Dual Tensions at Hormuz and the Red Sea: Carriers Simultaneously Pull Back, Triggering War Risk Surcharges

AIS data for container ships (brown) concentrated at steel and anchorage in the Arabian Gulf on the morning of March 2; There are no ships transmitting signals in the Strait of Hormuz (Source: Pole Star Global)

Following tit-for-tat attacks between Iran, neighboring countries, and US forces in the Middle East, ocean carriers are conducting operations with the utmost caution. To ensure safety, many lines have paused transits through the Strait of Hormuz. Besides the risks to business operations and crew safety, another crucial factor is emerging: War risk insurance premiums for voyages through the Strait of Hormuz are on the rise, and the base freight rate per TEU will inevitably have to adjust accordingly.

Emergency Responses from Shipping "Giants"

●    Hapag-Lloyd: The German carrier announced on Sunday that it will apply a War Risk Surcharge (WRS) starting March 2 for cargo to and from the Persian Gulf. Costs for shippers will increase by $1,500/TEU, or $3,500/container for reefers and special cargo (certain heavily regulated shipments will be exempt).

●    MSC: The world's largest shipping line stated it is adjusting network operations in the region for safety purposes. MSC has instructed all vessels currently in the Gulf or heading to the region to "proceed to designated safe haven areas until further notice." The carrier has also temporarily suspended all cargo bookings for the region.

●    CMA CGM: The French carrier is also pausing operations in the Gulf. In a statement, the company said — similar to MSC — that it is diverting all vessels in the region to designated safe spots.

●    Maersk: For its part, the world's second-largest carrier announced an indefinite suspension of transits through the Strait of Hormuz. The company affirmed in a Sunday statement: "The safety of our crew, vessels, and customers' cargo remains our top priority. We are suspending all vessel transits through the Strait of Hormuz until further notice."

Severe Disruptions to Port Operations

Beyond the impact on vessels, ports in several Middle Eastern countries are also facing disruptions and closures:

●    Jebel Ali (UAE): The region's largest container port suffered a fire caused by falling drone debris from an Iranian attack. Operator DP World stated the port was temporarily closed but has now resumed operations across all four terminals.

●    Bahrain: In the country home to the US Navy's 5th Fleet, multiple drone strikes have forced authorities to close seaports until further notice. Crew changes are also reported to be suspended, partly due to disrupted commercial aviation resulting from closed Bahraini airspace.

●    Duqm (Oman): Drones also targeted the Port of Duqm in Oman, located quite far from the conflict zone and the Strait of Hormuz. This port on the Arabian Sea had to suspend operations after being attacked by two drones; fortunately, there were no casualties or property damage.

Red Sea Turmoil, Cape of Good Hope Bottleneck Returns

Top Western carriers had only recently resumed operations through the Red Sea, after years of diverting around the Cape of Good Hope to avoid risks from Houthi rebel forces in Yemen. However, the Houthis have informed the media that they plan to restart the Red Sea blockade in retaliation for US strikes on Iran, putting the Red Sea route at risk of paralysis once again.

Just before the US airstrikes, Maersk announced the suspension of all Red Sea transits, rerouting vessels around the Cape of Good Hope - a move that provided a massive boost to its profit outlook. If multiple carriers simultaneously opt for the Cape routing over the much shorter Suez Canal route, the excess vessel capacity in the market will be fully absorbed by the extra distance added to each voyage.

Shortly after, CMA CGM made a similar move on Saturday by announcing the suspension of all transits through the Suez Canal.

Reacting to this news, Maersk's shares rose by 2.5% in early morning trading on Monday, while shares of Hapag-Lloyd - Maersk's alliance partner in the Gemini Cooperation - also surged by up to 5.5%.

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Source: Phaata.com (According to Shipping Telegraph)

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