Caitong Securities Co.,Ltd. released a research report suggesting that the joint U.S.-Israel airstrike on Iran on February 28, 2026, has triggered significant domestic political shifts within Iran. Drawing parallels with Venezuela's political transition, the report indicates that Iranian crude oil may re-enter compliant markets more rapidly than previously anticipated. Currently, spot freight rates for VLCCs on the TD3C route have surpassed $200,000 per day, while one-year time charter rates for VLCCs are nearing $120,000 per day. Against the backdrop of escalating geopolitical risks following the airstrike, this environment is expected to further enhance the pricing power of major shipping operators who control significant capacity. The report expresses optimism regarding a sustained upward trend in average freight rates. The convergence of geopolitical shifts, tightening compliance regulations, and the market control exerted by large operators presents a favorable opportunity for oil tanker companies to experience a period of strong earnings performance. The key points from Caitong Securities Co.,Ltd. are as follows:
Significant changes within Iran have heightened expectations for a shift towards compliant oil demand. Global seaborne crude oil exports averaged approximately 39.3 million barrels per day in 2025. Iran's seaborne crude exports accounted for about 1.6 million barrels per day, representing roughly 4.1% of the global total. The joint U.S.-Israel airstrike on Iran on February 28, 2026, has led to major domestic political changes in Iran. By comparing this situation to the political transition in Venezuela, the report suggests that Iranian crude oil might re-enter compliant markets at a faster pace than expected.
OPEC+ continued production expansion benefits compliant demand, while surging geopolitical risks boost shipowners' bargaining power. Following a seasonal pause on production increases during the first three months of 2026, OPEC+ held its monthly meeting on March 1, 2026, confirming a production increase of 206,000 barrels per day for April. This increment slightly exceeded prior expectations, potentially reflecting concerns over potential supply shortfalls. Overall, this development is viewed as positive for compliant oil transportation demand. Furthermore, current VLCC TD3C spot rates have exceeded $200,000 per day, and one-year VLCC time charter rates are approaching $120,000 per day. The surge in geopolitical risk following the airstrike on Iran is anticipated to further strengthen the pricing power of major shipping operators with controlled capacity, supporting a forecast for higher central freight rate levels.
Investment recommendation: Benefiting from their large-scale tanker fleets, China Merchants Energy Shipping and COSCO SHIP ENGY are positioned for significant earnings elasticity. Using VLCCs as an example, for every $10,000 per day increase in Time Charter Equivalent (TCE) rates, the annualized net profit of China Merchants Energy Shipping and COSCO SHIP ENGY is projected to increase by approximately RMB 1.1 billion and RMB 950 million, respectively. Currently, catalyzed by multiple favorable factors including geopolitical changes, stricter compliance, and market control by major operators, oil tanker companies are poised to capitalize on an opportunity for substantial earnings growth. The report recommends core holdings China Merchants Energy Shipping (601872.SH) and COSCO SHIP ENGY (600026.SH, 01138).
Risk warnings include a substantial decline in crude oil demand, OPEC+ production increases falling short of expectations or a shift towards production cuts, sanctions implementation being weaker than anticipated, slower-than-expected progress on environmental policies, and war risks.