Reuters Gulf Currents-Hormuz tension jolts tanker rates

Andrew Mills, deputy bureau chief, Gulf

All eyes in the Gulf now shift to Geneva, where the U.S. and Iran meet again on Thursday. The region is waiting to see whether the talks deliver deescalation or open the door to a U.S. strike on Iran. As anxiety builds, this week’s newsletter tracks spiralling tanker rates and new embassy precautions.

NEWS BRIEFING

• The United States evacuated some nonessential staff and families from its embassy in Beirut amid rising concerns over possible military confrontation with Iran, a U.S. official said. The move underscores Washington’s heightened security posture across the region, though there have been no publicly announced evacuations from U.S. embassies or military facilities in the Gulf. Australia announced it will allow dependents of diplomats in Qatar and the UAE to leave voluntarily.

• Etihad Airways reported a nearly 50% jump in net profit to $698 million last year as rising capacity and fleet expansion met strong travel demand. The performance highlights the carrier’s solid post-pandemic recovery, supported by higher passenger numbers and the addition of new aircraft and routes.

• Saudi Aramco has sold the first condensate cargoes from its $100 billion Jafurah gas plant to U.S. major energy companies and India, ahead of initial exports from what is potentially the biggest shale gas project outside the U.S.. The sales mark a milestone in Aramco’s push to expand its gas business and introduce new ultralight crude grades to global buyers.

ANALYSIS: Hormuz tensions drive Gulf tanker costs sharply higher

The Gulf’s oil and gas trade is being jolted by a freightmarket surge driven not by disrupted supply but by fear – shipowners and charterers are racing to reprice the cost of moving crude through the Strait of Hormuz, the world’s most sensitive chokepoint as the prospect of a U.S.–Iran clash intensifies.

The rate to charter a very large crude carrier (VLC

C) from the Middle East to Asia has surged past $170,000 a day, the highest since April 2020, LSEG data showed, as charterers rush to book ships ahead of any conflict and owners demand higher prices to call on Gulf ports. The spike comes even though exports continue to flow: Middle East shipments in February rose above 19 million bpd, the strongest since April 2020.

This is not a supply shock story – not yet.

As one broker notes, VLCC rates “do not need barrels to disappear to move” – they react instantly when war risk premiums rise and shipowners grow wary of Hormuz. Recent GPS jamming and AIS spoofing – a term for the manipulation of ship transmitters – in the Gulf of Oman, linked to Iranian drills, adds to the uncertainty.

For decades, regional tensions have played out in the Strait of Hormuz, the 33-kilometre (21-mile) wide chokepoint between Oman and Iran that serves as the Gulf’s only maritime gateway. During the Iran–Iraq “Tanker War” of the 1980s, mining and attacks periodically halted shipping altogether, and since then Iran has repeatedly used the strait for strategic leverage – threatening closures and at times seizing commercial vessels.

Today, about 20% of global oil and aro

und one-fifth of global LNG transit the strait. It is the primary maritime outlet for all oil and gas exports from Kuwait, Qatar and Bahrain, plus nearly 40% of Saudi exports and a substantial share from the UAE. With such huge volumes at stake, even Iran’s short-lived closure during recent live-fire drills jolted markets.

For Gulf exporters, soaring freight costs are already biting. Higher transport costs squeeze Asian refinery margins and risk denting demand for Middle Eastern grades. India – one of the region’s fastest growing buyers – has shifted further toward Gulf barrels just as shipping costs jump.

For now, the heart of the issue remains geopolitical psychology: the market is behaving as though disruption is imminent, even as U.S.–Iran talks are poised to resume on Thursday in Geneva. Until the dipl

omacy delivers clarity – or collapses – the Hormuz premium is likely to stay embedded in freight, keeping the Gulf at the centre of global energy risk.

CHART OF THE WEEK

THE LAST WAVE: Has anyone seen the King of Bahrain?

Spotting Bahrain’s King Hamad among officials at last week’s debut of Donald Trump’s new Board of Peace proved tricky for the U.S. president. “Where are you? He’s so rich, he can sit there,” Trump said, even though the king was seated to his right. “He can sit wherever the hell he wants… he could sit up in the corner. He could sit up top.”

Trump then shifted to real estate banter, warning that the monarch might even buy into the venue. “He’ll take 25 % of the building for about $6 billion,” he said, thanking Bahrain for backing the Board, which Trump unveiled at the renovated former headquarters of the U.S. Institute of Peace, recently rebranded the Donald J. Trump Institute of Peace.

Qatar’s Prime Minister, on Trump’s left, got a different message, with Trump saying Doha’s leaders “help us so much” but need a better public relations agency. “They have you down as evil and you’re not evil … I only tell the truth.”