Rising Shipping Costs: Israel-Iran Conflict Disrupts Global Fuel Supply Chains
The cost of transporting refined oil out of the Middle East has surged on Tuesday, as shippers react to the ongoing conflict between Israel and Iran. According to data from the Baltic Exchange, rates for shipping large cargoes of fuel from the Persian Gulf to Japan have almost doubled to more than $55,000 a day. The cost of moving product to East Africa and northwest Europe from the Middle East has also soared. "We are seeing strong demand for near-term cargoes in the Middle East," said Torm Plc, one of the world's largest owners and operators of product tankers. "The uptick remains centered on the Middle East — other markets may be affected if momentum continues." The increase in shipping rates had already begun since the Israel-Iran conflict began late last week, but Tuesday's surge on the route to Japan was particularly significant. Some tanker owners and managers had already paused offering vessels as they assessed the risks. The sharp jumps in the cost of hauling fuels will not only affect shippers' bottom lines but will also ripple through the wider petroleum markets. Persian Gulf exports of diesel are almost 1.4 million barrels-a-day, while naphtha shipments are about 1.2 million, according to a report from FGE NexantECA, citing Kpler. Exports of liquefied petroleum gas are even larger, while there are also significant volumes of fuel oil. In addition to the direct impact on shipping rates, the conflict between Israel and Iran has also caused uncertainty in the global energy market, leading to increased volatility in oil prices and potential disruptions in supply chains. As a result, energy companies and consumers alike are closely monitoring developments in the region and preparing for potential changes in the market. The situation is likely to continue to evolve, with further impacts on shipping rates and the broader petroleum market. Shippers and energy companies will need to closely monitor developments and adjust their strategies accordingly to navigate this uncertain time.
