Goldman Sachs has released a research report stating that media reports of a framework agreement between the US and Iran to end the war could have significant implications for China's transportation sector if the Strait of Hormuz reopens and sanctions on Iranian oil are potentially lifted. In its scenario analysis, the firm expresses a preference for tanker, airline, and shipbuilding stocks.
The report notes that among the covered transportation stocks, COSCO SHIP ENGY (ASX: 01138) possesses the largest potential upside. The reopening of the Strait of Hormuz would reverse the current supply surplus of approximately 9% to 11% in crude oil and product tanker shipping caused by the strait's closure.
Concurrently, if exports from the Gulf region normalize by the end of July, the potential global demand for crude inventory restocking could be around 5%, sufficient to offset the inventory drawdown from the strait's closure.
Goldman Sachs estimates that in the first year following the strait's reopening, Very Large Crude Carrier (VLCC) Time Charter Equivalent (TCE) rates could reach $250,000 per day, significantly higher than the baseline forecast of $150,000. This would drive a potential 57% increase in company earnings.
The firm further points out that in a more optimistic "blue sky" scenario involving a full lifting of sanctions on Iranian oil, an estimated additional 5% of shipping demand could shift from the shadow fleet to compliant vessels. This scenario would push VLCC TCE rates to soar further to $350,000 per day in the first post-opening year, potentially boosting COSCO SHIP ENGY's earnings by up to 114%.
Goldman Sachs estimates that under the baseline scenario, advancing the normalization timeline from the end of August to the end of July could reduce oil prices by $10 per barrel. Based on this, the firm calculates the following potential earnings improvements for covered airlines: 16%-26% for the three major carriers, 4% for Spring Airlines (benefiting from lower fuel costs and demand boost from reduced fuel surcharges), and a 4% upside for Eastern Air Logistics.
If Persian Gulf exports normalize by the end of July 2026, the potential share price upside for the H-shares of the three major airlines is approximately 60%-70%.
Although the immediate earnings impact of the Strait of Hormuz reopening on shipbuilders may be limited due to their limited exposure, Goldman Sachs believes that sustained high freight rates and improved trade visibility could incentivize shipping companies to place new vessel orders. This could re-accelerate order momentum after a slowdown in May, potentially serving as a positive stock price driver for covered shipbuilders.
Among the covered shipbuilders, the firm prefers Songfa Shares (603268.SH), whose main asset is Hengli Heavy Industry, benefiting from rapid expansion and stronger order momentum during an industry upcycle.
Goldman Sachs maintains a cautious stance on the container shipping sector and COSCO SHIP HOLD (ASX: 01919). The firm believes that if eased geopolitical tensions lead to a reopening of the Red Sea, major shipping lines would resume plans to return to the Suez Canal route. The shorter voyage would then release approximately 10% of global effective shipping capacity, posing a moderate downside risk to container shipping rates.
The firm expects that in a scenario of fully adjusting routes from the Cape of Good Hope back to the Suez Canal, while COSCO SHIP HOLD could outperform break-even peers with its cost advantage, leading to a $30 per TEU reduction in unit costs, and would still be supported by its robust port business, interest income, and investment income, its net profit would still face a 48% downside compared to the baseline forecast after calculations.
Goldman Sachs reiterates its "Sell" rating on COSCO SHIP HOLD, maintaining a 12-month target price of HK$10.9.
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