With hundreds of vessels still stuck in the Persian Gulf and costs piling up, shipping companies are being whipsawed by uncertainty over how and when the Strait of Hormuz might reopen more than two months into the Iran war.
On Sunday, President Donald Trump announced “Project Freedom,” a way for the U.S. to “guide” ships to exit the strait. Two ships made the transit, but by Tuesday Trump abruptly paused the effort to allow time for a deal to end the war.
Meanwhile, the risks for ships and crew haven’t faded. A cargo container ship operated by the CMA CGM Group was damaged when it came under attack while attempting to transit the strait, the French shipping company said Wednesday, and concerns about Iranian speedboats and drones are leading major ship owners and operators to say the strait remains too dangerous.
“Ultimately, it’s still going to come back to the primary issues of risk and safety,” that shippers have to evaluate, said Sean Pribyl, a maritime attorney at Holland & Knight in Washington, D.C. ”It seems as though we’re not anywhere near to returning to a free flow of traffic and navigation through the strait,” he added.
Costs pile up as goods, oil and ship workers remain stranded
Before the Iran war, 100 to 135 vessels passed through the Strait of Hormuz daily, according to research firm Lloyd’s List Intelligence, but that has slowed to a trickle as Iran has demanded that vessels go through a vetting process run by the Islamic Revolutionary Guard Corps to receive safe passage. The process requires ships to follow a route near Iran’s coast, submit information on crew and cargo, and in at least some cases, pay a fee. Meanwhile, paying the IRGC risks running afoul of sanctions from the U.S. and the EU, which have designated it a terrorist organization.
Goods stranded in the strait include oil and oil products such as fertilizer, not to mention thousands of ship workers. Air Force Gen. Dan Caine, chairman of the Joint Chiefs of Staff, said Tuesday there are more than 1,550 vessels with about 22,500 mariners on them inside the Persian Gulf.
To pressure Iran, the U.S. Navy is blockading Iran’s ports, enforcing the blockade outside the strait in the Gulf of Oman and the Arabian Sea.
Holland & Knight’s Pribyl said shippers and ship insurers are likely still assessing the scenario in the strait. Ships carry two main types of insurance: protection and indemnity, which covers property and third-party liabilities, and — during a conflict — war risk insurance that covers damage and losses due to war.
Insurance costs have shot up for vessels in the region due to the risk of attack, jumping from less than 1% of the value of goods on a ship to anywhere from 3% to 10% during the conflict, said Ed Anderson, a professor of supply chain and operations management for the McCombs School of Business at the University of Texas. But even with insurance, most shippers have deemed the crossing too unsafe.
“Ferrying out a couple of ships has not really affected the shipping industry in any way whatsoever,” he said.
Companies weigh costs and risks
Hapag-Lloyd AG, one of the world’s largest container shipping companies, says the Hormuz situation is costing it $60 million a week, particularly in skyrocketing prices of fuel and insurance. It has a fleet of 301 ships, including four stranded in the Persian Gulf. The company has also had to suspend some of its transport services and find alternate routes either to safe harbors or over land. “These options are however limited in capacity and cannot completely replace the regular maritime routes through the region,” the company said in a statement.
The Maersk shipping company said its U.S.-flagged Alliance Fairfax vehicle carrier exited the Persian Gulf through the Strait of Hormuz “accompanied by U.S. military assets” on Monday. “The transit was completed without incident, and all crew members are safe and unharmed,” the company said in a statement.
A long return to normal
Oil prices and shipping are unlikely to return to normal until it’s clear the risk of attacks in the Strait of Hormuz have receded, cautioned Kaho Yu, head of energy and resources at risk intelligence company Verisk Maplecroft.
“Even with diplomatic engagement continuing, energy markets are unlikely to return quickly to precrisis assumptions,” he said. “Refiners, shippers, and commodity traders will remain cautious until there is clearer evidence that Hormuz disruptions will not re-escalate.”
A meeting on Wednesday between Iranian and Chinese diplomats emphasized de-escalation. But “Hormuz remains the real metric that will be watched,” Yu added. “Tanker traffic and energy flows over the coming weeks and months are likely to matter more than diplomatic language in assessing whether Beijing can translate influence with Tehran into practical stability.”
If the ceasefire holds and ships gradually begin transiting the Strait of Hormuz again, shipping won’t “snap back overnight,” warned Razat Gaurav, CEO of Kinaxis, a supply chain management company.
“Even when conditions improve, carriers, insurers, and shippers need confidence that stability will hold before capacity and routes fully normalize,” he said. “Air cargo can recover relatively quickly, but ocean shipping typically takes weeks or months because of longer lead times and contractual constraints.”
He said shipments of certain categories like liquid natural gas and sulfur, where the Middle East is a major source of supply, are likely to move more quickly as backlogs clear, but “most shippers will remain cautious until stability proves durable,” he said.
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McHugh reported from Frankfurt, Germany.
The ongoing conflict in Iran has created significant disruption in maritime trade, particularly affecting shipping routes through the Strait of Hormuz, where hundreds of vessels remain stranded. Over two months into the war, the uncertainty surrounding the strait has left shipping companies grappling with rising costs and operational challenges.
On a recent Sunday, President Donald Trump introduced “Project Freedom,” aimed at assisting ships in navigating the strait. Initial attempts saw two vessels successfully transit, but by the following Tuesday, Trump decided to pause the operation to facilitate diplomatic efforts for a ceasefire. Despite this, the dangers for ships and crews persist. A cargo ship operated by CMA CGM Group was reportedly attacked while attempting to navigate the strait, reinforcing the perception that it remains too hazardous for safe passage. Maritime attorney Sean Pribyl noted that the risks involved in shipping through this area continue to dominate the considerations of shippers.
Before the conflict, the Strait of Hormuz was a critical maritime passage, with 100 to 135 vessels transiting daily. However, this number has drastically reduced due to Iran’s new vetting requirements imposed by the Islamic Revolutionary Guard Corps (IRGC). These requirements include following specific routes near Iran’s coast, providing detailed information about crew and cargo, and potentially paying fees. This situation complicates matters for shipping companies that risk violating U.S. and EU sanctions against the IRGC, which is designated as a terrorist organization.
The impact of the conflict has left thousands of mariners stranded. According to Air Force Gen. Dan Caine, over 1,550 vessels, carrying approximately 22,500 crew members, are currently in the Persian Gulf. In an attempt to exert pressure on Iran, the U.S. Navy has implemented a blockade on Iranian ports and is enforcing restrictions in the Gulf of Oman and Arabian Sea.
The financial implications for shipping companies are substantial. Insurance costs for ships in the region have surged due to heightened risks, with rates escalating from less than 1% to between 3% and 10% of the goods’ value. Despite this, many companies deem the crossing too perilous. Hapag-Lloyd AG, a major container shipping firm, reported losses of $60 million weekly due to increased fuel prices and insurance costs, alongside operational disruptions that have forced them to suspend services and seek alternative routes.
Other shipping companies, such as Maersk, have managed to navigate the situation with military escort, successfully transporting their vessels without incident. However, the broader picture indicates that oil prices and shipping operations are unlikely to stabilize until the threat of attacks subsides. Kaho Yu, an expert on energy and resources at Verisk Maplecroft, stated that markets would remain cautious about returning to pre-crisis conditions, despite ongoing diplomatic discussions.
A recent meeting between Iranian and Chinese diplomats highlighted efforts towards de-escalation, but the situation in Hormuz will be closely monitored as a key indicator of stability in the region. Razat Gaurav, CEO of Kinaxis, emphasized that even if the ceasefire holds and shipping resumes, full normalization would not happen quickly. Ocean shipping typically involves longer lead times and contracts, meaning a gradual recovery is expected.
Specific commodities, notably liquid natural gas and sulfur, which are heavily sourced from the Middle East, might see quicker movement as backlogs clear. However, the overarching sentiment among shippers remains cautious, as confidence in long-term stability is crucial for resuming normal operations.
The maritime industry is thus at a crossroads, with many companies weighing the immediate costs against the long-term implications of the ongoing conflict and the precarious situation in the Strait of Hormuz. The uncertainty continues to pose a significant challenge for shipping routes and the global supply chain.
