Shares of Shipping Corporation of India (SCI) rose 4 percent on Monday amid concerns of possible disruption in the Strait of Hormuz due to escalating tensions in West Asia.
On June 23, the scrip jumped to an intraday high of Rs 230.51 on the NSE, gaining 4.97 percent from its previous close, before trimming some gains to trade at Rs 227.95 around noon, up 3.8 percent.
Fears of supply chain disruptions in the key shipping route acted as a possible trigger for the rise in SCI stock, given the company’s exposure to crude oil transportation. SCI, the country’s largest tanker owner, has nearly 31 percent of its total deadweight tonnage in crude oil carriers.
A closure or disruption of the Strait of Hormuz, which handles close to 20 percent of global oil trade, could force oil tankers to take longer alternative routes. This may lead to higher freight charges and improve earnings for shipping companies.
Shares of SCI have gained nearly 12 percent since June 13, when the conflict began with Israel’s attack on Iran. The latest round of escalation on Saturday, involving US strikes on Iran's nuclear sites, has raised concerns of further supply disruptions.
The development also had a rub-off effect on shares of Great Eastern Shipping Company, which rose over 1 percent to Rs 972.5.
The Baltic Dry Index (BDI), a global benchmark for dry bulk shipping rates has already shown volatility amid rising geopolitical uncertainty.
Iran-Israel war raises shipping freight rates, logistics sector tracks fuel price impact
While no final decision has been taken on the closure of the Strait, and such a move would require clearance from Iran’s Supreme National Security Council, any disruption is expected to impact global oil movement.
Analysts, however, noted that Iran may hesitate to block the waterway as it relies on the route to export crude, mainly to China.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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