Global Shipping Enters Uncharted Territory: A Cautionary Tale of Recovery
As the Strait of Hormuz reopens, the global shipping industry is poised for a prolonged recovery process. The disruption caused by the recent conflict has resulted in a staggering 95% decline in traffic through the strait, with far-reaching consequences for energy markets and supply chains. The impact has been particularly severe for countries heavily dependent on Middle Eastern energy imports, such as India, China, Japan, South Korea, and Singapore.
The reopening of the Strait of Hormuz is a crucial step towards resolving the crisis, but it marks only the beginning of a complex and challenging recovery process. According to Carsten Ladekjær, CEO at Glander International Bunkering, “Even with a ceasefire, reopening won’t be immediate. There’s a backlog, with ships waiting to leave, and likely a controlled process for who gets out first.” This sentiment is echoed by Arne Lohmann Rasmussen, chief analyst and head of research at Global Risk Management, who notes that “there are logistical issues, security issues, and even communication challenges” that must be addressed before the system can fully recover.
The extent of the disruption is staggering. Over 1,000 ships remain in the Gulf, including hundreds of tankers awaiting passage. Under normal conditions, roughly 150 vessels pass through the strait daily, making it a logistical nightmare to clear the backlog. The process will require sequencing through, refueling, and repositioning of vessels, which will take time.
The market has already responded to the crisis, with Brent crude falling by around 15% in response to news of the ceasefire. However, this does not necessarily mean that prices at the pump or in storage will drop immediately. According to Ladekjær, “fuel already bought at higher prices is still in the system, so it takes time for cheaper supply to come through.” This could take at least a month or longer, depending on the extent of damaged infrastructure and ongoing bottlenecks.
The region’s energy infrastructure has been severely affected by missile and drone strikes. QatarEnergy declared force majeure on some LNG contracts after facilities were hit, while Saudi Aramco suspended operations at its Ras Tanura refinery following a reported drone attack. Similar incidents have been reported across the United Arab Emirates, Bahrain, Kuwait, and Iraq.
Even if supply resumes, there will be a lag. Storage may have held up during the crisis, but replenishing supply will take time, and prices are expected to remain volatile during this period. According to Lohmann Rasmussen, “there are practical challenges too… Some ships may need new crews, fuel, or maintenance before they can even move. It could take time to clear that backlog.”
The industry is now focused on assessing damage and restarting operations. Facilities are being evaluated and gradually brought back online. However, there remains a risk of the ceasefire breaking down again, which would have severe consequences for global energy markets.
Ultimately, the recovery process will depend on the willingness of shipping companies and insurers to reenter the strait. According to Lohmann Rasmussen, “I think many will be hesitant to reenter the strait until there’s more clarity because of the risk of being trapped again.” As the industry navigates this uncharted territory, it is clear that a prolonged recovery process lies ahead.