Fuel Tanker Rates Surge as Mideast Conflict Puts Hormuz in Focus

(Bloomberg) -- Tanker rates for vessels carrying refined oil products from the Middle East have surged in recent days, as the exchange of fire between Israel and Iran makes hauling fuel through the Strait of Hormuz more risky.

The cost to ship fuels from the Middle East to East Asia climbed almost 20% in three sessions to Monday, according to data from the Baltic Exchange. Rates to East Africa, meanwhile, jumped more than 40%. Tanker owners and managers had been pausing vessel offers in the Middle East as the hostilities between Israel and Iran show no signs of letting up.

There haven’t yet been any major attacks on commercial shipping in the Persian Gulf, but the market is on edge. Major exporters in the region, such as Saudi Arabia and the United Arab Emirates, use the route to ship oil to international markets.

Indicative levels suggested that rates were continuing to rise on Tuesday, according to ship brokers and owners.

Benchmark rates for a medium-sized vessel carrying refined oil product from the Middle East to Japan, known as TC1, rose to 136 Worldscale points on Monday from 114 on Thursday. Costs for smaller vessels doing the same route, or TC5, advanced to 167 points, from 139 two sessions prior.

The corresponding level for mid-sized tankers carrying fuels from the Persian Gulf to East Africa, or the TC17 route, meanwhile, was at 287 Worldscale points on Monday, against 202 two sessions ago.

Worldscale points are a percentage of an underlying flat rate, which is set for each major route at the start of the year.

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