Strait of Hormuz Blockade Redirects Global Cargo Flow: Shipping "Diverges," Air Freight "Under Pressure"

According to Xinhua News Agency, Iranian Deputy Foreign Minister Ravanchi stated in an interview on the 12th that Iran allows ships from certain countries to pass through the Strait of Hormuz.

Currently, as the Middle East situation continues to evolve, the transit capacity of the strategic shipping chokepoint, the Strait of Hormuz, is severely restricted. Data from the United Nations Conference on Trade and Development (UNCTAD) shows that shipping activity through the strait has plummeted from an average of 151 ships per day in February to just 4 ships last weekend.

Against this backdrop, the global freight logistics system is experiencing intense turbulence. According to a recent customer notice obtained by First Financial from C.H. Robinson, all services at Persian Gulf ports remain suspended, but major carriers are still maintaining some booking operations at Red Sea and Mediterranean ports. “The global transportation network remains under pressure, with maritime, air, and inland transportation all affected to varying degrees. While freight movement continues, carriers are dealing with limited capacity, selective cargo acceptance, and rising fuel costs, leading to market price fluctuations and service stability issues,” the notice states.

In response to this situation, Marsh, a risk and insurance brokerage firm, Asia-Pacific Maritime, Cargo, and Logistics Business Managing Director Michael Walls, told First Financial that the performance of the air and sea shipping sectors has diverged. Airlines are under profit pressure due to soaring fuel costs and operational disruptions; meanwhile, the shipping sector shows structural differentiation, with operators capable of passing on costs potentially benefiting from tightened capacity.

Multiple Increases in Shipping Costs

C.H. Robinson’s notice indicates that, aside from the Persian Gulf region, the global shipping network is still operating overall, but shipping companies are proactively managing routes, port capacities, and related costs. Due to ongoing security concerns in the Strait of Hormuz, ships cannot normally enter or exit the Persian Gulf, and freight must be evaluated on a case-by-case basis, relying on safe and passable alternative routes.

According to the International Maritime Organization (IMO), hundreds of ships have been stranded in the Persian Gulf over the past two weeks, affecting about 20,000 seafarers. The impact is not limited to oil tankers but also includes cargo ships transporting goods, food, and chemicals. German shipping giant Hapag-Lloyd stated that six of its container ships remain anchored in the western Persian Gulf.

At ports, booking services have been diverted toward the Red Sea and Mediterranean routes. Ports such as Jeddah and New Future City in Saudi Arabia, Aqaba in Jordan, and Suez in Egypt continue to operate; along the Mediterranean, Haifa in Israel, Istanbul in Turkey, and Fujairah in the UAE are still on the list of ports accepting cargo. For cargo already en route through the Persian Gulf, shipping companies are taking emergency measures such as rerouting, returning to the origin port, or terminating voyages at alternative ports to mitigate risks.

On the route side, the increased time costs caused by detours are beginning to influence freight rates. Jervin Naidoo, geopolitical analyst at Oxford Economics, told First Financial during a seminar this week that rerouting via the Cape of Good Hope is regaining favor. While this offers supply opportunities for transshipment hubs like Angola, it also means that global voyage durations could extend by 10 to 14 days.

As a result, C.H. Robinson reports that major shipping companies have begun implementing market-driven General Rate Increases (GRI) and are generally adding surcharges for urgent fuel costs. Additional war risk or emergency surcharges are also levied on cargo directly heading into conflict zones. Naidoo noted that giants like MSC have already imposed “war risk surcharges,” and these extra costs will ultimately translate into higher consumer prices.

Premiums have surged, adding another heavy burden. Mercer, an investment management and consulting firm, Asia-Pacific Multi-Asset Leader Cameron Systermans told First Financial that insurance rates for ships passing through the Persian Gulf could soar by as much as 50%, increasing costs significantly. Walls cited examples: “The premium for a single voyage of a large oil tanker could increase by about $1 million, while premiums for large container ships might rise by $1.5 to $2 million. Actual premiums vary depending on the vessel, cargo, route, and underwriters’ willingness, and can change rapidly with the situation.”

C.H. Robinson warns that if the deadlock persists for more than a few weeks, port congestion, empty container shortages, and vessel suspensions could worsen further worldwide.

Reconfiguration of Air Routes and Shift of Hub Pressures

In the air freight sector, Walls said, “Airline profit expectations are generally being downgraded, as rising fuel costs and operational disruptions directly erode earnings, and insurance payouts often fail to cover actual revenue losses.”

C.H. Robinson’s notice indicates that restrictions in certain airspaces are reshaping global route structures and capacity distribution. Although some flights are attempting to resume, overall operations remain structurally constrained. Detours increase fuel consumption, reduce available cargo space, and extend transit times on multiple routes.

The company states that Middle Eastern airlines are generally adopting a “selective cargo acceptance” strategy, prioritizing high-yield or time-sensitive shipments. This approach causes ongoing fluctuations in available capacity, especially in India and South Asia. A more profound impact is that, as freight bypasses traditional Middle Eastern transshipment hubs, large volumes are rerouted via Europe and other alternative gateways, directly reducing capacity at major European hubs and causing secondary congestion and higher prices on European routes.

Data from TAC Index, a cargo data provider, shows that in the week ending March 9, the Baltic Air Freight Index increased only slightly by 0.2% week-over-week, but rates from several Asian economies to Europe surged significantly, with Singapore outbound air freight rates soaring 47.6% that week, and rates from Vietnam, Bangkok, and India to Europe rising over 10%.

Additionally, some airlines have begun withdrawing or adjusting existing air freight agreements on short notice, citing rising fuel costs, extended routes, and deteriorating operational environments. Many airlines are also introducing fuel surcharges, security surcharges, and war risk surcharges with limited advance notice. C.H. Robinson believes, “These adjustments reflect volatility in fuel prices and efficiency losses from rerouted flights, continually pushing up total air freight costs. Even when capacity remains, price certainty diminishes, and rates will continue to fluctuate with market conditions.”

(Article from First Financial)