GLMS SEC has released a research report stating that the risk of chokepoint disruptions is becoming a normal occurrence, which is shifting the baseline pricing for oil shipping upward. Short-term risk premiums provide elasticity, while medium-term route restructuring and supply rigidity determine the new pricing baseline.

1) The closure of the Strait of Hormuz is a first in history, and its duration has exceeded expectations. Theoretically, this conflict has the greatest impact on crude oil supply, potentially extending the period of high oil and shipping rates significantly. 2) The conflict has spread to the Bab el-Mandeb Strait, creating a "dual strait crisis." 3) Red Sea diversion option: Under extreme conflict scenarios, an alternative route would bypass the Red Sea-Suez Canal-Mediterranean-Cape of Good Hope, a voyage approximately 2.3 times longer than the Hormuz route. 4) In the medium term, route restructuring lengthens voyage distances, and rigid supply constraints drive shipping rates higher. The normalization of geopolitical risks in the Middle East is forcing crude oil importing nations to restructure their trade routes, expanding from a single market in the Middle East to include the U.S. Gulf and West Africa. This route restructuring may permanently increase ton-mile demand for oil shipping, which, combined with supply rigidity, pushes the pricing baseline upward.

Key Points from GLMS SEC

Event Review

The ongoing U.S.-Iran conflict, combined with the Houthi blockade of the Bab el-Mandeb Strait and the disruption of traffic through the Strait of Hormuz, has created a "dual strait crisis," putting pressure on Middle Eastern crude oil exports. As the U.S.-Iran conflict continues, passage through the Strait of Hormuz has been disrupted. Saudi Arabia has increased its use of the East-West Pipeline to transport crude oil from its eastern fields to the Red Sea port of Yanbu for loading. According to Poten & Partners, crude oil loading at Yanbu port exceeded 4 million barrels per day in June and early July 2026, compared to less than 1 million barrels per day during the same period in 2025, representing a year-on-year increase of over 300%.

Geopolitical Risk Escalates to the Bab el-Mandeb Strait

On July 20, 2026, the Houthi group issued a ban preventing ships from loading cargo at Saudi ports and departing. On the same day, two Dynacom tankers (one VLCC and one Panamax) were attacked in the Omani waters of the Strait of Hormuz, and a Sinokor tanker was also attacked. On July 21, Sinokor offered its crew transiting the Strait of Hormuz an additional six months' salary per voyage, but many crew members refused, requesting to leave the ship or be replaced. The Houthis declared a "maritime blockade" targeting Saudi shipping, threatening merchant ships calling at Saudi ports, carrying Saudi cargo, or having any connection to Saudi shipping operations. Approximately 2.5 million barrels per day of crude oil that normally travel south from Yanbu through the Bab el-Mandeb Strait into the Gulf of Aden—destined for buyers in China, South Korea, Japan, and India—are now affected. This puts Middle Eastern crude oil exports under simultaneous pressure from both the Strait of Hormuz and the Bab el-Mandeb Strait, creating a "dual strait crisis."

Subsequent Developments

On July 24, U.S. President Donald Trump ordered a halt to a new round of airstrikes on Iran, ending 13 consecutive days of daily strikes. The essential demands of the U.S. and Iran appear to converge on reopening the waterways, with the dispute centered on control of the straits. Signs of further escalation to watch for include U.S. strikes on Iran's energy export facilities and independent, expanded strikes by Israel, Iran, or the Houthis.

Red Sea Shipping Rates Surge Week-on-Week

According to Clarksons data (July 24), the VLCC-TCE rate for the Middle East-China route was $421,000, down 1% week-on-week. The Red Sea-South Korea route rate was $242,000, a significant increase of 60% week-on-week. Atlantic routes, such as West Africa-China and East South America-China, saw declines of 13% and 15% week-on-week, respectively, with daily earnings falling to $112,000 and $110,000.

Transit Through the Strait of Hormuz Declines

According to data from ShipEyes, before the U.S.-Iran conflict, the average number of transits was about 122 per day. During the ceasefire period, this fell to about 33 per day. From July 19 to July 25, the average daily transit count was 14 vessels, which is only 12% of the pre-conflict daily average.

Risk Warning

Geopolitical conflicts may recur, and oil prices could rise significantly.