Strait of Hormuz reopening won't end shipping risks
A proposed US-Iran deal to reopen the Strait of Hormuz is raising hopes for global shipping and oil markets. But naval mines, high insurance costs
A proposed US-Iran deal to reopen the Strait of Hormuz is raising hopes for global shipping and oil markets. But naval mines, high insurance costs and geopolitical risks mean disruption could persist for months. US President Donald Trump on Sunday hailed a framework agreement between the United States and Iran aimed at ending hostilities in the Gulf that have reduced commercial shipping in the Strait of Hormuz to a trickle for more than three months. The deal, scheduled to be signed on Friday in Switzerland, reopens the strait to shipping without tolls, lifts the US naval blockade of Iranian ports and allows Tehran to resume oil exports under limited sanctions relief. The framework also extends the current ceasefire for at least 60 days while launching broader talks on Iran's nuclear program. Yet, unlike reopening a highway after a car wreck, restoring prewar oil, gas and container traffic through this vital chokepoint faces significant hurdles. Greek maritime risk management agency MARISKS warned in a research note on Monday that the framework agreement should be viewed as "the beginning of a de-escalation process rather than the immediate restoration of normal trading conditions." Iran-US peace deal leaves many major issues unresolved To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video When can Gulf shipping safely resume? Assuming attacks from both the US and Iran have ended for good, Iran must first find and clear the naval mines it deployed during the conflict to make the waterway passable once again Most could be located fairly quickly using minesweepers, underwater drones and sonar.
But some mines may have drifted or be hard to find, say maritime experts. Independent observers will then need to verify that the waterway is safe for shipping. The process could take 40 to 50 days, according to maritime security sources cited by Reuters news agency on Monday. Jakob Larsen, chief safety and security officer at shipping association BIMCO, told Reuters that Hormuz transits right now would be "very risky" and called for "mine-free routes" to be established. War-risk insurance is still a major hurdle Even when the mines are cleared, shipping firms will be looking for much lower war-risk insurance costs for transiting Hormuz before confidence is restored. Currently, premiums remain extremely high, at 1% to 4% of a vessel's value per transit, compared with prewar rates below 0.1%, according to a report in The New York Times. For a typical $200-million (€172-million) tanker, this has added between $2 million and $8 million per transit, compared with less than $200,000 before the war. Shipping data and analysis company Lloyd's List on Monday cited an unnamed insurance underwriter based in Singapore who described premiums as "quick to go up, slow to go down." Anoop Singh, global head of shipping research at Oil Brokerage Ltd, warned that shipowners would assess the pros and cons based on their own risk tolerance. "The Japanese, Koreans and Chinese are less open to high risk, while the Greeks have a different appetite — so we may see some people gearing up," Singh told Bloomberg.
The BriefWire