TThe conflict in the Middle East caused an immediate shock to the foreign market. Saudi Aramco, Qatar Energy, Kuwait Petroleum and ADNOC have reduced, suspended or declared force majeure on production, with Gulf oil exports falling more than 60% to about 9.7 million barrels per day for the week ending March 15. The closure of major offshore fields including Safaniyah, the world’s largest offshore oil field, along with Marjan, Al-Zuluf and Abu Al-Safa, have contributed to an estimated 2 million to 2.5 million barrels per day decline in Saudi production.
Qatar Energy Company also stopped all gas production in the offshore North Field in the Arabian Gulf and declared force majeure. Repairs at the Ras Laffan LNG terminal are expected to take up to five years, putting one of the most significant long-term OSV and OCV demand programs in the region on hold. The OSVs and OCVs that support drilling, logistics, subsea and field maintenance across the region are now without active operations and have no clear timeline for resumption.
The size of the fleet vulnerable to disruption is also large. The region currently hosts 1,440 OSVs, 432 OCVs and 156 cranes, representing 19% of the global OSV fleet, 18% of the global OCV fleet and 27% of the global crane market, according to VesselsValue data. Of all marine asset classes, approximately one in five of the world’s ships is based in an area that has effectively ceased operations. Oil and gas fields across Saudi Arabia, Kuwait and Qatar are affected by the closures.
As the conflict continues, the market could begin to split across global regions in the medium to long term, although much remains uncertain. Within the Gulf, a large proportion of the stranded fleet was built for shallow water operations, and lacks the specifications needed to compete in more demanding markets, leaving these vessels effectively stranded.
Outside the Gulf, a Brent crude price above $100 per barrel makes previously marginal projects in West Africa, Brazil and the North Sea more attractive, which could lead to increased demand for OSV and OCV in those markets. If higher specification ships begin to reposition to meet this demand, global supply in those markets could shrink further, adding upward pressure on prices and representing a broader upside for the offshore market outside the Gulf region.
Conflict in Iran sends mixed signals on dry bulk cargo
While the dry bulk sector is not as vulnerable to the impacts of conflict in the Middle East as oil and gas tankers, it will not escape the damage. The situation could be a double-edged sword for this sector: short-term inefficiency and reorientation could support the market, while long-term economic impacts could turn negative.
Redirection, inefficiencies and demand for coal conversion support
The most immediate impact stems from the virtual closure of the Strait of Hormuz, which has brought Persian Gulf exports to a near halt. According to VesselsValue Trade data, approximately 3% of total dry bulk trade passes through the strait, including aggregates, iron ore, fertilizers and cement. Obtaining these materials from alternative sources leads to longer sailing distances and operational inefficiency, which supports freight rates.
In addition, approximately 1.4% of the global dry bulk fleet is currently confined within the strait, limiting vessel availability and limiting supply. At the same time, the armed Houthi group pledged to continue its attacks in the Bab al-Mandab Strait in solidarity with Iran. The rerouting away from the Red Sea is expected to continue, with bulk ship transits in the Red Sea already down by 50% compared to pre-attack levels. These factors contribute to tightening ship supplies and increasing freight rates.
High gas prices and limited availability may lead to a shift from natural gas to coal in energy production. The transition to a cheaper energy source may help contain energy prices, but it may also become a necessity from an energy security perspective. This would boost coal trade and prove positive for the bulk cargo market.
Higher energy costs are impacting the long-term outlook for dry bulk
However, this more optimistic scenario for dry bulk carries an important caveat: higher oil and gas prices. Rising energy costs are putting a burden on global economic activity, which will ultimately affect demand for dry bulk cargo.
Since approximately 15% of the world’s seaborne fertilizer trade originates in the Arabian Gulf, a significant increase in production elsewhere will be required to cover the shortfall. This gap is unlikely to be filled in the meantime, given that natural gas is a major input into fertilizer production, with its availability restricted by the closure of the Strait of Hormuz. This will not only reduce the volume of fertilizer trade, but may also limit grain production in the next harvest season.
Concerns over oil availability have led to a sharp rise in bunker fuel prices, with Singapore’s VLSFO price nearly doubling from around US$500/ton in February to around US$1,000/ton towards the end of March. Higher fuel costs significantly increase overall transportation expenses, which may reduce demand for dry bulk shipping.
The longer the conflict lasts, the greater the potential damage to energy infrastructure, the higher energy prices, and the more negative the impacts on the global economy and dry bulk trade become.
Despite the closures in the Arabian Gulf, demand for vehicle tankers may rise in the short term
The Arabian Gulf remains effectively closed today, with 17 carriers anchored awaiting further instructions, with all liner services currently suspended. Inbound vehicle deliveries into Saudi Arabia continue via the Jeddah Islamic Port – either through a large detour at the Cape of Good Hope from Asia to avoid the Bab el-Mandab Strait, which adds a significant trip cost, or directly from Asia depending on the carrier.
The scale of market exposure is significant: the UAE, Saudi Arabia and neighboring Gulf states combined imported more than 900,000 Chinese light vehicles last year, and a sustained closure of the Strait of Hormuz could remove approximately 15% of China’s seaborne vehicle exports and about 10% of global demand for vehicle carriers.
However, the demand picture is more nuanced than the headline numbers suggest. The lost volumes heading to the Gulf could be partially offset by the return of containerized cars to ro-ro routes from China, which is estimated at 1 million units shipped worldwide. In addition, China will likely target the European market more aggressively, which would support demand for vehicle mileage. This dynamic suggests that, contrary to the broader narrative of demand contraction, aircraft leasing prices may face upward pressure in the short term before a correction eventually occurs. The one-year VesselsValue TC of 6,500 CEUs is currently $50,000/day, up 13% compared to the January-February average.”
Global LNG supplies are at risk as conflict increases in the Middle East
Conflict in the Middle East sparked new uncertainty in global energy markets this week after reports of damage to Qatar’s Ras Laffan liquefied natural gas terminal raised major supply concerns. As the world’s largest LNG export hub – with a production capacity of 77 metric tons per year and a share of around 20% of global LNG supply – any outage at Ras Laffan carries significant market implications.
Qatar Energy Company confirmed the damage to the LNG infrastructure, and repairs are expected to take three to five years. It has now sidelined 12.8 million tons per year, representing about 17% of Qatar’s total LNG production. A significant share of global supply has been effectively removed from the market for the foreseeable future. Gas markets have responded sharply, with TTF prices doubling since the conflict began, including a 20% increase since Wednesday alone.
What we are unfortunately beginning to see are domino effects caused by the continuing imbalance in the global energy system. According to the BBC, nearly 400,000 workers in Morbi, India’s ceramics hub that accounts for nearly 80% of the country’s tile and sanitary ware production, remain unemployed after factories closed due to propane and natural gas shortages as a result of regional unrest. An industry worth more than eight billion dollars that exports to the Middle East, Africa and Europe has been halted. Morby is unlikely to be the last example.
Tensions in the Strait of Hormuz raise prices for used ships
The escalation of tensions around the Strait of Hormuz has had a significant impact on the VLCC sector. The disruption to normal transportation routes has prompted cargo owners and operators to reassess fleet locations, with some shipments from the Arabian Gulf being redirected via the East-West Pipeline to the port of Yanbu on the Red Sea. This reorientation has changed the dynamics of ton-mile demand, and periods of higher freight rates have led to stronger asset valuations as owners benefit from improved earnings.
The situation has also led to enhanced asset values of used tankers, due to disruption of trade flows and fleet positioning. This adds to other factors driving up prices for used tankers, including widespread sanctions on ships in the so-called dark fleet, which have gradually removed compatible tonnage from the trade supply pool and created a structural imbalance where legitimate demand continually outstrips available supply. Finally, Korea’s Sinocor’s recent aggressive acquisition drive included the purchase of 56 ships in 2026 alone, an unprecedented level of buying activity that has further tightened supply and pushed values higher. For example, the value of 15-year-old, 310,000 DWT VLCCs has risen approximately 31.74% year-to-date, rising from US$59.57 million to US$78.48 million.
The Iranian conflict could send shockwaves through LPG and ammonia shipping chains and energy supplies
Ongoing turmoil in the Strait of Hormuz continues to worry energy markets, especially after six commercial ships were targeted in recent days. Ships are still waiting for safe passage through the strait, and the latest escalation does not indicate an imminent safe crossing.
This development has already increased energy prices, and as volumes of LPG, LNG and ammonia pass through this critical strait, the cascading impacts on global energy, petrochemical and food production could worsen dramatically the longer the situation persists.
The escalating disruptions will have significant impacts on the global LPG supply chain. 30% of the world’s LPG is exported from the Middle East, almost all of it destined for Asia. A large proportion of LPG is used as a feedstock to produce other petrochemical gases used to power a variety of household consumer goods, including clothing, carpets and dishwashers.
If transit disruption continues, we may not only see higher prices on a variety of these commodities, but we may ultimately risk supply shortages. We are already seeing lower operating rates for Asian crackers, with some declaring force majeure due to the ongoing conflict.
The ammonia trade is also facing disruption, with about 25% of the world’s ammonia exported from the region, half of which goes to India. A. 70% of global ammonia production is used in fertilizer production. As natural gas prices rise in Asia, we could see less ammonia produced and available for global trade, which could hurt food production in India and other Asian countries.
LNG shipping is also severely affected, with about 20% exported from the Middle East with almost 90% heading to Asia. Gas is mainly used for power generation, and with competition from Europe for US LNG supplies, we may see an increase in the use of other energy sources, such as coal. For countries with less flexibility in fuel switching, this may pose a serious energy security concern.
Ship tracking data from the Qatari port of Ras Laffan shows the significant impact of the conflict in the Middle East on LNG exports. The number of daily calls from LNG vessels at the terminal averaged 6-8 calls per day during January and February, before collapsing to near zero earlier this month following attacks on the facility.
Source: Faison Bahri
