Freightos Baltic: Freight rally loses steam as Hormuz reopening eases fuel cost pressures

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Global ocean freight rates continued to edge higher in the week to 17 June, although the pace of increase has moderated markedly as geopolitical tensions in the Middle East show signs of easing.

Market sentiment eased after reports that the US and Iran are set to formally sign a peace agreement on 19 June, paving the way for the reopening of the Strait of Hormuz, potentially within the next 30 days. The prospect of restored traffic through the critical chokepoint has already eased concerns over bunker costs, reducing one of the key inflationary pressures on container freight rates.

However, a swift return to normality remains unlikely. Industry experts estimate that daily vessel transits may take several weeks to recover to even half of pre-conflict levels, while a full normalisation of oil flows could require up to six months. Iranian naval mines have significantly constrained navigation through the waterway, necessitating extensive demining operations and limiting ships to a handful of designated safe corridors in the interim.

The disruption extends beyond the Strait itself. Vessel dislocations and infrastructure damage across the region continue to hamper logistics. Even after crude exports resume, shipments to the Far East typically require around seven weeks to arrive, with refined products such as bunker fuel and jet fuel becoming available only after crude deliveries are processed.

For the container sector, softer fuel costs should temper some of the upward pressure that has kept freight rates elevated on a year-on-year basis since the onset of the conflict. Spot cargoes are likely to benefit first through lower Emergency Fuel Surcharges. However, large shippers operating under annual contracts will continue to absorb elevated costs through third-quarter Bunker Adjustment Factors (BAFs), even as underlying fuel prices retreat.

Meanwhile, the unusually early start to the peak shipping season has added another layer of uncertainty. Frontloading activity, driven by anticipated BAF increases, tariff concerns and expected manufacturer price hikes, has accelerated cargo bookings. Some market participants now expect volumes to peak in June rather than later in the third quarter, raising the possibility that carriers could face greater resistance to implementing further rate increases in July after successfully pushing through higher pricing in June.

Written by: Rochelle Nguyen