$400,000 freight rate for large vessels, hundreds of ships stranded: Shipping, freight industries face rude shock from Israel-US vs Iran conflict

The global shipping industry is facing tens of billions of dollars in estimated costs and losses per day after just three days of regional conflict arising from the US-Israel attack on Iran and Tehran's retaliatory strikes on Gulf nations, coupled with disruptions at the Strait of Hormuz. Freight charges have surged given security risks, with some reports citing increases of up to $400,000 per day. The Strait of Hormuz handles roughly 20 per cent of global seaborne oil, approximately 20–21 million barrels per day before the conflict began. It also handles a similar share of LNG exports, primarily from Qatar.

At least 750 ships hit by congestion

As Iran effectively shut down the Strait of Hormuz, nearly 750 ships are reportedly impacted by congestion in and around the waterway,. Only a few tankers were transiting compared with the normal 130 per day, as ship traffic through the strait plunged by about 86 per cent. Hundreds of vessels are queued on either side.

Some 100 container ships, representing about 10 per cent of the global container fleet, are caught in the backups and unable to transit normally because insurers have withdrawn war-risk coverage and carriers are avoiding the area.

Maersk and other major carriers suspend operations

Maersk, one of the world’s largest container carriers, suspended acceptance of new bookings on key routes in and out of the Middle East, including Gulf states like UAE and Oman, and has paused some operations to safeguard cargo and crews. Other major carriers such as MSC, CMA CGM, Hapag-Lloyd, and COSCO have also stopped transits through the Strait of Hormuz or rerouted services to avoid the affected waters.

From freight rates to war-risk premiums, shipping costs shoot through the roof

Freight rates for oil tankers have surged to record highs, reportedly up to $400,000 per day in the case of Very Large Crude Carriers or VLCCs transporting crude from the Middle East to China due to route disruptions and elevated risk. LNG tanker rates have surged more than 40 per cent, with some routes reaching $41,000–$61,500 per day according to reports.

Shipping companies have introduced emergency conflict surcharges of up to $4,000 per container to offset added risks and expenses. War-risk insurance premiums have risen sharply or been cancelled entirely for vessels in the region, forcing carriers to either pay much higher insurance or avoid the strait altogether.

Ripple effect: A sharp rise in oil and gas prices

The fuel transit disruption, along with Iran’s attacks on oil and gas facilities in producer nations like Qatar and Saudi Arabia, has contributed to sharply rising oil and gas prices, which in turn increase operating costs for ships worldwide. Brent crude futures spiked nearly 10–13 per cent in direct response to the conflict, trading nearly $77–$85 per barrel, with fears of $100 or even $200 per barrel in prolonged disruption scenarios.

Indirect costs include higher freight rates, insurance surcharges, longer detour routes, and idle vessels, potentially amounting to tens of billions of dollars.

All these factors point to mounting economic stress across the shipping and freight industry.

More than 150 oil and LNG tankers and other vessels are currently stranded or forced to anchor outside the strait due to the escalating conflict and safety concerns. Idling loaded LNG vessels also incur significant boil-off losses, which could be up to 100 tonnes per day per large vessel, impacting fuel and cargo value.

Longer routes bleed the shipping industry

There is a de facto closure of the Strait of Hormuz despite no official full blockade by Iran. Direct attacks on vessels, threats to close the strait, and GPS jamming have led to the rerouting of vessels, often around the Cape of Good Hope, or anchoring in safer waters. These developments have contributed to a near-total halt in commercial traffic, with tanker and bulk traffic dropping by 80 per cent or more.

A dire prognosis: Strait of Hormuz could be disrupted for weeks. Another oil shock in the making?

Analysts warn that if the strait remains disrupted for weeks, costs to global goods and energy markets could grow larger. Some estimates suggest global oil supply disruptions equivalent to 20 per cent of daily world consumption. A one-day full blockade of Hormuz could spike potentially double the oil prices in extreme scenarios, translating to billions in daily global economic costs. Clearly, the clock is ticking as stranded ships, surcharges, higher insurance and rate spikes are leading to mouting costs

Disclaimer: WION takes utmost care to accurately and responsibly report ongoing conflicts in West Asia involving Israel, Iran, US, Gulf nations and non-state actors like Hezbollah, Hamas, Houthis, Islamic State, and others. Claims and counterclaims, disinformation and misinformation are being made online and offline. Given this context, WION cannot independently verify the authenticity of all statements, social media posts, photos and videos.