Shares of COSCO SHIP ENGY (ASX: 01138) rebounded sharply, climbing more than 7%. At the time of writing, the stock was up 7.12% to HK$14, with a turnover of HK$250 million.

The market sentiment improved following former U.S. President Trump's sudden announcement to cancel military action and hints that a peace agreement was within reach. The U.S. Central Command also stated that the Strait of Hormuz remains open for passage.

It has been noted that the Middle East region has recently experienced a surplus of vessels and a shortage of cargo, leading to a sustained decline in VLCC time charter equivalent spot rates since May.

Analyst Perspectives on Market Dynamics

Analysts from Changjiang Securities pointed out that three months into the conflict, current freight rates may have already largely factored in the adverse impacts of cargo shortages from the Middle East due to potential strait blockades.

CITIC Securities noted that the fluctuating U.S.-Iran negotiation process, coupled with a cooling of Middle East tensions, has eroded the risk premium previously priced in due to geopolitical conflicts. Following the initial strait passage disruptions, vessels accelerated their migration to the Atlantic region, leading to an oversupply of cross-regional shipping capacity.

Long-Term Outlook and Price Support

Looking at the medium to long term, global crude oil inventories are at historically low levels. Strategic stockpiling efforts by various nations are expected to generate incremental demand for shipping, which is anticipated to provide support for a subsequent rise in freight rates.