Introduction
As geopolitical tensions escalate in the Middle East, particularly between Iran and Israel, the global shipping industry is once again in the spotlight. With fears mounting over a potential closure of the Strait of Hormuz—a critical chokepoint for global oil transit—freight rates are surging, and investors are closely watching historical patterns to anticipate market movements.
Historical Parallels Offer Insight
According to Clarkson’s Securities, past conflicts, such as the Iran-Iraq War and the Gulf Wars, provide valuable lessons. Historically, oil markets have reacted with fear to potential supply disruptions, while shipping markets have often thrived amid the resulting inefficiencies and risk premiums.
Frode Morkedal, Chief Analyst at Clarksons, notes: “History shows that while oil markets fear the loss of barrels, shipping markets benefit from operational inefficiencies and geopolitical risk premiums.”
Freight Rates on the Rise
Giannis Parganas, Head of Research at Intermodal, confirms a significant spike in freight rates, especially for tankers. Despite the uncertainty, the market is experiencing a bullish trend, with containerships and product tankers also seeing increased demand.
Here is a chart showing hypothetical VLCC freight rate trends from May 18 to June 18, 2025, illustrating a sharp spike in the last week due to rising tensions in the Middle East:
The rates remained relatively stable around $50,000/day through most of the month, but surged to nearly $100,000/day in the final week, reflecting increased geopolitical risk and market volatility.
The perceived threat of conflict in the Red Sea and Persian Gulf is enough to shift trade flows and drive up insurance premiums, even without actual supply disruptions.
Strait of Hormuz: A Strategic Flashpoint
Roughly 20% of the world’s oil passes through the Strait of Hormuz. According to Polymarket, there is a 33% probability that the Strait could close in 2025. While such a move by Iran would have severe economic and military consequences, the mere possibility is already influencing market behavior.
Market Reactions and Stock Performance
Shipping stocks have rallied in response. Companies like Frontline and Hafnia saw gains of over 3% on the Oslo Stock Exchange, while Asian firms such as Shandong International Transportation Corp also benefited.
Clarksons emphasizes that these gains come from previously low valuations, suggesting further upside potential if tensions persist.
LNG and LPG Markets Also Affected
The LNG sector faces heightened risk, particularly if the Strait of Hormuz is closed. China, which imports 24% of its natural gas from Qatar, could be significantly impacted. Meanwhile, the LPG market may see VLGC rates approach $100,000 per day if Iran’s shadow fleet is sidelined.
Electronic Interference Raises Maritime Safety Concerns
Bloomberg reports that over 900 vessels in the Persian Gulf have experienced severe GPS disruptions, likely originating from Iran’s Bandar Abbas port. These electronic interferences are forcing ships to rely on traditional navigation methods, increasing the risk of accidents in one of the world’s busiest maritime corridors.
Conclusion
Even without a full-scale conflict or closure of the Strait of Hormuz, the perceived threat is enough to reshape global shipping dynamics. As history has shown, the shipping industry often outperforms during periods of geopolitical instability, making it a focal point for investors and analysts alike.
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