Strait of Hormuz Navigation Recovery Stalls: 120 Million Barrels of Crude Stranded, War Risk Premiums Hamper Shipping Revival

The partial resumption of navigation in the Strait of Hormuz has not led to a full recovery of shipping markets. As of June 23, industry data shows 162 AIS-trackable fully loaded crude tankers remain stranded in and around the strait, carrying approximately 120 million barrels of crude and refined products. This figure excludes 'dark ships' that have deliberately turned off their positioning signals, suggesting the actual backlog is even larger. Compared to pre-conflict norms, the average daily number of transiting vessels is less than 60% of pre-war levels, with shipowners adopting a cautious, exploratory approach rather than large-scale coordinated transits.

Background

Following the US-Iran 60-day temporary ceasefire agreement, navigation in the Strait of Hormuz has partially recovered, and international crude oil prices have fallen sharply. On June 23, WTI crude closed at $73.21/barrel and Brent crude at $76.85/barrel, both down about 1% on the day; over the whole of June, both major crude futures fell nearly 16%. However, the anticipated rapid flow of accumulated crude into the global market has not materialized, with congestion exacerbated by hidden 'dark ships.'

Industry Impact

High war risk insurance premiums remain a core obstacle to shipping recovery. Current war risk insurance rates along the strait, though down from conflict peaks, remain around 1% of vessel value, compared to the pre-conflict norm of 0.1%—a tenfold cost increase. For a typical Very Large Crude Carrier (VLCC), a single transit of the Strait of Hormuz costs up to $2 million in war risk premiums, severely eroding shipping profits. Shipowner operational strategies have turned conservative: some medium and small operators are opting to bypass the strait via the Cape of Good Hope, increasing voyage distances and fuel and labor costs; major shipping companies are deploying only a few vessels for trial runs, reluctant to commit large capacity to the Persian Gulf.

From a pricing perspective, the recent decline in crude oil prices has already priced in the short-term navigation recovery. Bloomberg Intelligence analyst Lee Klaskow noted that the 60-day temporary ceasefire is highly fragile, with fundamental disagreements among Middle Eastern parties unresolved, leaving the geopolitical situation prone to sudden deterioration. Should incidents like ship attacks or channel disruptions reoccur, the outflow of stranded crude would be interrupted again, and risk premiums would quickly re-emerge.

Practical Recommendations

For Buyers - Monitor war risk premium changes: High premiums directly inflate transport costs; include clear premium-sharing clauses in contracts to avoid passive cost absorption. - Diversify supply sources: Increase short-term crude procurement from non-Middle Eastern regions to reduce reliance on Strait of Hormuz transit.

For Trading Companies - Lock in shipping capacity early: Given cautious shipowner attitudes, secure medium-to-long-term transport agreements with major carriers to avoid last-minute cost spikes. - Assess rerouting costs: For goods transiting the Strait of Hormuz, calculate the fuel and time costs of Cape of Good Hope rerouting and negotiate cost-sharing with clients.