The “Emirates 24” website reported that the Israeli newspaper “Calcalist” reported that shipping traffic in the Strait of Hormuz had almost completely stopped, coinciding with an attack on a tanker, stressing that the economic consequences of this development could be dire for the global economy.
Calcalist stressed that the direct economic effects of this stop will be disastrous, because Hormuz is not just a shipping lane, but rather a vital choke point for energy exports. It is estimated that about 80% of cross-Strait exports go to Asian markets.
The newspaper pointed out that “drama is no less important in the gas market. In such crises, the oil market has a certain ability to maneuver, through stocks or increased production from countries outside the cycle of violence, while the liquefied natural gas market depends on sailing schedules and unloading dates.”
According to the Israeli newspaper, at least 14 liquefied natural gas tankers slowed down, turned around, or stopped in or around the strait, indicating real turmoil, not just fears.
According to the analysis, the damage to the overall economy as a result of closing the Strait of Hormuz is immediate and cannot be prevented, and it is sufficient for transit through it to be classified as “dangerous” or “unexpected” to activate three mechanisms that raise prices globally.
She explained that the first mechanism is waiting time and delay fees, as every day that passes without safe crossing in the strait represents a direct cost to shipments and contracts. The second mechanism is war risk insurance. When the risk increases, the insurance price rises significantly, which immediately leads to the removal of “weak” ships from the region. The third mechanism is competition for alternative shipments, especially in Asia, which receives most of its supplies through Hormuz. The newspaper continued: “The longer the closure lasts, the Asian markets will try to seize supplies destined for Europe.”
The newspaper asked about the existence of alternatives to the Strait of Hormuz, and replied that they exist, but they cover only a small part. The International Energy Agency estimates that there are pipelines with a potential capacity of between 3.5 and 5.5 million barrels per day that could divert supplies bypassing Hormuz, but this remains a small fraction compared to the 20 million barrels that pass through the strait.
Calcalist concluded that what is happening in Hormuz is not just a theoretical matter. Even if there is not a noticeable shortage in the markets currently, the world has begun to price a “Hormuz premium,” and this will ultimately be reflected in the prices of energy inputs, transportation and insurance costs, and the costs of importing raw materials and products in the near term. If LNG shipments continue to be disrupted, competition for alternative gas shipments may also put pressure on other markets. (Emirates 24)
