!_StoryTags_!, trade, SHIPPING + MARITIME, UAE, Oman,

Has the crude tanker market gone from a normal supply-demand market to a live risk-price screen? In the last two weeks, the big benchmark routes have been repriced less by “how many cargoes” and more by “how many owners will actually send a ship.” Owner willingness has collapsed as Hormuz becomes a war zone.

The scale shows up clearly in data: On the benchmark Baltic Exchange VLCC route from Middle East Gulf to China (TD3C), assessed earnings have shifted from “very strong” to panic-level prints in days. For TD3C, it was USD 206k per day on 26 February, but after the outbreak of the war it was USD 423.7k per day on 2 March, while market benchmarks put early-March assessments in the range of USD 486k per day. Gibson Shipbrokers had the TD3C route at USD 506k per day late in the first week of March vs USD 215k per day in late February — a 136% jump in a week.

Rates were already climbing before the war: The Middle East-China VLCC route earnings were reported at USD 170k per day on 24 February.

But the market is also warning you not to take every print literally: Lloyd’s List flagged that extreme index spikes can be driven by very few fixtures and may not hold if agreements fail or remain unconfirmed — which matters a lot if freight is now indexed.

A quick crash course on how freight forward agreements work: Say, for example, the current freight rate for a VLCC route is USD 40k per day. A trader then thinks rates will spike because of geopolitical risk, so they buy a freight forward contract (FFA) that locks in USD 40k per day for the next month. If the actual rate becomes USD 60k per day, they make the difference — if it drops to USD 30k per day, they lose. No ship movement, it’s purely financial — think derivatives.

And a quick translation for non-shipping readers: Tanker freight is often quoted in Worldscale points (WS) first — a standard reference cost for transporting oil on a route. WS 100 represents the benchmark reference cost of a voyage. TD routes are the benchmark voyages, so when the benchmark Middle East-China route, known as TD3C, jumps to levels like WS 400 or higher, it signals that charterers are paying four times the normal cost for transporting crude. Brokers then convert WS into an earning number (TCE, time-charter equivalent) to express it as USD per day.

The domino effect: When TD3C blows out, it pushes the West Africa-Europe (TD20), Black Sea-Mediterranean (TD6), and Atlantic basin routes up as refiners substitute cargoes from outside the Gulf and tanker demand shifts across basins.

Supply squeeze and fleet utilization

The market move makes more sense once you look at effective supply: When ships idle at anchorage, take longer routes, or refuse a zone, you shrink the number of cargoes the fleet can deliver per month — even if the world fleet size hasn’t changed. Right now, the utilization shock is visible in three hard indicators:

First, anchorages filled up: At least 150 tankers dropped anchor beyond Hormuz at the beginning of March, and at least another 100 anchored outside Hormuz along the UAE and Oman coasts. Later estimates put “at least 200 ships” (mixed types, including tankers) at anchor off major Gulf producers by 4 March.

Second, transit collapsed: Tanker transits — of all types — through Hormuz fell from 50 in late February, hitting almost zero in the first week of March vs a historical average of some 140 vessel transits per day.

Third, mainstream tonnage got trapped or repositioned: Nearly 10% of mainstream oil tankers are trapped near Hormuz, while 3.2k ships are idling inside the Arabian Gulf, with 500 waiting outside — which is huge friction even if not all are tankers.

ICYMI- Currently, 35 VLCCs are idling on the eastern side of the strait, with another 22 steaming toward the Gulf from the Indian coast.

Floating storage and congestion

The market impact is also about ships being forced into waiting mode. Large anchorages as well as near-zero transits create two overlapping effects. First, they reduce effective fleet supply — a ship at anchor is not completing voyages — which is freight-bullish in the short run.

It also starts to build “trapped barrels.” Estimated oil volumes stranded on tankers in the Middle East Gulf rose by some 85 mn barrels since the conflict began. If that’s right, storage saturates and producers start shutting — which is already happening. Less export volume eventually becomes freight-bearish — because you can’t ship what isn’t produced.

So the tanker market is doing two things at once — pricing a shortage of available ships now, while anxiously watching for a shortage of available cargoes later.

What comes next

If escorted transits and stabilized ins. terms arrive fast, you get a “reopening rally unwind”: Rates can fall hard even if the war continues, because the backlog clears and the fear premium leaks out. Talks of US escorts have resurfaced alongside state-backed ins. ideas, but nothing like a clean corridor yet.

If paralysis drags on, you can keep outsized spot prints — but also more “paper vs physical” fights. Both Gibson and Baltic benchmarks explicitly describe parts of the curve as theoretical/uncertain because the market isn’t fixing normally. That matters because many shipping contracts are linked to benchmark freight indexes, while traders hedge exposure through freight forward agreements. When only a handful of fixtures set those benchmarks, small price swings can ripple through the entire tanker market. Lloyd’s List quotes multiple brokers warning that rumours are rife and unconfirmed rates aren’t being "publicized or confirmed.”

For now, the tanker market is pricing a shortage of ships. But if exports begin to shut because storage fills and production slows, the shortage could flip. Freight markets may soon discover the harder problem isn’t finding ships — it’s finding cargo.

Other freight markets are reacting differently

Container shipping has reacted far more calmly so far: “Ocean container price increases have been limited just to containers directly impacted by the closure of Hormuz, meaning limited to emergency surcharges for containers already headed for the Gulf states or area,” Judah Levine, head of research at Freightos, told EnterpriseAM, noting that rising fuel costs are already resulting in fuel surcharges being announced, so fuel prices may start to have an impact on container rates.

Recent increases in container freight rates are likely tied to the usual post-Chinese new year demand pickup rather than the gulf crisis. “So these increases are likely not related to the Hormuz closure, though the fuel increases could start showing up as a component of rate levels once they are introduced, and could push prices higher than they would've been otherwise, but not to extremes for now, Levine told us.

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