What this means for global shipping

Escalating war in the Middle East has raised fears of prolonged disruption to global trade through key maritime corridors such as the Strait of Hormuz and the Bab el-Mandeb Strait.

Container shipping giants have suspended operations through the strategically important Strait of Hormuz and rerouted ships around the southern tip of Africa following US and Israeli attacks on Iran over the weekend.

Danish shipping company Maersk said in a statement it would suspend all vessel crossings in the Strait of Hormuz until further notice, warning that services calling at ports in the Arabian Gulf could experience delays.

Located in the Gulf between Oman and Iran, the Strait of Hormuz is one of the world’s major oil choke points. In 2023, oil by waterway averaged 20.9 million barrels per day, accounting for about 20% of global petroleum liquids consumption, according to the US Energy Information Administration.

Maersk, widely regarded as a global trade barometer, said the situation in the Middle East had prompted it to pause future trans-Suez sailings through the Bab el-Mandeb strait until further notice.

The waterway is a narrow maritime pinch point between the Horn of Africa and the Middle East, connecting the Red Sea to the Gulf of Aden and the Indian Ocean. The Bab El-Mandeb Strait is estimated to account for 12% of seaborne oil trade and 8% of liquefied natural gas (LNG) trade in the first half of 2023.

All sailings on Middle East-India to Mediterranean and Middle East-India to East Coast US services will be rerouted around the Cape of Good Hope, Maersk said.

Peter Sand, chief analyst at Xeneta, said higher container shipping rates to the Middle East should be the reason for the duration of the conflict, adding that there is “no real alternative” to ocean freight.

“The risk of geopolitics has shown its ugly face in recent years with greater frequency and greater intensity than ever before,” Sand told CNBC’s “Squawk Box Europe” on Monday.

“I think it’s also fair to say there’s a bit of fatigue in the industry because you put in 10 contingency plans only to have it all torn up with a new twist and a new angle.”

Even if oil tankers are temporarily blocked from the Strait of Hormuz, that could raise global fuel prices, increase shipping costs and cause significant supply delays.

The Strait of Hormuz is important for global container trade. The region’s ports, such as Jebel Ali and Khor Fakkan, are transshipment hubs that act as intermediary points in global networks.

Along with Maersk, the German container shipping company Hapag-Lloyd It said all ships passing through the Strait of Hormuz would be suspended over the weekend, citing the safety and security of its crews.

France’s CMA CGM said on Saturday it was committed to all its ships within the Gulf and the region to proceed with the shelter. CMA CGM said transit through the Suez Canal was suspended until further notice, with ships rerouted around Africa via the Cape of Good Hope.

MSC, the world’s largest container shipping company, said on Monday it had ordered all ships operating in the Gulf region to proceed to designated safe areas, adding that it would closely monitor further developments.

The key question is what will happen to the Strait of Hormuz, Amrita Sen, founder and director of market intelligence at Energy Aspects, said on Monday.

He estimates that last year roughly 15 million barrels of oil and roughly 80 million tons of LNG moved through the waterway.

“We don’t think it’s very likely,” Sen told CNBC’s “Europe Early Edition” when asked if Iran would try to close the strait completely.

“America and Israel will pick it up very quickly. The US has far superior military power to neutralize any of Iran’s capabilities,” Sen said.

“While we are not saying the strait will be closed, the US will not be able to control this one-off attack on tankers and it is enough to make the market very cautious about sending ships. And that will create disruptions,” he said.