Dongxing Securities has released a report stating that the conflict involving the US, Israel, and Iran has already caused significant disruptions to the global shipping industry. The ongoing struggle for actual control over passage rights through the Strait of Hormuz continues to create severe uncertainty, which will persistently affect the global supply chain system. The long-term consequences of this situation should not be overlooked. The firm recommends focusing on the tanker shipping sector, which stands to benefit most directly from the conflict.
Even without considering the impact of the Iranian situation, the tanker industry is already in a relatively certain upward cycle based solely on changes in supply and demand dynamics. Influenced by the US-Israel-Iran conflict, tanker freight rates have climbed further and have remained elevated for an extended period. Compared to the typical short-lived spikes seen in the past, the current increase in freight rates demonstrates stronger sustainability. Consequently, there is a possibility that the industry's average freight rates in 2026 could exceed expectations.
The primary views of Dongxing Securities are as follows:
**Direct Impact of the US-Israel-Iran Conflict on Shipping: Tanker > Container > Dry Bulk** The shipping industry can be broadly categorized into tanker, container, and dry bulk shipping. The tanker sector is the most immediately and significantly affected by the conflict. As the Strait of Hormuz is the only sea passage from the Persian Gulf to the Indian Ocean, it handles 25% of global seaborne oil trade, 19% of liquefied natural gas trade, 29% of liquefied petroleum gas trade, and 13% of related chemical trade, according to a UNCTAD report, making it a critical global maritime chokepoint. Issues with transit through the strait have directly led to rising oil prices and freight rates. Currently, Brent crude oil is priced around $110 per barrel, significantly higher than pre-conflict levels, while the VLCC-TCE (CT1) rate from the Middle East to Ningbo remains high at approximately $300,000 per day.
The impact on container shipping is primarily concentrated within the region. According to Clarksons data, container throughput in the Middle East accounts for about 5% of the global total. This relatively low share means the impact is relatively contained. Obstructions in the Strait of Hormuz have led to some containers being rerouted via the Red Sea, with subsequent shifts to land transport or multimodal solutions, but this obviously increases costs and reduces transport efficiency. The alternative Red Sea route itself is under pressure from rising insurance premiums and the imposition of emergency surcharges. As another vital route in the Middle East, the Red Sea route had not yet fully recovered from the Red Sea crisis triggered by Yemen before being affected again by this conflict. This has caused some Europe-bound vessels to avoid the Red Sea route due to risks, opting instead to sail around the Cape of Good Hope, adding roughly two weeks to transit times and correspondingly increasing freight costs. Furthermore, the rise in oil prices caused by the conflict has led to overall cost increases for the container shipping industry. However, overall, the impact of this conflict on container shipping is weaker than that of the Red Sea crisis in late 2023.
The impact on dry bulk shipping is relatively minor. As the Middle East is not a primary market for dry bulk shipping, the direct impact is quite limited. The industry mainly faces the effect of rising fuel costs. It is important to note that although the strait blockade makes the transport process more difficult and costly, it actually enhances the importance of shipping companies within the supply chain. This improved position grants shipowners stronger bargaining power, allowing them to pass increased costs onto upstream and downstream partners, which can conversely lead to improved profitability. This is evident in the recent significant performance improvements of tanker companies.
**Conflict Transmission Through Shipping to Related Industries: Petrochemicals, Freight Forwarding, and Insurance Directly Impacted** The impact of the US-Israel-Iran conflict on the chemical industry is quite direct. As the chemical industry is a direct downstream sector of crude oil transportation, the dual increase in oil prices and freight rates raises the costs of petrochemical products and directly pushes up final product prices. The price of National 6 Standard 95# gasoline rose from 8,000 yuan per ton at the start of the year to a peak of over 11,000 yuan per ton in early April, and has since retreated to around 10,000 yuan per ton.
The freight forwarding industry and export businesses to the Middle East have also been directly impacted. The conflict has caused significant rerouting of Middle East containers, leading to noticeably longer transport times and soaring freight costs and surcharges. Shipping lines impose temporary additional charges on freight forwarders, but the process of passing these costs on to shippers is not always smooth. The cargo receiving process also involves various risks. Even if the shipping line completes the sea transport as agreed, subsequent challenges such as cargo release, customs clearance procedures, and container pickup remain. Consignees might abandon shipments due to losses incurred in the war, potentially leaving freight forwarders to bear costs like customs duties, container detention fees, and storage charges. Therefore, existing Middle East route business held by freight forwarders may accumulate a certain level of risk.
Regarding exports to the Middle East, according to China's General Administration of Customs data for March, China's export value to the Middle East fell significantly year-on-year. Exports to Iran, Iraq, Kuwait, Bahrain, and Qatar saw monthly year-on-year declines approaching or exceeding 80%. Exports to Saudi Arabia and the UAE, two key Gulf hubs, decreased by 38% and 65% year-on-year, respectively. COSCO Shipping Holdings, China's largest container shipping company, issued a customer notice on March 4th suspending new bookings for relevant Middle East routes. On March 25th, COSCO updated its services for the Middle East region, resuming new bookings for routes from the Far East to the UAE, Saudi Arabia, Bahrain, Qatar, Kuwait, Iraq, and Oman via multimodal transport solutions. However, the company stated that due to the uncertainty of the situation in the Middle East, it has not yet considered resuming transit through the Strait of Hormuz. Affected by the strait blockade, current transport costs for exports to the Middle East have increased substantially compared to pre-conflict levels, while transit times have lengthened significantly, creating major obstacles for trading parties.
Furthermore, the insurance industry is directly impacted. Insurance plays a crucial role in the shipping industry. The absence of marine insurance would prevent cargo ships from obtaining bank financing, lead to ports refusing berthing, and leave shipowners bearing unlimited liability, which is clearly untenable for normal shipping companies. A key measure in US sanctions against Russian oil tankers has been prohibiting the provision of insurance and reinsurance for vessels carrying Russian oil. In early March, the mainstream international marine insurance system initiated a "collective withdrawal and refusal of coverage" for the Persian Gulf/Strait of Hormuz. This acts as a "soft blockade" layered on top of Iran's physical blockade, as operating vessels without insurance ("sailing naked") would inevitably violate charter contracts and bank loan agreements, forcing them to anchor and wait. For insurance companies, prolonged cargo delays and vessel damage will trigger more claims. As insurers tend to use exclusion clauses to limit payouts, disputes arising from the Iran conflict are expected to increase持续ly. The pressure on the insurance industry is clearly not limited to shipping; premiums for aviation, real estate, and property in the Middle East have already risen due to the conflict. Future insurance market pricing, underwriting conditions, and reinsurance capacity will continue to be influenced by the developments in the US-Israel-Iran conflict.
**Supply Chain Vulnerability and Resulting Long-Term Uncertainty are Key Concerns** For most observers, attention easily focuses on the direct impacts of the conflict, including rising oil prices, freight rates, and insurance premiums. However, Dongxing Securities believes that supply chain participants are likely equally concerned about the long-term uncertainty created by the conflict. Following the Red Sea crisis, this conflict once again highlights the vulnerability of global supply chains. The fact that a regional power can leverage its geographical advantage to blockade a vital global energy artery at a relatively low cost for an extended period has taken most countries by surprise. The Red Sea crisis triggered by Yemen in late 2023 had a similar effect, but at that time, vessels had the alternative option of rerouting via the Cape of Good Hope. The blockade of the Strait of Hormuz is evidently more thorough and has a more profound impact on the global energy supply chain landscape.
After Iran demonstrated its effective control over the strait, even though such a blockade is also highly damaging to Iran itself, the relevant parties, besides seeking ways to reopen the strait promptly, face the more critical task of establishing a mechanism to ensure Iran does not wield this power again in the future. If the root issue cannot be resolved, and Iran blockades the strait whenever it feels its interests are harmed, the Persian Gulf will know no peace, and global energy security will be unattainable. Currently, while a gradual easing of the conflict is observable, Iran evidently does not intend to lift the strait blockade. Normal navigation through the strait awaits resolution through negotiations among the parties. In the long term, achieving a binding mechanism for all involved parties and ensuring no party unilaterally breaches agreements remains a significant challenge.
For industries reliant on supply chains, certainty, or at least quantifiable uncertainty, is key to long-term sustainability. High freight rates can eventually be managed, but the greatest fear is not knowing how high they might go. The supply chain vulnerability exposed by the US-Israel-Iran conflict and the potential for long-term uncertainty it creates mean that supply chain participants need to consider risks and contingency plans more thoroughly than before. This leads to additional expenditures on infrastructure layout, inventory management, etc. While these measures enhance the stability of the supply chain system, they also correspondingly increase unit transport costs. This represents the potential long-tail effect of the US-Israel-Iran conflict on the global supply chain system.
Risk warnings include changes in geopolitical situation, oil price fluctuations exceeding expectations, and demand falling short of expectations due to economic recession.
