Strait of Hormuz WEEK 5 Update | Is the Strait OPEN or CLOSED? | Have We Gone Full Looney Tunes?
Quick Read
Summary
Takeaways
- ❖Strait of Hormuz traffic is at critical levels, with only 5-12 transits daily compared to a normal 138.
- ❖Iran is operating a 'toll booth' system, granting passage to specific nations/companies, potentially for a fee.
- ❖The full economic impact of the five-week shutdown is now hitting global markets, causing price increases and supply shortages.
- ❖US oil and LNG exports are surging, creating a potential disincentive for the US to push for a rapid reopening.
- ❖20,000 seafarers remain stranded in the Gulf due to the crisis, facing issues with food, fuel, and water.
- ❖International efforts, like the UK hosting talks, are seen as belated and insufficient without direct military protection for shipping.
Insights
1Drastic Reduction in Strait of Hormuz Traffic
Normal daily traffic through the Strait of Hormuz is approximately 138 ships. However, recent data shows only 5-12 transits per day, including Iranian vessels. This represents a 90%+ reduction in activity, indicating the Strait is not operating at normal capacity.
On 31 March, five transits; on 1 April, twelve transits. Normal passage is 138 ships. (, )
2Delayed Global Economic Impact
The immediate impact of the Strait's shutdown was not felt globally due to the time it takes for ships to complete their voyages. However, after five weeks, the 'big dip' in traffic is now hitting destination markets in Asia, Europe, and the Americas, causing significant economic problems.
A tanker from Saudi Arabia to Rotterdam takes 39.5 days. Ships that sailed before Feb 28th are still arriving, but the 95% drop-off in traffic is about to hit. (, )
3Iran's 'Toll Booth' Control
Iran has established an effective 'toll booth' system, requiring ships to enter its territorial waters and negotiate passage. This allows Iran to exert significant influence over which vessels can transit the Strait, potentially charging fees (estimated at $1-2 million per supertanker) and undercutting international freedom of navigation.
Ships are heading to a 'toll booth' between Lar and Kisham Islands, running through an Iranian toll booth. India, China, and Turkey are negotiating with Iran for ship passages. (, , )
4Surge in US Energy Exports
The disruption in the Middle East has led to record high US LNG exports and offshore oil production. This shift benefits the US energy sector by increasing demand and prices for American crude and natural gas, potentially creating a complex incentive structure regarding the Strait's reopening.
US LNG exports break record high as Middle East war disrupts global supply. Offshore oil hitting a record 714 million barrels in 2025. (, )
5Market Shift Towards Smaller Tankers
The current crisis has made medium-range clean product tankers and Suezmax/Aframax crude carriers more profitable than Very Large Crude Carriers (VLCCs). These smaller vessels are better suited for longer, diverted routes from the US Gulf Coast to global markets, where they can command high charter rates despite longer ballast legs.
Medium-range clean product tankers out of the US Gulf Coast are going for a fortune in charter rates. Suezmax and Aframax crude carriers are also more profitable now. (, )
Bottom Line
The US may have a disincentive to aggressively reopen the Strait of Hormuz due to the economic benefits accruing to its domestic oil and LNG industries from the disruption.
This creates a conflict of interest that could prolong the crisis, as US economic gains from higher energy prices and increased exports might subtly outweigh the global economic imperative to restore free navigation.
Nations heavily reliant on Middle Eastern energy could form new alliances or accelerate investments in alternative energy sources and supply routes, bypassing traditional US-led security frameworks.
The crisis in Hormuz, following the Red Sea disruptions, fundamentally undermines the principle of 'freedom of the seas,' setting a dangerous precedent for other global chokepoints.
This erosion of international maritime law empowers non-state actors or regional powers to control vital trade routes, leading to increased costs, instability, and the potential for similar blockades in areas like the Straits of Malacca or Gibraltar.
Companies and governments should proactively diversify supply chains and invest in resilient logistics networks, exploring new shipping routes, port infrastructure, and regional trade agreements to mitigate future chokepoint vulnerabilities.
Opportunities
Invest in Medium-Range Clean Product Tankers
Acquire or charter medium-range (MR) tankers, specifically for hauling refined petroleum products from the US Gulf Coast. The current market conditions, driven by global disruptions, make these vessels highly profitable for long-haul routes, even with extended ballast legs.
Develop 'Flyaway Packages' for Maritime Security
Create and offer 'flyaway packages' for strategic sealift officers or private maritime security teams. These packages would include secure communications and necessary equipment, enabling rapid deployment onto commercial vessels for convoy or escort missions in high-risk zones.
Key Concepts
Lag Effect in Global Supply Chains
Disruptions in critical shipping lanes do not have an immediate impact. It takes weeks for ships to complete their journeys, and for the absence of new shipments to be felt at destination ports, creating a delayed but significant economic shockwave.
Dual System of Shipping (Parallel Fleet)
Geopolitical conflicts are fostering a bifurcation in global shipping: a 'standard' network adhering to international norms and sanctions, and a 'parallel' or 'dark' fleet operating under different rules, often with state-negotiated protections, to bypass restrictions or pay 'tolls'.
Lessons
- Governments should prioritize direct naval protection and escort missions for commercial shipping in critical chokepoints, rather than relying solely on insurance backstops, to restore confidence and ensure free movement.
- Shipping companies and logistics providers must immediately assess and diversify their supply chain routes, considering longer detours around chokepoints and investing in flexible vessel types (e.g., Suezmax, Aframax) to mitigate future disruptions.
- International bodies need to urgently address the humanitarian crisis of stranded seafarers, ensuring access to food, fuel, and water in conflict zones, and establishing clear protocols for crew changes and repatriation.
Quotes
"Just because we're seeing an uptick in traffic go through doesn't mean we're back to normal levels. Just because you have maybe double-digit numbers go through the Strait of Hormuz, we are nowhere near 138 ships which is the normal passage."
"Even if you see an uptick in the Persian Gulf, you got to be careful about it because the damage has already been done."
"It does no freaking good to do this five weeks later. I'm sorry. It just doesn't... What they need from you is not insurance now, is protection. They need an Arleigh Burke class destroyer. They need F-16s, F-18s, F-35s, and F-22s flying overhead."
"I also think the flip side of that story is the US doesn't have a lot of incentive to reopen Hormuz either. Remember the stories I talked about about LNG being up, about US domestic oil being up, about exports being up."
Q&A
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