Shipping companies, including owners and operators of tankers and LNG carriers, are on high alert following escalated tensions in the Middle East, with risks of freight rates rising sharply, higher war insurance premiums and other risk mitigation efforts being implemented.
Japan’s Mitsui O.S.K. Lines, one of the country’s largest shipowners, issued a new safety advisory for its vessels transiting the Strait of Hormuz, the key choke point for oil and gas ships traversing the Persian Gulf, amid a tense stand off between the US and Iran.
Under the latest safety advisory, which was issued after a US strike on Thursday killed Iranian General Qassem Soleimani in Baghdad, MOL advised its ships to keep a distance from the Iranian coast and avoid Iranian waters when transiting the Strait of Hormuz, a company spokesman said Monday.
NYK Line, another major Japanese shipowner, also maintained its measures in place, including maximizing the speed of its ships passing through the Strait of Hormuz, a spokesman said Monday.
MOL has about 30 ships with UK-linked flags including those not transiting the Strait of Hormuz, accounting for about 3% of its total fleet, the spokesman said. UK-linked flags include Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, and Isle of Man.
The UK is beefing up security around the Strait of Hormuz. Iran in the past had threatened to close the waterway in case of war in the region.
“I have instructed preparations for HMS Montrose and HMS Defender to return to accompanying duties of Red Ensign Shipping in the Strait of Hormuz,” UK defense secretary Ben Wallace said in a statement on Saturday.
“The government will take all necessary steps to protect our ships and citizens at this time.”
The Strait of Hormuz is the world’s most important oil choke point because of the large volumes of oil that flow through it.
In 2018, its oil flow averaged 21 million b/d, or the equivalent of about 21% of global petroleum liquids consumption, according to the US Energy Information Administration.
HIGH RISK OF MARITIME ATTACKS
Singapore-based ship brokers said risk management teams have been in meetings since the attacks took place and owners and charterers are concerned as the situation is much more serious than the tanker attacks of 2019.
“So for the (freight) market has not seen any knee jerk reactions yet. People are still coming back from holidays and the picture will be clearer this week,” a ship broker said.
On Friday, maritime security consultancy Dryad Global said that it is not inconceivable that the threat will spill out into the maritime domain.
“Dryad assess that the high threat to vessels within the region remains primarily focused on US and Saudi-flagged vessels. Dryad further assesses that there is an additional threat to vessels carrying US cargoes or assets or are seen to be linked to US economic interests,” it said in an industry alert.
“Marshall Islands-flagged vessels, for example, which come under US protection as a US associated state, are also at a heightened risk. There is a latent, but similarly high risk to vessels belonging to states that support the US Sentinel operation,” it added.
The Sentinel Program is a security initiative launched by the US military to build a multinational force for the protection of sea lanes in the Persian Gulf and the Gulf of Oman in 2019.
It remains highly unlikely that Iran will attempt to close the Strait of Hormuz due to geopolitical repercussions from other stakeholders like China and because Iranian support to Syria remains dependent on the free passage of oil through the Strait of Hormuz, according to Dryad’s assessment.
It said while Iran’s activities in the later part of 2019 had shifted from the maritime domain towards high impact onshore attacks, the risk to vessels beyond the Strait of Hormuz, notably within the Red Sea, remains high for US-linked vessels.
“Iran is able to, and has, previously targeted Saudi vessels via Iranian proxies in Yemen, a risk that remains extant,” it said, adding that escorts by vessels other than the US Navy should be considered by ship owners.