Freight rates today... Hype or Real?
- 15 minutes ago
- 2 min read
Tanker rates east of Suez have risen sharply this year, and the pattern suggests it's tied more to how the market prices geopolitical risk than to an actual shortage of vessels or crude oil supply.
The Iran war triggered the first spike, especially after the closure of the Strait of Hormuz on February 28. Freight rates spiked across all tanker segments, with Middle East-to-Asia VLCC rates peaking at $423,736/day, before easing as liftings shifted to Oman and the Red Sea.
Then in July, the Houthis announced a blockade on Bab el-Mandeb (BEM), renewing that premium. BEM transits fell 34% and war-risk insurance ran roughly four times its five-year average in the immediate aftermath. Freight rates have trended upward since.
On a fundamental level, though, the case is thinner. Vessel tracking shows tonnage remains generally available east of Suez, and naval intelligence still rates the BEM threat as only "moderate" based on actual incident frequency. West African exports fell 10.4% year-on-year in H1 2026, and China's seaborne crude imports dropped to a decade-plus low of ~6.2 million bpd in June. These demand signals that should have cooled DPP freight rates in general.
Instead, rates kept climbing, which fits a risk-premium story better than a fundamentals-driven one.
Of course, supply has been improving and is expected to continue. UAE exports hit 3.7–3.9 million bpd in June, the highest since 2020, and OPEC+ has approved its fifth straight monthly output increase, with a further hike agreed for September. Should Hormuz flows stabilize and China resume importing to rebuild inventories at lower prices, vessel demand east of Suez could recover quickly.
However, is this recovery able to counter a sharp correction in risk-premia, or will softer fundamentals catch up with sentiment.
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