Damage Control

Last week, tanker attacks in the Middle East hit their highest levels since the war began and that pace has continued this week. Further, in the past 48 hours, attacks have broadened to the Gulf of Oman and Arabian Gulf, expanding beyond the Hormuz chokepoint. Since the war started, Gibson has tracked 95 attacks on tankers in the region, including Iranian trading tonnage. The actual number is likely higher due to suppressed reporting. Damage has ranged from superficial to severe, with some vessels requiring extensive repairs or being lost entirely. We count 9 VLCCs being struck in the last 12 days alone.

The increase in attacks coincided with the breakdown of talks following the UN General Assembly in late September, suggesting that Iran is once again escalating attacks in the absence of any progress towards a diplomatic resolution. Surprisingly, the US is yet to publicly retaliate, as it did during early September when several tankers were sunk or disabled, though this could change after the midterm elections in early November. Remember “a tanker for a tanker”?

With the rate of attacks high, vessel supply could tighten further as more vessels are removed from service pending repairs. Insurance premiums and freight rates are also likely to rise as owners reassess risk. The reported attack on a VLCC in the Gulf of Oman further adds to the uncertainty, given that is where the majority of Middle East crude is transhipped onto vessels unwilling to risk a Hormuz transit.

This story was originally published by Breakwave Advisors. Read the full story at Breakwave Advisors →