Iran Declares Renewed Closure of Strait of Hormuz

Summary

Vessel Traffic Has Fallen to Single Digits As Mines, Insurance Gaps and Safety Concerns Hamper Restart Iran’s ‘renewed closure of Hormuz’ CNN reported onJune 20 (local time) that although Iran declared it would blockade the Strait of Hormuz again, ships passing through the strait had already virtually disappeared. Despite the United States and Iran signing an agreement to end the war, forecasts suggest that it will take months for shipping traffic and crude oil flows to normalize. According to the report, the Iranian military announced on the day that it would blockade the Strait of Hormuz again, citing ongoing fighting between Israel and Lebanon’s Hezbollah. Since this announcement came one day before the United States and Iran were set to hold end-of-war negotiations in Switzerland on June 21, it has emerged as a test of the agreement’s implementation and a variable in the negotiations. However, making the blockade declaration effectively meaningless, the number of ships passing through the strait had already dwindled to single digits. According to maritime intelligence firm Kpler, 25 ships passed through the Strait of Hormuz as of June 18, which was the highest number since Iran briefly allowed commercial navigation in mid-April. But upon the news that the initial negotiations between the United States and Iran to coordinate the details of the agreement had fallen through, the number of passing ships dropped back to single digits on April 19. This is still extremely minimal compared to the 100 to 120 oil tankers that traveled daily between Iran and Oman before the war. Matt Smith, lead oil analyst at Kpler, said, “It is not a situation where a sudden mass exodus is occurring,” adding, “Although traffic has increased somewhat, it is not at a significant level, and it is not yet the stage for a ‘first mover’ to emerge.” Since the outbreak of the war, approximately 500 ships, including 220 oil tankers, are currently stranded in the Persian Gulf. Analyst Smith predicted, “It will take weeks just for about 120 oil tankers loaded with oil to get out, and it will take even more time for 100 empty oil tankers to fill up with crude oil and set sail.” The biggest reason shipowners are hesitating to operate is safety concerns. Jakob Larsen, head of maritime safety and security at the Baltic and International Maritime Council (BIMCO), an international shipowners’ association, stated, “Despite the signing of the ceasefire agreement, the security situation for the shipping industry remains unstable,” and “The central part of the strait is heavily mined, making navigation impossible, and only the coastal routes close to Oman and Iran are known to be free of mines.” However, he added that even these coastal sections are dangerous to navigate due to congestion and the risk of accidents. Along with the ships, an estimated 20,000 crew members are also trapped on board. Ben Bailey, director at the seafarers’ support organization Mission to Seafarers, conveyed that many sailors want to leave despite the anxiety over departure safety, saying, “The expression ‘cautious optimism’ would be accurate.” The insurance void is also a burden for shipowners. Marine insurers withdrew their “war risk” coverage for damages caused by attacks and mines at the beginning of the war, and they have not restored it for most customers despite the ceasefire agreement. This means that if they suffer damage while navigating hazardous sections without coverage, they cannot receive compensation. Independent oil analyst Tom Kloza pointed out, “It was not only Iran that closed Hormuz, but also insurance companies like Lloyd’s of London.” In addition to this, there are numerous practical hurdles, such as the seaworthiness of ships that have been anchored for over three months, securing fuel and supplies, and removing barnacles attached to the hulls. Director Bailey pointed out, “It is not a simple matter of saying the green light has turned on at the traffic light, so everyone can just start their engines and go.” Even if ships immediately resume operation, the normalization of crude oil production in the Persian Gulf is a separate issue. A significant portion of regional production and refining stopped when oil tanker traffic was cut off early in the war, and restarting it will also take time. Ultimately, trust that the peace agreement will be maintained in the long term is the key. Analyst Kloza said, “We do not know the answer to that,” adding, “It might be considered a safe sea someday, but there is a long way to go to reach that stage.”