US-Iran war: Ship movement grinds to a halt at Strait of Hormuz, India-bound tankers drop to nil

Ship traffic slows in Hormuz as Gulf tensions escalates, India-bound tankers drops to nil

• Tanker traffic in Strait of Hormuz halted amid closure reports
• India-bound oil tankers via Hormuz have dropped to zero
• Disruption may affect 50% of India's oil imports and global markets

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Movement of ships through the Strait of Hormuz, which carries about 20 percent of the world's crude, has come to a standstill, as Iran continues to hit targets across West Asia in response to attacks by the US and Israel, industry sources said.

According to analytics firm Kpler, there were no India-bound tanker traffic through the strait  on March 1. Around 50 percent of India's monthly oil and almost all of its LPG imports pass through the vital shipping route, the closure of which will have wide implications for India, which relies to imports to meet its energy needs.

Ship tracking data from S&P Global Commodities at Sea confirmed no tanker passed through the narrow strait on March 1 as shipowners reassess their risk exposure and reroute vessels following reports of a blockade.

According to analytics firm Kpler, there were no India-bound tanker traffic through the strait  on March 1, as no oil ships passed through the vital shipping lane.

“Globally, around 19 million barrels of crude oil passed through the Strait of Hormuz as of February 27 which dropped to 18 million barrels on February 28. As of March 1, there was only one tanker carrying 2 million barrels of oil transiting through Hormuz which was destined for Europe,” Nikhil Dubey, senior research analyst, refining and modelling at Kpler, told Moneycontrol.

Iran has warned ships not to pass through the strait and according to reports three ships have been hit near the strait, which is 33 km wide at its narrowest point.

In the days, leading up to the escalation, crude movements were particularly elevated with 10-11 crude tankers exiting daily on February 27-28, before falling to a single crude departure on March 1, Kpler said.

There were no crude or product tankers seen arriving to transit the main Hormuz traffic separation scheme (TSS) channels that run east–west through the narrowest part of the strait between southern Iran and the UAE/Oman coast, S&P Global Commodities at Sea said.

The strait lies between Oman and Iran and links the Gulf north of it with the Gulf of Oman to the south and the Arabian Sea beyond.

Kpler vessel tracking also indicated a build-up of tanker traffic in the Gulf of Oman and the northern Arabian Sea, with some vessels appearing to hold short of the Strait of Hormuz amid heightened geopolitical tensions, said Dubey.

The firm also said that even if loading continues inside the Gulf, a reduction in eastbound exits can quickly translate into delayed arrivals, and higher effective shipping costs as cargoes spend longer waiting to clear the chokepoint.

Fuel fire

In February, India imported 2.8 million barrels of crude oil per day via the Strait of Hormuz against 2.2 million bpd during the same period last year, Kpler data showed.

About 20 percent of the world's oil or petroleum liquid consumption passes through the strait and any disruption will have a broader impact for the entire energy market, Prashant Vasisht, senior vice president and co-group head, corporate ratings, Icra Ltd said.

Crude tankers were observed clustered near the Port of Fujairah in the UAE, just outside the strait, with vessels headed toward the port as of March 1, according to data from S&P Global Commodities At Sea.

As one of the world’s most critical energy and commodities chokepoints, any sustained disruption here has far‑reaching implications including elevated freight rate volatility, driven by sudden capacity dislocation, risk premiums, and reduced effective supply of compliant tonnage, Rahul Kapoor, Vice President, Global Head of Shipping Analytics and Research said.

Analysts said that they now expect to see strategic rerouting of vessels, tightening tonnage availability, extending voyage durations, and materially altering voyage economics and regional arbitrage flows.

“For Very Large Crude Carrier (VLCCs), we see an increasing tonne‑mile demand, extending ballast and laden legs, constraining regional tonnage availability, and materially reshaping voyage economics and arbitrage viability,” Kapoor said.