Excess capacity and low demand weight heavier on container rates than high-priced bunker fuel

While oil prices surge, container freight rates are moving in the opposite direction. Excess capacity and subdued demand are pushing rates lower, outweighing the impact of rising bunker fuel costs. It should be noted, however, that rates remain high for the low season.Although domestic pressure on Trump to end the war in Iran is increasing—including from within his own party, with a view to the midterm elections in November—he is, for the time being, pursuing a different strategy. The American president is attempting to bring Tehran to its knees by financially squeezing the regime. Meanwhile, oil prices are above $110 per barrel, pushing up the cost of bunker fuel as well. Despite high-priced bunker fuel and tensions in the Middle East, the Drewry World Index dropped for the third week in a row, by 1%. Low demand and excess capacity are causing this decline. On both the Asia–Europe and the Transpacific trade routes, rates decreased. Although rates are going down, they are still elevated. Prices normally reach their floor during the low-demand season for ocean freight, according to Freightos. According to The Wall Street Journal, Trump has instructed staff to prepare for a prolonged blockade of Iranian ports, depriving the regime of oil revenues. Trump hopes this will compel Tehran to comply with the US demand to abandon its nuclear programme. Since the US began blocking Iranian ports, even fewer oil tankers have been passing through the Strait of Hormuz than when Iran itself started disrupting traffic there. On 20 April, oil prices reached their highest level since the start of the war on 28 February. The newspaper also reports that, according to some US officials, the war is likely to end without violence and without a nuclear agreement.