Tanker freight rates have surged to 4.5 times the base rate, as the war costs of Middle East conflicts are being written into the bill for every barrel of crude oil.

Tanker freight rates have surged to 4.5 times the base rate, as the war costs of Middle East conflicts are being written into the bill for every barrel of crude oil.

The escalating situation in the Middle East is transmitting to the global economy through the energy transportation market. This week, international tanker freight rates climbed to record highs as the conflict between the US and Iran intensified, exacerbating market concerns about renewed inflationary pressures.

According to data from the Baltic Exchange, freight rates for Very Large Crude Carriers (VLCCs) from the Gulf of Oman to China surged this week to around 450 of the Worldscale international oil shipping benchmark rate, or 4.5 times the normal benchmark rate, equivalent to about $11.50 per barrel, setting a new record high since the route was launched.

This shipping route was launched after the outbreak of the war between the US and Israel and Iran. The soaring freight rates indicate that the Middle East conflict is spreading to a broader economic level. If high transportation costs persist, they will increase inflationary pressures, placing an even greater cost burden on businesses and consumers already facing uncertainty from the escalation of the conflict.

The conflict between the US and Iran directly drives up shipping costs.

Wall Street News reported that earlier on Friday, CCTV International News cited a video statement released on September 11 by Houthi spokesman Yahya Sarreya, stating that the Houthis launched a large-scale offensive against "Saudi-backed forces" on Yemen's west coast starting September 3, capturing six districts in Taiz and Hodeidah provinces within nine days, covering an area of 5,400 square kilometers. The Houthis also claimed that the operation resulted in hundreds of enemy casualties or prisoners, and that they intercepted 32 Saudi warplanes and shot down nine drones.

According to Xinhua News Agency, shipping through the Bab el-Mandeb Strait has been significantly affected after the Houthi rebels captured the Red Sea port city of Muha. As of approximately 3:00 PM local time on the 10th, only 6 ships had passed through the Bab el-Mandeb Strait, compared to 30 on the 9th, 26 on the 8th, and 29 on the 7th.

Xinhua News Agency reported that after capturing Muha, the Houthi rebels continued their advance towards the Bab el-Mandeb Strait and surrounding islands, leading to new changes in the Red Sea shipping lanes.

Ioannis Papadimitriou, an analyst at energy data company Vortexa, said:

The escalating clashes between the U.S. Navy and Iran continue to push shipping costs in the Gulf region to new highs.

He added that the risks of operating in the Middle East Gulf and surrounding waters have increased, putting pressure on freight rates in the Gulf of Oman and consequently tightening the number of tankers available in the region.

The price increase effect has spread to global routes.

The military escalation in the Middle East has triggered broader repercussions, with freight pressures extending beyond the Gulf region. According to Reuters, freight rates for very large crude carriers (VLCCs) on the West Africa-Asia route have also reached record highs, indicating that the overall supply and demand dynamics of the tanker market have been affected.

Analysts point out that the widening risk premium in the Middle East region has led shipowners to avoid high-risk routes, allowing for a redistribution of capacity globally, which in turn has driven up freight rates on other major routes.

This spillover effect means that even if the conflict does not directly affect a particular shipping route, global crude oil buyers and refiners will still find it difficult to remain uninvolved.

The rise in tanker freight rates directly increases the cost of crude oil at the port of call, and this transmission along the industrial chain to refined oil products and downstream consumer goods. Given that the current inflation situation has not yet fully stabilized, this transmission path has raised concerns in the market about a renewed rise in price pressures.

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