Houthis enter the fray as Israel and Iran trade missiles - Splash247

Summary

Houthis enter the fray as Israel and Iran trade missiles Middle East tensions have escalated sharply after Israel launched strikes against Iran, triggering fresh concerns for global shipping markets already grappling with disruption in the Strait of Hormuz and renewed threats in the Red Sea. The Israeli military said it had struck a petrochemical plant in Iran’s southwest, along with military targets in western and central Iran in retaliation for Iranian missile attacks on northern Israel. Iranian state media reported explosions in Tehran, Isfahan, Tabriz and other cities, while authorities in Isfahan said there were no casualties. The latest exchange marks the first direct military confrontation between the two countries since the ceasefire brokered in April and comes after Iran launched missiles at northern Israel in response to Israeli strikes against Hezbollah targets in Beirut. The conflict has rapidly spilled back into maritime markets. Brent crude climbed nearly 5% on the news, trading to about $97 per barrel, as traders assessed the risk of further disruptions to Middle Eastern oil exports. The renewed hostilities follow a week of heightened pressure on Iran. US forces on Friday boarded the sanctioned tanker Davina in the Indian Ocean. The vessel had previously been sanctioned by Washington for transporting Iranian crude to China. At the same time, Yemen’s Houthi movement announced what it described as a “full navigation ban” on Israeli shipping in the Red Sea and warned that vessels linked to Israel would be considered military targets. Maritime security specialist Vanguard said the announcement did not amount to a blanket ban on commercial shipping but warned operators to maintain heightened vigilance and carry out enhanced affiliation screening. The developments have again shifted attention to the Strait of Hormuz, through which roughly a fifth of global oil supplies normally pass. Iranian lawmaker Mohsen Zanganeh claimed Tehran receives between $1.5m and $2m from each vessel transiting the waterway, with payments made through cash transfers, barter arrangements and, in some cases, cryptocurrency settlements. Shipbroker Braemar said the outlook for tanker markets remains heavily dependent on when normal traffic can resume through Hormuz. “An early opening of the Strait of Hormuz would support freight rates,” Braemar said, arguing that risk premiums and stock rebuilding would create additional tanker demand once exports recover. However, the broker believes a prolonged disruption remains the more likely scenario. “Should Hormuz remain closed to all but a handful of tankers, which right now seems to us the most likely outcome for the next six months or so, demand destruction will quickly replace stock draws as countries look to preserve a depleted supply buffer.” Braemar warned that a short-lived reopening followed by another lengthy closure could create additional pressure on freight markets by increasing vessel supply outside the Gulf while demand weakens. Product tanker markets are also being reshaped by the disruption. According to Poten & Partners, around 5m barrels per day of refined product exports from the Gulf have been disrupted, while about 3m barrels per day of refining capacity has been forced offline during the conflict. The broker said the US has emerged as the world’s key replacement supplier, increasing refinery runs and sending cargoes to destinations that would normally source products from the Middle East or Asia. US exports have expanded beyond traditional markets in Latin America to include countries such as Australia, Turkey and Namibia, generating a sharp increase in tonne-mile demand. The shift initially triggered record product tanker earnings as vessel dislocations and replacement trade flows tightened tonnage availability. However, Poten noted that freight gains have since moderated as trade routes adapted to the new reality. The next move for tanker markets will depend largely on developments in the Middle East. “A delayed opening will eventually strain global refined product stocks, limit availability of products and spike prices to force demand destruction. This is bearish for product tanker rates,” Poten said. “Conversely, a speedy reopening will bring the market back on the path of normalcy and support the freight market.”