TODAY: Gulf airlines face hidden capacity squeeze + the Hormuz bypass trade faces its first real test

Good morning, friends. We have a packed issue this morning, but it all comes back to one question: how do you keep business moving when the shortest route is no longer an option?

Even the airlines are taking the long way now. Getting back to 100% of seats doesn't mean Gulf carriers have their capacity back — longer routings and slower turnarounds are quietly eating into productivity even as schedules look full again.

At sea, the scenic route has a name: ship-to-ship. QatarEnergy just joined Aramco and Adnoc in asking buyers to collect crude outside Hormuz instead of inside it — an earlier tender requiring vessels to enter the strait went unawarded, underscoring how the security risk outweighed buyers’ appetite for the barrels. Iraq is the outlier, with seven tankers loading directly from the Gulf on Monday alone.

On the geopolitical front: Iran and Oman have proposed a phased framework for a temporary joint maritime corridor through Hormuz, according to a joint statement. Technical talks will continue on a permanent corridor, the strait's future administration, information-sharing, traffic management, and maritime security services — with Oman also pushing to bring in other Gulf littoral states.

But, opening a corridor requires more than a political framework. Iran and Oman may be able to design and administer a shipping route, but traffic is unlikely to normalize unless Washington accepts the arrangement, since US naval operations and sanctions enforcement remain active around the strait, with Gulf producers are using alternative routes and ship-to-ship transfers that Tehran views as attempts to undermine its control (more on that in the news well below). We did a deep dive earlier on the futures of Hormuz and what this means for business here.

UAE wheat pipeline to Egypt goes live

Abu Dhabi-based Al Dahra has begun implementing a five-year wheat supply agreement with Egypt worth up to USD 500 mn, moving a 2023 framework into operation, state news agency Wam reports. The agreement will supply imported wheat to state commodities buyer GASC under financing backed by the Abu Dhabi Exports Office (ADEX).

REFRESHER- Egypt’s parliament approved the financing framework in late 2024, paving the way for ADEX to fund GASC’s wheat purchases from Al Dahra under a revolving program capped at USD 100 mn a year.

Market watch

Oil prices fell this morning asIran-Qatar talks raised hopes of a Hormuz reopening and easing supply disruptions, Reuters reports. Brent crude futures declined around 0.41 to USD 87.43 / bbl by 03.30 GMT, while West Texas Intermediate (WTI) decreased USD 0.37 to USD 81.86 / bbl.

The Baltic Index gains ground: The Baltic Exchange’s dry bulk index — which tracks rates for the capesize, panamax, and supramax vessel segments — was up 4.4% to 3,056 points on Wednesday. The capesize index increased 6.3% to 5,033 points, while the panamax climbed by 3.7% to 2,246 points. The smaller supramax gained 0.1% to 1,644 points.

Data point

500k — that’s the volume of TEUs DP World has moved across the GCC through its road and rail network since March, as shipping lines and cargo owners lean on inland routes to dodge disruption in the region’s main shipping lanes, according to a statement. The network now handles some 3k truck movements a day, after DP World added 700 trucks to the fleet last month.

The buildout is a hedge against Red Sea and Hormuz risk. DP World has opened fast-track bonded corridors linking east coast gateways directly to Jebel Ali, a bonded corridor from Sohar in Oman, and new routing through Jeddah Islamic Port’s South Container Terminal — each a way to keep cargo moving if Bab Al Mandab or the Hormuz become less reliable.

Hedging against the next bottleneck? The company opened a 100k sqm empty-container depot in Al Awir, Dubai, adding storage and release capacity outside Jebel Ali itself. The site sits on Emirates Road and is positioned for future rail links via Etihad Rail. DP World’s logistics COO for the GCC said the goal is to cut unnecessary trips to the port and give shipping lines more flexibility to reposition boxes across Dubai, Sharjah, and the Northern Emirates. It’s the same inland-first playbook behind DP World’s new multi-client warehouse in Riyadh.

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