The Hormuz closure has fundamentally shifted LPG flows, driving freight earnings to all-time highs

A closed Gulf has pushed Asian buyers toward US supply
With Middle East Gulf volumes largely cut off since late February, Asian LPG buyers have turned to the US Gulf Coast to cover the shortfall. A growing share of those cargoes are now travelling via the Cape of Good Hope rather than the Panama Canal, nearly doubling voyage times and removing vessels from the market for longer. The result is a sharp tightening in available tonnage that has pushed VLGC spot rates to all-time highs, more than doubling since the closure began.

The rate environment remains firm, with a Hormuz deal the key variable
With the position list tight and charterers competing for vessels well into June, there is little near-term supply relief in sight. The primary risk to the current rate environment is a Hormuz deal: restoring Middle East Gulf supply would reduce the distance premium that is currently underpinning earnings. However, vessel repositioning and the gradual re-engagement of insurers mean any normalisation is likely to be slow rather than immediate, limiting the downside for owners even if an agreement is reached.