Overview of the Impact of the Iran-Israel Conflict on Maritime Transport
The ongoing tensions between Israel and Iran reached a new level after Israel carried out a strike on an Iranian diplomatic facility in Damascus, Syria — a key hub for Iranian military coordination in the region.
This action prompted a direct response: Iranian missiles targeted several major Israeli cities on Monday.
What had long been a proxy conflict is now shifting toward direct confrontation, as Israel announced it would target nuclear and missile facilities in Iran.
Military operations impacting global trade and maritime transport
While the overall impact of the conflict on global trade remains difficult to assess, the maritime sector is already feeling the first effects. Airstrikes have led to a surge in signal interference affecting vessels operating in the Middle East — the world’s leading oil-producing region. This GPS disruption, affecting a tool essential for navigation and vessel tracking, is complicating maritime traffic monitoring. As a result, port logistics and trade routes are under strain, leading to longer transit times and higher shipping costs.
The mere perception of heightened risk in the Middle East is enough to increase oil price volatility and disrupt tanker schedules. Rising oil prices can prompt producers to boost exports, which in turn puts pressure on supply chains and drives up vessel chartering rates.
Could Iran close the Strait of Hormuz?
In the past, under Western pressure, Iran has already threatened to close the Strait of Hormuz — a key chokepoint for global oil transport. Any disruption of traffic in this area would likely restrict trade and impact global crude prices. As of now, strategic oil infrastructure remains intact, which has helped ease concerns over the ongoing conflict.
Experts believe that a closure of the strait remains unlikely, as it would severely harm Iran’s own economy, which relies heavily on discounted oil exports to China. These sales are the country’s main source of foreign currency, making the continuation of exports vital to its economic stability.
Analysts believe that if the strait were to be closed, Saudi Arabia and other OPEC members would struggle to offset the drop in Iranian supply by tapping into their spare capacity. Such a scenario would likely trigger a sharp spike in oil prices on international markets.
Longer routes and tighter supply – the market adapts
In the event of an escalation of the conflict, the Red Sea and the Suez Canal could be deemed too risky, prompting tankers to reroute around Africa via the Cape of Good Hope. This would significantly increase sailing distances, reduce vessel availability, and lead to higher freight rates.
To offset a potential decline in oil exports from the Persian Gulf, refiners may turn to crude supplies from West Africa or Brazil. At the same time, U.S. producers and OPEC members such as Saudi Arabia and the United Arab Emirates could increase shipments via alternative routes — including the Red Sea pipeline or the port of Fujairah — both of which bypass the Strait of Hormuz. Any constraint on this strategic chokepoint forces an adjustment in global oil flows, extending maritime routes and increasing volatility in both the shipping and energy markets.
In conclusion, a positive market response amid heightened geopolitical tensions
Even if the crisis situation proves temporary, market conditions have already improved, driving revenues higher across most shipping segments. Should the conflict persist, EMF could benefit from sustained earnings growth and an increase in the value of its fleet.
Source: Bloomberg, Wall Street Journal, Reuters, TradeWinds