60-Day Ceasefire in Hormuz: Oil Backlog and Insurance Costs Hinder Shipping Recovery

The Strait of Hormuz has seen partial navigation recovery after a 60-day ceasefire between the US and Iran, but shipping is far from a full rebound. As of June 23, 162 fully loaded crude oil tankers with AIS signals were stranded in and around the strait, carrying approximately 120 million barrels of oil. This figure excludes 'dark ships' that have turned off positioning signals, suggesting the real backlog is larger.

Current daily transits through the strait remain below 60% of pre-conflict levels. Shipowners are adopting cautious strategies—sending only a few vessels to test passage—creating a congestion standoff where ships 'can go but dare not, or want to go but must queue.' This situation is unlikely to quickly digest months of accumulated capacity, putting sustained pressure on global crude supply chains.

Crude Oil Price Volatility and Geopolitical Risk

International crude oil prices fell sharply after the ceasefire. On June 23, WTI crude closed at $73.21/barrel and Brent at $76.85/barrel, both down about 1% on the day. Over June, both benchmarks fell nearly 16%, rapidly unwinding the geopolitical risk premium accumulated since the conflict began.

However, multiple analysts caution that the price correction reflects short-term sentiment rather than a fundamental reversal. The 60-day ceasefire is highly fragile, with deep divisions unresolved. Any new incident—such as attacks on vessels or channel closures—could interrupt the outflow of backlogged oil and trigger a price rebound.

For the textile industry, synthetic fiber raw materials like polyester and nylon are closely tied to crude prices. Short-term oil declines may lower costs in the polyester chain, but geopolitical risks could quickly reverse this. Buyers should not base long-term cost decisions solely on current prices.

High Insurance Costs Hinder Shipping Recovery

War risk insurance premiums remain the core obstacle to shipowners returning to the Strait of Hormuz. Current rates, though down from conflict peaks, still hover around 1% of vessel value—10 times the pre-conflict level of 0.1%. For a very large crude carrier (VLCC), a single transit through the strait costs up to $2 million in war risk insurance, severely eroding shipping profits.

Shipowners are adopting conservative strategies: some small and medium operators are rerouting via the Cape of Good Hope, increasing voyage length and fuel costs; major shipping firms are deploying only a few vessels for trial passages. As long as war risk premiums remain elevated, shipping efficiency through the strait will not return to pre-conflict levels, and global crude transport turnover will continue to suffer.

Industry Impact and Practical Recommendations

The Strait of Hormuz's transit conditions directly determine international crude pricing, tanker operating costs, and feedstock supply for global refineries. The current 120-million-barrel backlog could further depress oil prices if released quickly, but a ceasefire collapse could trigger a sharp rebound. Textile fiber producers must monitor Middle East dynamics and crude price correlations, managing raw material inventory and procurement timing.

For Buyers - Use the short-term oil price dip to sign 2-3 month medium-term contracts with synthetic fiber suppliers, locking in current prices. - Set up an oil price alert mechanism—for example, trigger emergency procurement if Brent exceeds $80/barrel. - Diversify raw material sources by increasing purchases from Southeast Asian or domestic recycled fiber suppliers to reduce single-channel risk.

For Exporters - Include raw material price fluctuation clauses in export contracts, allowing price adjustments when crude oil prices swing significantly. - Monitor shipping insurance cost changes and prioritize cargo insurance plans with geopolitical risk coverage. - For orders from the Middle East, use letters of credit or prepayment methods to reduce payment risk from sudden geopolitical changes.