Latest news with #TankerWar
Daily Maverick
6 hours ago
- Business
- Daily Maverick
Israel could push the global economy — and South Africa with it — into a recession
Links between geopolitics and the global economy are tangential at best, at least in the short term. Obviously, in a conflict such as this, the key factor between the two is the price of oil. But even this relationship can be unpredictable. After the 9/11 attacks in 2001, the price of Brent crude oil, the key benchmark, jumped by 5% as markets braced for broader disruptions to supply across the Middle East. Yet, within weeks, oil prices had fallen by 25% as worries about weakening global demand and a possible recession overtook the fears of supply shocks. Similarly, after Russia invaded Ukraine in February 2022, Brent crude surged 30% in two weeks, only to return to pre-invasion levels eight weeks later. Oil prices are currently roughly 15% higher than they were in early June, before Israel started its strikes on Iran. What happens in the next few weeks will determine whether they push any higher, or if they start to normalise back to where they were. Research by the European Central Bank highlights the two ways in which geopolitical shocks affect the price of oil and the global economy. In the short term the dominant factor is risk, which is precisely what one can imagine has pushed up the oil price so far. When markets fear disruption to oil production, traders push up the 'convenience yield', or the premium for holding an oil contract. 'Rather one in the hand than two in the bush.' This pushes prices higher, at least momentarily. But over time general economic activity and demand factors take over. As happened following 9/11, heightened geopolitical tensions often dampen global demand as uncertainty weighs on investment, consumption and trade. This reduces oil demand and depresses prices. Of course, this has not always been the case. The oil price shocks of 1973 and 1979 were both followed by recessions in the US. This possibility now cannot be ruled out. The US economy is already battling high interest rates, and the effects of tariffs. Even before the oil price spiked, the business cycle was long in the tooth and a recession was a real risk, even if not most economists' base-case scenario. This undoubtedly raises the risks. Of particular relevance is the 1981 recession, which was caused by the Iranian Revolution and in part worsened by the Fed having to maintain high interest rates to beat inflation. The parallels with today are unmistakable. Where does this go now? This depends on four factors. First, how will Iran continue to respond to Israel, and whether the conflict spreads into a regional conflagration which seriously disrupts the flow of tankers through the Strait of Hormuz. This narrow waterway – just 33km wide at its narrowest point – is the only maritime gateway to the Persian Gulf and handles about 20% of global oil consumption. Its shipping lanes are vulnerable to attack or blockade, such as that attempted by Iran during the Iran-Iraq War of 1980 to 1988, which became known as the 'Tanker War' as both sides targeted commercial vessels. Yet even then the strait was never fully closed. Furthermore, should Iran attempt that now, it would incur the wrath of Saudi Arabia and the UAE who depend on the strait for their oil exports. That will further weaken the already fraught relationships Iran has with its neighbouring regional powers. Either way, Iran has made it clear that it will not be the first side to stop the attacks, and Israel must be the first to halt bombing, before Iran will even consider a ceasefire and negotiation. 'If President Trump is genuine about diplomacy and interested in stopping this war, the next steps are consequential,' Iranian foreign minister Abbas Araghchi said on X on Monday. 'It takes one phone call from Washington to muzzle someone like Netanyahu. That may pave the way for a return to diplomacy.' The mullahs know that Bibi is after them. Second, what is the actual objective of Prime Minister Benjamin Netanyahu? Does he actually believe he can enact regime change in Iran, as he has threatened? There can be little doubt that he would like to see Iran's regime fall. Given its deep domestic unpopularity and internal divisions, that possibility cannot be dismissed. But history suggests that external attacks often prompt populations to rally around their government, not overthrow them. His attacks could have the opposite effects of what he intends. Calls by an Israeli leader for the Iranian people to rise up have little appeal when those same people are being bombed by Israel. Initial signs are that Israel is preparing for a three- to four-week conflict at least. Given that it now has almost complete air superiority over Iran, with its F16s free to sow terror and eradicate targets at will, it would seem surprising for them to pull out now. Third will be the reactions of Iran's authoritarian friends, Russia and China. Will they attempt to prop up the regime and assist its military efforts, or are they wary of being embroiled in the conflict? Russia, stretched thin by its war in Ukraine, lacks the capacity for another intervention like the one that saved Syria's Assad in 2015. China, for its part, is more interested in buying Iranian oil and selling surveillance technology than getting drawn into Middle Eastern security entanglements. One factor that should be remembered is that Putin will not be averse to a drawn-out conflict that pushes up the price of oil; the higher the price at which Russia can sell its oil, the more sustainable is its war economy. While the military partnership signed between the two countries in January falls short of a mutual defence clause, Russia could support Iran indirectly by sending munitions. Indeed, Iran has helped Russia in its war against Ukraine by sending critical drones and missiles. The final factor is the all-critical role of the US. If there is one constant with President Donald Trump it is that he is an anti-war leader. He sees it as being bad for business. Yet, now the US risks being pulled into yet another costly war in the Middle East. The personal relationship between Netanyahu and Trump is clearly strained, to put it mildly. Trump seeks deals and peace, but Netanyahu's actions broadside both goals. Being unable to get Netanyahu to desist, Trump is in a lose-lose situation. This could be the moment, along with the ruinous effects of his tariffs, that his administration starts coming off the rails. Why this is important It may be true that geopolitics does not normally have an impact on the global economy and markets, but unfortunately these do not seem to be normal times. As this drags on, pulling the actors deeper and deeper into catch-22 situations, and making their actions ever more desperate and less predictable, investors should be aware that the implications for an already teetering global economy are profoundly negative. For South Africa – reliant on oil imports and already battered by energy crises and high fuel costs – the fallout could be severe. A prolonged spike in oil prices could be the final blow that pushes its struggling economy, already under pressure from trade threats like tariffs, into a recession. DM
NDTV
10 hours ago
- Business
- NDTV
All About The Strait Of Hormuz: World's Most Important Oil Artery
Israel launched strikes against Iran on June 13, saying it targeted nuclear facilities, ballistic missile factories and military commanders during the start of a prolonged operation to prevent Tehran from building an atomic weapon. Iran, which has denied such intentions, has in the past threatened to close the Strait of Hormuz for traffic in retaliation to Western pressure. Experts have said that any closure of the strait could restrict trade and impact global oil prices. Below are details about the strait: The strait lies between Oman and Iran and links the Gulf north of it with the Gulf of Oman to the south and the Arabian Sea beyond. It is 21 miles (33 km) wide at its narrowest point, with the shipping lane just 2 miles (3 km) wide in either direction. WHY DOES IT MATTER? About a fifth of the world's total oil consumption passes through the strait. Between the start of 2022 and last month, roughly 17.8 million to 20.8 million barrels of crude, condensate and fuels flowed through the strait daily, according to data from Vortexa. OPEC members Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq export most of their crude via the strait, mainly to Asia. The UAE and Saudi Arabia have sought to find other routes to bypass the strait. Around 2.6 million bpd of unused capacity from existing UAE and Saudi pipelines could be available to bypass Hormuz, the U.S. Energy Information Administration said in June last year. Qatar, among the world's biggest liquefied natural gas exporters, sends almost all of its LNG through the strait. Iran has threatened over the years to block the strait but has never followed through. The U.S. Fifth Fleet, based in Bahrain, is tasked with protecting commercial shipping in the area. HISTORY OF TENSIONS In 1973, Arab producers led by Saudi Arabia slapped an oil embargo on Western supporters of Israel in its war with Egypt. While Western countries were the main buyers of crude produced by the Arab countries at the time, nowadays Asia is the main buyer of OPEC's crude. The United States more than doubled its oil liquids production in the last two decades and has turned from the world's biggest oil importer into one of the top exporters. During the 1980-1988 Iran-Iraq War, the two sides sought to disrupt each other's exports in what was called the Tanker War. In July 1988, a U.S. warship shot down an Iranian airliner, killing all 290 aboard, in what Washington said was an accident and Tehran said was a deliberate attack. In January 2012, Iran threatened to block the strait in retaliation for U.S. and European sanctions. In May 2019, four vessels - including two Saudi oil tankers - were attacked off the UAE coast, outside the Strait of Hormuz. In July 2021, an Israeli-managed oil tanker was attacked off Oman's coast, killing two crew members, with Israel blaming Iran for the incident, which Iran denied. Three vessels, two in 2023 and one in 2024, were seized by Iran near or in the Strait of Hormuz. On June 17, 2025, two oil tankers collided and caught fire, near the Strait of Hormuz, where electronic interference has surged during the conflict between Iran and Israel, but there were no injuries to crew or spillage reported.
Straits Times
11 hours ago
- Business
- Straits Times
The Strait of Hormuz: the world's most important oil artery
The Strait of Hormuz: the world's most important oil artery Israel launched strikes against Iran on June 13, saying it targeted nuclear facilities, ballistic missile factories and military commanders during the start of a prolonged operation to prevent Tehran from building an atomic weapon. Iran, which has denied such intentions, has in the past threatened to close the Strait of Hormuz for traffic in retaliation to Western pressure. Experts have said that any closure of the strait could restrict trade and impact global oil prices. Below are details about the strait: The strait lies between Oman and Iran and links the Gulf north of it with the Gulf of Oman to the south and the Arabian Sea beyond. It is 21 miles (33 km) wide at its narrowest point, with the shipping lane just 2 miles (3 km) wide in either direction. WHY DOES IT MATTER? About a fifth of the world's total oil consumption passes through the strait. Between the start of 2022 and last month, roughly 17.8 million to 20.8 million barrels of crude, condensate and fuels flowed through the strait daily, according to data from Vortexa. OPEC members Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq export most of their crude via the strait, mainly to Asia. The UAE and Saudi Arabia have sought to find other routes to bypass the strait. Around 2.6 million bpd of unused capacity from existing UAE and Saudi pipelines could be available to bypass Hormuz, the U.S. Energy Information Administration said in June last year. Qatar, among the world's biggest liquefied natural gas exporters, sends almost all of its LNG through the strait. Iran has threatened over the years to block the strait but has never followed through. The U.S. Fifth Fleet, based in Bahrain, is tasked with protecting commercial shipping in the area. HISTORY OF TENSIONS In 1973, Arab producers led by Saudi Arabia slapped an oil embargo on Western supporters of Israel in its war with Egypt. While Western countries were the main buyers of crude produced by the Arab countries at the time, nowadays Asia is the main buyer of OPEC's crude. The United States more than doubled its oil liquids production in the last two decades and has turned from the world's biggest oil importer into one of the top exporters. During the 1980-1988 Iran-Iraq War, the two sides sought to disrupt each other's exports in what was called the Tanker War. In July 1988, a U.S. warship shot down an Iranian airliner, killing all 290 aboard, in what Washington said was an accident and Tehran said was a deliberate attack. In January 2012, Iran threatened to block the strait in retaliation for U.S. and European sanctions. In May 2019, four vessels - including two Saudi oil tankers - were attacked off the UAE coast, outside the Strait of Hormuz. In July 2021, an Israeli-managed oil tanker was attacked off Oman's coast, killing two crew members, with Israel blaming Iran for the incident, which Iran denied. Three vessels, two in 2023 and one in 2024, were seized by Iran near or in the Strait of Hormuz. On June 17, 2025, two oil tankers collided and caught fire, near the Strait of Hormuz, where electronic interference has surged during the conflict between Iran and Israel, but there were no injuries to crew or spillage reported. REUTERS Join ST's Telegram channel and get the latest breaking news delivered to you.
CNBC
4 days ago
- Business
- CNBC
How global freight ships are preparing for Israel-Iran tensions, Strait of Hormuz risks
Commercial traffic including critical global oil trade continues to flow through the Strait of Hormuz after Israel's attack on Iran, but maritime shipping experts say there will be ongoing risk that safety measures taken by ship owners act as a de facto Strait of Hormuz slow down, if not outright closure. The situation is very tense, according to Jakob Larsen, chief safety & security officer at the Baltic and International Maritime Council, one of the largest international shipping associations, and he said BIMCO is receiving reports that more shipowners are exercising extra caution and are opting to stay away from the Red Sea and the Persian Gulf. The Strait of Hormuz, which is 35 to 60 miles (55 to 95 kilometers) wide, and connects the Persian Gulf and the Arabian Sea sees roughly 20 million barrels per day of oil and oil products pass through, accounting for nearly one-fifth of global oil shipments. There are reasons Iran may not close the strait, which has handled 34% of all seaborne-traded oil so far this year, according to a post from MarineTraffic. The strait last effectively closed during the Iran-Iraq "Tanker War" in 1984, and remains a critical transit point for global oil and gas shipments, which led to a surge in the price of crude on Friday. But the Strait of Hormuz is also key for global container trade. The ports in this region (Jebel Ali and Khor Fakkan) are transshipment hubs. The majority of cargo volumes from these ports are destined for Dubai, which has become a hub for the movement of freight with feeder services in the Persian Gulf, South Asia, and East Africa. In a threat circular, British maritime security firm Ambrey advised companies and vessels to prepare rerouting of high-risk transits following military strikes. "In the event of escalation, merchant vessels are advised to reconsider transiting through the Strait of Hormuz and close to Iranian waters, as well as to seek drifting locations close to friendly and protected territorial waters," Ambrey wrote. It also recommended vessel owners and operators to check the affiliation of vessels as part of risk assessment to see if there is any Israel connection before their Arabian Sea, Gulf of Oman, and Persian/Arabian Gulf voyages. Vessels with affiliation or past affiliation with Israel have led to targeting of the ships in the past. BIMCO has advised ship owners to implement ship defense measures outlined in industry documents, report suspicious sightings to the UK's Maritime Trade Operations, reconsider current routing, and keep seafarer safety in mind, are among the recommendations it has shared with clients. Larsen said any perception of the United States' involvement will bring greater risks for ships. "If the United States is suddenly perceived to be involved in attacks, the risk of escalation increases significantly," he said. "An escalation is likely to impact freedom of navigation in the Red Sea and Persian Gulf/Straits of Hormuz. Such an escalation could include missile attacks on ships or laying of sea mines in the Straits." The US-led Joint Maritime Information Center (JMIC) said on Friday that the Strait of Hormuz remains open and commercial traffic continues to flow uninterrupted, and added it has "no indications of an increased threat to the maritime environment." The JMIC is urging companies to review contingency plans for routing, crew welfare, and emergency response in the event of a significant regional escalation when transiting the Arabian Gulf, Strait of Hormuz, and Northern Arabian Sea. Greece, which has a history of Greek-owned tankers being seized by Iran, is also warning its Greek ship owners and operators to send details of their transits through the Strait of Hormuz. In an email to CNBC, Kpler said it is keeping an eye on any vessel diversions, but it remains too early to detect any changes since Israel's attacks.. Recent maritime safety practices in the Red Sea indicate that ship owners are wary of the region, with freight ship diversions ever since the Houthi attacks, despite the longer transit times and a 15% discount in containership fees offered by the Suez Canal to entice ocean carriers to return to previous routes. Suez Canal traffic is down 60% from pre-Houthi attack levels. The maritime industry has been avoiding the Middle East even amid hopes of a truce and with Houthis saying they are not attacking ships, but Israel's strikes have put those hopes of a return to normal Red Sea shipping on hold. "A large-scale return of container ships to the Red Sea seem less likely, a situation which continues to have a major impact on ocean container shipping rates 18 months after Iran-backed Houthi militia in Yemen began attacking vessels in the region," said Peter Sand, chief shipping analyst at Xeneta. Insurance on ships, cargo and crew is likely to be hiked by underwriters, according to Sand. "The inevitable disruption and port congestion, as well as the potential for higher oil prices, would cause a spike in ocean freight container shipping rates, with carriers likely also pushing for a 'security surcharge' on these trades in the coming days," Sand added.
