Global tanker operators and shipping authorities have taken decisive action, even without an official closure of the Strait of Hormuz, amid escalating tension between Israel and Iran. Their public statements, route shifts, and risk assessments are reshaping freight scheduling, insurance premiums, and–most significantly–energy market sentiment in real time.
Oil shippers may have walked back some of their panic expressed during the weekend, which led oil to jump 7%, but this isn’t over, and the volatility will be high.
Reuters reported on Monday that VLCC bookings for Middle East-to-Asia routes plunged this past Friday, with freight rates surging more than 20% to around Worldscale 55 by Monday—signal enough for tanker owners to adopt a “wait and see” posture. Analysts at LSEG noted that while ships remain available in the Gulf for outbound charters, new contracts are drying up, underscoring a sudden market-wide caution.
Reuters also reports that smaller shipowners are similarly holding back vessel offers, with export charters now largely priced out of the Gulf unless risk terms are adjusted. Clean-product tanker rates are showing signs of pressure too: once $3.3–3.5 million per voyage, brokers now expect quotes near $4.5 million.
At the center of this shift is Frontline, the world’s largest oil tanker company. Its CEO Lars Barstad confirmed to the Financial Times that the firm has suspended new bookings for Gulf voyages altogether. “We’re not contracting to go into the Gulf,” he said. Barstad explained that vessels already in the region would leave under naval convoy, adding poignantly: “Trade is going to become more inefficient and, of course, security has a price.”
Bloomberg corroborates that other major tanker firms have also rooted out Gulf contracts, citing growing alarm over potential retaliatory moves by Iran after recent Israeli strikes against its energy sites. Clients and charterers now face shrinking capacity—a trend that may ripple into regional and global fuel price pressures.
The tightening of tanker willingness flows directly into insurance markets. Brokers calculate that tankers traversing Gulf waters now require an additional $3–$8 per barrel in war-risk insurance, significantly inflating transport costs. That added cost alters the economics of crude trades, nudging pricing models upwards.
Ports and maritime agencies are publicizing precautionary measures. The Greek shipping ministry has instructed Greek-flagged vessels to report travel through high-risk zones like the Gulf of Aden or Hormuz, mandating detailed voyage logs. Similarly, the UK Maritime Trade Operations advises minimal crew deployment on deck and strict reporting protocols. Each advisory signals that national flags are treating the waters as low-grade conflict zones.
Maritime-security experts point to non-traditional threats as well.
A recent CIMSEC analysis, cited by Capt. Harifidy A. Alex Ralaiarivony of Mauritius’s RMIFC, highlights that the Western Indian Ocean now faces a “diversifying threats” portfolio—from naval shadowing and electronic jamming to state-linked disruptive tactics. He emphasizes that escalating threats demand broader resilient responses, recognizing shipping firms as first responders in a complex threat environment.
Recent GPS spoofing and navigational interference events flagged by LSEG analysts also point to more danger beyond missiles. These “electronic ambushes” are also alarming insurers and shippers.
Now, as of June 16 at 10:40am ET, Brent is down over 4%, reflecting a partial unwinding of that initial fear trade as no tankers have yet been directly targeted and core shipping lanes remain technically open. In effect, the market initially reacted to perceived shipping risk, but as the weekend passed without a direct incident, some of that risk premium has been pulled back, even though the underlying vulnerabilities remain. This is not over for the tanker sector.
Refined-product tankers have also felt the squeeze. According to Reuters, freight brokers report that clean-product tanker voyages from the Gulf to Asia, which previously cost around $3.3 to $3.5 million per voyage, are now being quoted as high as $4.5 million. The sharp rise reflects mounting war-risk premiums and growing owner reluctance to take on Middle Eastern routes as tensions escalate. These higher freight costs directly impact product supply chains, narrowing refinery margins and putting additional upward pressure on consumer fuel prices.
Even the IMO has echoed red-light conditions. It flagged an uptick in diverted routes, with vessels avoiding the Red Sea and Suez Canal and instead skirting the African southern coast, more willing to risk shipments to piracy.
The situation presses home the evolving logic of tanker risk. You don’t need bullets or missiles; uncertainty is enough. Shortened tanker routes, higher war-risk premiums, and stricter fill levels can render oversupply fragile. As one market observer noted, higher oil prices in such contexts reflect the narrowing of physical glut, not just headline supply figures.
For both governments and carriers, the key indicators now are freight rates, insurance clauses, and official advisories. A surge in premiums or new route warnings signal that tanker risk is structural, and this could create a situation of ongoing volatility even if tanker attacks remain unrealized.
If Iran or its proxies begin targeting tankers, the industry may retreat. For example, MSC rerouted container vessels away from drone threats in the Indian Ocean days ago, a move costing 10–14 days in transit delays. BIMCO’s Jakob Larsen predicted for Reuters that Western-linked ships may avoid entire zones, prompting capacity crunches.
National navies may respond, but shipping firms act first. That cascade—operators opting out, insurers hiking rates, HPC freight indices jumping—understands strategic shock as much as a direct hit. It makes tanker pullback today more consequential than headline diplomacy.
India, China, and other major refining nations are closely watching. Even minor signs of maritime unrest can trigger bunker price swings, eroding purchasing power and supply predictability measured in the millions of barrels per day.
While the G7 and U.S. may work behind the scenes, markets now pivot on what tanker companies do, not necessarily what policymakers promise. As markets track de-escalation or naval deployments, tanker behavior is what will really predict a supply shock.
By Charles Kennedy for Oilprice.com