Iran war could push up bunker costs and freight rates

Container freight rates rose this week after seven consecutive declines, driven by higher rates on Transpacific routes. At the same time, the Iran war is beginning to disrupt shipping logistics — primarily oil and gas transport, but also container shipping — which could push up bunker costs and freight rates in the coming weeks.After seven consecutive declines, the Drewry World Container Index is up again. It climbed 3% to $1,958 per 40ft container, driven by Transpacific routes. While rates on the Shanghai–Rotterdam route declined by 2%, rates on the Shanghai–Los Angeles trade route increased by 10%.Drewry expects spot rates on both Asia–Europe and Transpacific trade routes to increase in the coming weeks due to the reopening of factories in Asia now that the Lunar New Year is over.The US and Israeli strikes on Iran and Iranian counterstrikes in the region are disrupting oil tanker movements through the Strait of Hormuz, Drewry said. This could push up fuel prices and war-risk premiums and cause logistical disruptions, which may increase freight costs and container shipping rates.Cargo to the Middle EastWhile the escalation in the Middle East primarily affects oil and gas transport, container shipping is also being impacted. Hapag-Lloyd has implemented a booking stop for all cargo to the United Arab Emirates, Iraq, Kuwait, Qatar, Bahrain, Oman (Sohar), Saudi Arabia (Dammam and Jubail) and Yemen. MSC, Maersk and CMA CGM have also suspended bookings for cargo to the Middle East region until further notice. According to Freightos, these moves mean delays of uncertain duration for shippers to and from the Gulf region. “The canceled sailings mean Gulf-bound containers are already starting to pile up and threaten container yard congestion in India. They could likewise lead to backlogs at Far East origins that may start to be felt by other shippers from those ports if the shutdown lengthens.”For now, the war’s impacts on the container market are mostly local, Freightos expects. “But the longer the conflict continues, the more disruptive it will be and the more broadly it will be felt.” The Strait of Hormuz handles around 2.5% of global container capacity. If the disruption continues, the volumes stuck in the Middle East will be felt, according to analysts. And when the situation eases again, that could lead to congestion at ports. Both, combined with higher fuel prices, could elevate container rates.Red SeaThe situation also affects the Red Sea, since the Houthis have threatened to strike vessels again. While it had been quiet from the Houthis, carriers have diverted their ships back around the Cape of Good Hope.