OPTIMISM is in short supply as geopolitical turmoil deepens and the Hormuz crisis adds fresh strain to global shipping. Experts warn the fallout will be long‑lasting, compounding the economic damage left by the pandemic.

Attacks on energy infrastructure are expected to drive inflation as supply tightens and markets struggle to rebalance. Disruptions at QatarEnergy’s LNG facilities, for example, will take a long time to resolve.

“The attacks on energy infrastructure on both sides have been very, very strategic. The chief executive of QatarEnergy has already said it’s a three-to-five-year replacement task,” said Lloyd’s Register CEO Nick Brown while speaking at the Lloyd’s List Intelligence Outlook forum in Singapore on Wednesday.

Consumers are already paying the price for the conflict, with shipping lines levying emergency fuel surcharges to combat the rise in bunker prices. This is in addition to higher energy costs raising the cost of goods globally.

Oxford Economics has lifted its global inflation forecast by “almost a full percentage point” since the start of the year, managing director Martina Bozadzhieva said. 

“It doesn’t sound like a lot, but after you’ve gone through 2022 and you’ve gone through this entire process of bringing down inflation, for the end consumer, this still feels quite painful.”

Bozadzhieva expects the US and Europe to feel the sharpest impact. Europe’s GDP growth could reach 0.8% only if crude prices ease, she said. Globally, Oxford Economics has cut its 2026 growth forecast from 2.8% to 2.4%, with a downside case of just 1.4% if the Hormuz crisis worsens. 

Shipping at the centre of food and energy security

The blockade of the Strait of Hormuz has heightened global concerns over food and energy security, with the sharpest impact falling on the rising cost of food production.

“With 36% of liquified petroleum gas coming out of the Strait of Hormuz currently or before they closed, it has a huge proportion of fertilisers, and that obviously has a huge impact on fruit production and food prices,” said Maritime Strategies International managing director Adam Kent.

Kent expects resource scarcity to weigh heavily on global food and energy security, echoing patterns seen during the coronavirus pandemic. Trade flows are likely to shift as countries diversify their import sources.

As a result, cargo prices are set to remain elevated, a trend Kent warns will be deeply challenging for the shipping sector. 

“The tonne-miles are increasing, but once we get to that demand destruction, then the demand destruction will be greater than increasing tonne-mile input.”

Crude oil markets have already seen this shift with tanker rates rising sharply at the onset of the war in Iran. Tankers have since repositioned to the US Gulf as Asian crude oil importers pivot to North American crude oil with supplies from the Middle East Gulf becoming choked.

But since this pivot, the higher availability of tankers in the US Gulf has led to a reduction in tanker rates, eating away at time charter earnings for very large crude carriers.

Kent expects elevated cargo prices to prolong this pressure on the shipping market.

“From a shipping earnings perspective, we would then expect to see earnings turned down. Tankers never do well when the oil price is over $100 a barrel.”

Brown expects a similar effect on shipping, with elevated tonne-mile demand likely to persist as the conflict reshapes trade routes. 

“A lot of the strain is being put on the unaffected energy infrastructure that I think will have quite significant long-term impacts on those tonne-miles that Adam’s analysing. That maybe we don’t go back to normal, because energy security, I think, might actually be playing seriously into government’s thinking today.”

No quick fixes

Remedying the situation in Hormuz will be an uphill task, with logistical challenges and additional costs on the horizon.

On the logistical front, discussions at Singapore Maritime Week highlighted challenges of determining how vessels will be sequenced out of the strait. Some proposals prioritise ships based on the risk level of their cargo, while others argue for ranking departures according to the health and welfare of seafarers.

The International Maritime Organization shared that a plan is in place when it is safe.

But one thing is certain — efforts will be taxing on time and money.

“If you’ve got 120 ships a day going through there safely, and you have roughly 2,000 [ships] stranded back there, the math to get those out is months and months, and also you have to take into account the flow of traffic going in as well,” World Shipping Council president Joe Kramek said.

He sees the challenge as particularly acute for liners, which lack the flexibility to make rapid decisions on whether to lift cargo or reposition vessels.

“Liners are on networks. These are global networks with transhipment points and they have to be reconfigured... it takes months and months, and it’s tremendously costly to do that.”

Kramek estimates it would take liners more than six months to meaningfully rebalance their networks.