Iran conflict drives Gulf tanker earnings toward $650,000 a day
War-risk premiums, longer voyages and a reduced flow through the Strait of Hormuz have pushed VLCC rates to historic levels.
Daily earnings for Very Large Crude Carriers on the benchmark Gulf tanker route have approached $650,000 as the Iran conflict disrupts shipping through the Strait of Hormuz. Rates were about $20,000 to $40,000 a day 18 months ago.
Before US-Israeli strikes escalated the conflict on Feb. 28, roughly 125 ships a day passed through the strait. That flow has fallen to about 25 ships, sharply reducing available tanker capacity while demand remains elevated.
War-risk insurance has added to the cost. Premiums for Gulf transits rose from about 0.15% to 0.25% of a vessel’s hull value to as much as 1.5% or more during periods of peak tension.
VLCC earnings on Gulf-Hormuz routes reached nearly $470,000 a day in June and exceeded $800,000 during peak periods in August. Frontline reported $559 million in first-quarter net profit, its strongest quarterly result since 2004, while average spot time-charter rates topped $100,000 a day.
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Tankers that continue through Hormuz are earning the largest premiums. Ships avoiding the strait are taking longer routes around the Cape of Good Hope, keeping vessels out of service for weeks longer per voyage.
A $650,000 daily rate for a VLCC carrying two million barrels adds about $0.30 to $0.50 per barrel per day of transit. A two-week Gulf-to-Asia voyage could therefore add roughly $4 to $7 per barrel in transport costs before insurance and other surcharges.