Consumers are set to pay higher prices, but US producers could benefit, analysts say.
Several ships are anchored as Iran threatened to close the Strait of Hormuz, where hundreds of ships carrying oil pass daily, potentially affecting worldwide trade [File: EPA/Stringer]
The United States and Israel’s war with Iran has spilled over into the Strait of Hormuz, one of the world’s most critical energy chokepoints, prompting a surge in oil prices.
Shipping through the strait, which carries one-fifth of the oil consumed globally as well as large quantities of gas, has ground to a near halt amid Iranian attacks on oil tankers in the region.
A commander in Iran’s Revolutionary Guard Corps (IRGC) said on Monday that the strait was “closed” and that any vessel attempting to pass through the waterway would be set “ablaze.”
At least five tankers have been damaged, two personnel killed and about 150 ships stranded around the strait, which separates Iran and Oman.
Oil prices rose above $79.40 per barrel on Monday, after hitting $73 per barrel on Friday amid rising tensions in the lead-up to Saturday’s joint US and Israeli attacks on Iran.
“Traffic is down at least 80 percent,” Michelle Bockmann, a senior maritime intelligence analyst at Windward, told Al Jazeera, adding that the shipping industry had already been grappling with a “huge spike” in freight costs for routes out of the Middle East and the Gulf.
Cormack McGarry, the director of maritime intelligence and security services at Control Risks, said that mariners received a message from Iran via the international distress frequency on Saturday that the strait was closed.
“Every ship in the area would have heard that… and it was enough for most ships to pause.”
Vessel tracking service Kpler showed that limited traffic continued in the strait – primarily ships flying the flag of Iran and its major trading partner China – on Sunday.
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Bockmann said it was possible that some ships had passed through the strait after switching off their Automatic Identification System to avoid detection.
McGarry said that a total shutdown of the strait by Iran would mean it was “tightening the noose around its own neck”.
“If they attack shipping, they are encouraging the Gulf states to join the war, and it’s a big step for Iran to go there,” McGarry said.
“The idea they could affect a long-term sustained closure of the strait is completely unlikely,” he added. “I’m more worried for regional supply chains.”
Still, most commercial operators, major oil companies, and insurers have effectively withdrawn from the corridor, according to Kpler. Insurance premiums had already reached a six-year high ahead of the war.
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“There has definitely been an escalation overnight, with pressure on energy infrastructure in the Gulf and Qatar pre-emptively pausing LNG production,” Rachel Ziemba, a senior adjunct fellow at the Center for a New American Security, told Al Jazeera.
“With tankers unwilling to come into the Gulf, it sends a message of what is at stake.”
US not immune
Iran had ramped up oil exports to multi-year highs in February in anticipation of the US-Israeli strikes, Kpler said.
The Gulf states, too, had been front-loading their oil supplies, helping offset supply problems in the short term, said Ziemba.
The majority of the crude oil shipped through the Strait of Hormuz goes to Asia, with China, India, Japan, and South Korea accounting for nearly 70 percent of shipments, according to the US Energy Information Administration.
Apart from oil, energy products facing supply pressures include jet fuel and liquefied natural gas.
Some 30 percent of Europe’s supply of jet fuel originates from or transits via the strait, while one-fifth of the global supply of LNG passes through the waterway.
Even though the US is no longer dependent on Middle Eastern oil, and it can take weeks for pump prices to be affected, it is not immune to disruptions.
“The situation is very fluid,” David Warrick, an executive vice president at the supply chain platform Overhaul, told Al Jazeera.
As companies reroute their ships, including around the Cape of Good Hope, near the south of Africa, they are facing longer delivery times and additional costs.
“With war risk insurance and additional emergency contingency insurance, it’s adding on thousands of dollars,” Warrick said.
“This is prime time for sourcing for raw materials and planning for holidays… and any disruption at this time is not really good for supply chains,” Warrick said.
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There could also be winners from the disruption.
Being a net producer of energy, a rise in prices will benefit US oil producers, Ziemba said.
“Consumer sectors lose, but producers benefit. The question is: How long will this last? It’s hard to remain at this intensity for great lengths of time,” she said
Three tankers damaged in Gulf and one seafarer killed as US-Iran conflict escalates
Item 1 of 2 A map showing the Strait of Hormuz and Iran is seen in this illustration taken June 22, 2025. REUTERS/Dado Ruvic/Illustration/File Photo
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A map showing the Strait of Hormuz and Iran is seen in this illustration taken June 22, 2025. REUTERS/Dado Ruvic/Illustration/File Photo Purchase Licensing Rights, opens new tab
Summary
Hundreds of ships drop anchor owing to growing risks
War risk insurance rates expected to surge
Iran says it has halted navigation through Strait of Hormuz
DUBAI/LONDON, March 1 (Reuters) - At least three tankers were damaged off the Gulf coast and one seafarer was killed as Iranian retaliation for U.S. and Israeli strikes on Iran exposed ships to collateral damage, shipping sources and officials said on Sunday.
Risks to commercial shipping have surged in the past 24 hours, with more than 200 vessels including oil and liquefied gas tankers dropping anchor around the Strait of Hormuz and surrounding waters, shipping data showed on Sunday.
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Iran has said it has closed navigation through the critical waterway, prompting Asian governments and refiners - key buyers - to assess oil stockpiles.
Major container shipping lines have rerouted round the Cape of Good Hope.
"The U.S.-Israeli attack on Iran dramatically increases the security risk to ships operating in the Persian Gulf and adjacent waters," said Jakob Larsen, chief safety and security officer at shipping association BIMCO.
It was not immediately clear who launched the projectiles and drones that targeted or damaged ships on Sunday.
U.S. President Donald Trump said meanwhile that the United States had destroyed nine Iranian navy ships and pummeled Iran's naval headquarters.
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'SHIPS MAY BE TARGETED DELIBERATELY OR IN ERROR'
"Ships with business connections to U.S. or Israeli interests are more likely to be targeted, but other ships may also be targeted deliberately or in error," BIMCO's Larsen said.
A projectile hit the Marshall Islands–flagged product tanker MKD VYOM, killing a crew member on board as the vessel sailed off the coast of Oman, vessel manager V.Ships said on Sunday.
"The vessel suffered an explosion and subsequent fire after being struck," V.Ships Asia said in a statement.
"It is with great sadness that we confirm one crew member, who was in the engine room at the time of the incident, has died," the statement said.
The International Maritime Organization, the U.N.'s shipping agency, urged companies to avoid sailing through the affected area until conditions improved.
A Palau-flagged oil tanker under U.S. sanctions was also hit on Sunday off Oman's Musandam peninsula, injuring four people, the country's maritime security centre said without specifying what hit the vessel.
houses have suspended crude oil, fuel, and liquefied natural gas shipments via the Strait of Hormuz.
Another tanker in the UAE port of Jebel Ali was almost damaged by falling debris from an aerial interception after overnight Iranian attacks targeting Gulf states, maritime security sources said.
A third, oil-bunkering tanker was damaged off the UAE coast, two shipping sources said.
A fourth vessel, an oil products tanker, was targeted with a drone off the coast of the UAE, although it managed to sail without being damaged, maritime security sources said.
Port operations at Jebel Ali have been paused due to the situation, officials said on Sunday.
RISK OF MINES
Vessels were advised to keep clear of the Strait of Hormuz and wider Gulf of Oman because of the risk of retaliatory strikes by Iran, the U.S. transport ministry's Maritime Administration said separately in a note on Saturday.
"Any U.S.-flagged, owned or crewed commercial vessels that are operating in these areas should maintain a standoff of 30 nautical miles from U.S. military vessels to reduce the risk of being mistaken as a threat," it said.
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