until the conflict is resolved, the oil and gas markets will remain highly volatile. There is no short-term alternative to exporting oil and gas from that region, such as using pipelines, many of which would have to be constructed through other volatile regions,” he said.
Hartwell concluded that insofar as the effect of South Africa is concerned, we will, like the rest of the world, be subject to fluctuations in energy prices.
“We will also see an increase in traffic around our coast for ships diverted from the Arabian Gulf. Traders and cargo insurers in South Africa will be faced with possibly significant claims on cargo trapped in the Arabian Gulf. Depending on policy terms, some insurers will have to pay for the value of the ship or cargo if they are trapped for more than the period in the policy, which is typically between 6 and 12 months. As always, the additional costs and delays will ultimately be passed down to the long-suffering consumers and businesses who rely on international trade,” he said.
Dr Jacob van Rensburg, head of research and development at the Southern African Association of Freight Forwarders (SAAFF), said the waterway remains a critical global chokepoint, carrying around 20 million barrels of oil per day – roughly one-fifth of global supply – making disruptions highly consequential for energy shipping markets.
“About 20 million barrels of oil, or about one-fifth (and as much as 30%) of daily global production, flow through the Strait every day, according to the US Energy Information Administration, which calls the channel a ‘critical oil chokepoint," he said.
Van Rensburg added that the immediate transmission mechanism is not only physical disruption but also insurance market withdrawal and repricing. “If cover is unavailable or priced prohibitively, chartering appetite collapses irrespective of whether the waterway is formally closed. In summary, the likely impact on South Africa will be multi-fold. As vessels reroute around the Cape of Good Hope, South African waters can expect increased transit traffic and potential short-term port call adjustments.”
BUSINESS REPORT