Dislocation, trapped tonnage, and rerouting drive a structurally supported earnings environment

Supply shock at key chokepoint drives immediate tightening across global tanker markets
March was defined by a single, extraordinary event: the de facto closure of the Strait of Hormuz following US and Israeli airstrikes on Iran beginning 28 February. Starting in early March, Iranian forces declared the Strait closed, threatening and carrying out attacks on ships attempting to transit. Traffic was reduced to minimal levels, with only a limited number of tankers transiting compared with normal volumes. VLCC, Suezmax, and LR2/Aframax tankers have largely been unable to transit since late February, while freight costs on key Middle East Gulf routes rose from around $3 per barrel at the start of the year to roughly $11 per barrel.

Atlantic Basin earnings surge as Gulf-based index rates move beyond executable levels
The Baltic Exchange’s MEG–China VLCC index reached a record ~$424,000 per day, surpassing prior peaks. However, these levels were widely viewed as non-executable given the absence of open transit. Market participants instead focused on Atlantic Basin routes, where the West Africa–China VLCC index rose sharply to around $264,500 per day and the US Gulf–China route to approximately $155,000 per day, reflecting actual cargo movement. At the same time, an estimated 6–7% of the global crude tanker fleet became effectively trapped in the Middle East Gulf, while partial rerouting of flows tightened available tonnage and supported rates across active markets.

Diplomatic signals emerge late in the month, but structural support is independent of the outcome
A Defence Intelligence Agency assessment suggested Iran could keep the passage shut for one to six months, though diplomatic signals improved late in the period, with Trump indicating talks had been “very productive” and a temporary pause in strikes on Iranian energy infrastructure. A reopening would normalise Middle East benchmarks, but the broader market impact is likely to persist. Rerouting inefficiencies, constrained fleet availability, and a tightening supply profile continue to support earnings, reinforcing the structural case for modern, compliant tonnage regardless of the timing of resolution.