Quick Read
- Marine traffic in the Strait of Hormuz has fallen by 90%.
- Iran announced it took control of the strait on March 4, following US-Israeli attacks.
- Major marine insurance companies withdrew war-risk coverage for vessels in the Persian Gulf.
- Before hostilities, an average of 24 tankers passed through the strait daily.
- Major shipping companies have suspended freight bookings to Bahrain, Kuwait, Qatar, UAE, and Saudi Arabia.
YEREVAN (Azat TV) – Marine traffic through the Strait of Hormuz has plummeted by an estimated 90% following Iran’s assertion of control over the critical waterway on March 4, effectively blocking a vital global shipping lane. The dramatic reduction in movement, particularly for oil and gas tankers, comes just days after joint United States-Israeli attacks on Iran began on February 28, triggering widespread trade disruptions and significant economic uncertainty across the Middle East and globally.
The Persian Gulf region, a linchpin for international trade, has seen its maritime activity freeze since the onset of hostilities. Ports have closed, and ships have sought shelter, leading to a standstill in regional commerce. Iran’s announcement of its control over the Strait of Hormuz on Wednesday, March 4, escalated concerns, as this choke point is crucial for global energy supplies and various raw material exports.
Dramatic Drop in Marine Traffic and Insurance Withdrawal
Data from the maritime analytics company Kpler indicates that tanker movement through the Strait of Hormuz has decreased by approximately 90% compared to the previous week. This precipitous decline is largely attributed to mounting threats of potential attacks from Iran, which have compelled many gas and oil tankers to avoid the route. Before the outbreak of hostilities, an average of around 24 tankers traversed the strait daily, underscoring the severity of the current situation.
A primary catalyst for vessels rerouting or halting operations has been the decision by major marine insurance companies to withdraw or cancel war-risk coverage for ships operating in the Persian Gulf. Without this essential insurance, shipping companies face prohibitive risks, making transit through the strait economically unviable and dangerously exposed to geopolitical tensions.
Economic Ripple Effects from Persian Gulf Standoff
The blockage of the Strait of Hormuz threatens to send significant economic ripple effects across the globe. The consulting firm Bernstein, echoed by Dow Jones, has forecasted substantial disruptions to deliveries and auto sales throughout the Middle East. This region is a crucial market for major Chinese automakers, including Chery, SAIC Motor, and Great Wall Motor, which now face considerable challenges in their supply chains and distribution.
Beyond the automotive sector, French agricultural exports, such as grain, wine, and liqueurs, are also expected to be affected. The Persian Gulf is not only a hub for hydrocarbons but also accounts for a significant portion of global exports of essential raw materials for fertilizer production. Specifically, 27% of global ammonia exports, 22% of phosphates, and 45% of sulfur are typically shipped from this region aboard bulk carrier vessels. The disruption to these exports could impact agricultural productivity and food security worldwide.
Limited Alternatives for Regional Trade
Trade within the Persian Gulf region is almost entirely reliant on sea access due to a severe lack of adequate road and rail infrastructure. This dependency has made finding alternative supply routes exceptionally difficult. Since the start of the US-Israeli attacks, shipping companies have attempted to offload containers at secondary ports located at the mouth of the Strait of Hormuz, such as Khor Fakkan in the United Arab Emirates (UAE) or Salalah in Oman. From these points, goods are then transported by truck to the Gulf countries.
However, these alternative transshipment methods are proving insufficient. François Daniel, the director general of TLF Overseas, the French federation representing freight forwarders and transport commissioners, stated that while alternative routes are being considered, ‘so far none have been found to supply the Persian Gulf without passing through the strait.’ This logistical challenge has led most major shipping companies, including industry giants MSC and CMA CGM, to suspend all new freight bookings to and from countries in the region, specifically Bahrain, Kuwait, Qatar, the UAE, and Saudi Arabia.
The sustained blockage of the Strait of Hormuz highlights the intricate vulnerabilities of global supply chains to geopolitical flashpoints, demonstrating how regional conflicts can quickly escalate into international economic crises impacting diverse sectors from energy to agriculture.