A third vessel linked to Japan's Mitsui O.S.K. Lines (MOL) has successfully passed through the Strait of Hormuz, confirming a significant shift in a waterway critical to global energy supplies.
This is a big deal because the strait had been effectively shut since late February due to the conflict with Iran. This disruption sent shockwaves through energy markets. Brent crude, the international oil benchmark, shot up by over 38%, climbing from around $79 per barrel in early March to over $110. At the same time, the cost of insuring ships sailing through the area skyrocketed. War-risk insurance premiums surged to between 3.5% and 7.5% of a ship's value. To put that in perspective, a $100 million tanker would have to pay about $5 million for a single transit, a massive increase from peacetime rates.
So, what changed? The situation evolved through a few key stages. First, following the effective closure in February, major Japanese shipping lines halted all transits on March 2, reflecting the high risk of attacks or seizures. This created immense pressure on global supply chains. Second, diplomatic and military pressures began to mount. Bahrain proposed a UN Security Council resolution to secure the strait, while the U.S. signaled its intention to begin naval escorts. These moves likely encouraged Iran to seek a less confrontational approach. Third, Iran appeared to pivot its strategy from a total blockade to what can be described as a "toll booth" model. Instead of blocking all ships, it began allowing passage on a case-by-case basis, seemingly for "friendly" nations or those willing to meet certain conditions.
The recent vessel passages are the first concrete evidence of this new dynamic. A French-owned ship and an MOL-co-owned vessel made the first crossings on April 3. Another followed on April 4. The announcement of a third MOL-linked vessel on April 6 confirms this isn't just a series of isolated events but the beginning of a repeatable, albeit highly controlled, pattern.
In essence, the outlook for the Strait of Hormuz has shifted from a "total shutdown" to a "managed trickle." While this is a positive development that may help put a ceiling on the most extreme oil price fears, the situation remains fragile. The high insurance costs and Iran's role as a gatekeeper mean that risks are still elevated, and a full return to normal operations is not yet in sight.
- Glossary:
- Strait of Hormuz: A narrow, strategic waterway between Iran and Oman, through which about a fifth of the world's oil supplies pass.
- Brent Crude: A major international benchmark for oil prices, used to price two-thirds of the world's internationally traded crude oil supplies.
- War-Risk Insurance Premium: An extra charge applied by insurers to vessels operating in high-risk areas, such as conflict zones, to cover potential losses from war-related events.