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Shipping freight rates may rise following Iran vessel seizure, attack on Israel

Shipping freight rates may rise in response to increased tension and uncertainty following the capture of container ship MSC Aries by Iran and the country’s attack on Israel.

Online shipping platform Container xChange said there may be a possibility of diversions away from the Strait of Hormuz, but said it was unlikely to impact the Dubai hub Jebel Ali Port.

The company said war risk premiums will increase, leading to heightened volatility in shipping markets but that Jebel Ali’s importance in global shipping networks means it is actually unlikely to see diversions.

Reuters reported on Saturday that Iran had seized the vessel claiming it was ‘linked to Israel’. This follows more than six-month of violence in the Israel-Hamas conflict and resulting heightened tension between Israel and Iran.

Container xChange said the seizure near the Strait of Hormuz intensified concerns about the security of vital trade routes and the stability of regional hubs like Jebel Ali.

Christian Roeloffs, cofounder and CEO said: “This comes at a time when tensions have already been simmering since the end of November, particularly in the Bab-al-Mandab strait and the Red Sea.”

He added: “As far back as December, we highlighted the vulnerabilities in key maritime routes, such as the Bab-al-Mandab strait, emphasising the potential implications for global trade and shipping networks if the disruptions spread to e.g., the Strait of Hormuz.

“With the recent events, these concerns have flared up.”

Roeloffs added that this latest escalation, which Iran said was in response to an attack by Israel on its embassy in Damascus, further emphasises the fragility of regional stability and its potential impact on the global economy.

Container xChange described the strait as ‘vital for global energy security’.

“Any disruptions in the region can have immediate implications for global oil markets, affecting oil prices, shipping routes, and energy security worldwide,” the company said.
Source: Reuters (Reporting by Imogen Lillywhite; editing by Seban Scaria)

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