Asian tanker freight hits 2025 highs as Israel-Iran tensions spark fears of ship attacks

Asian tanker freight rates rose to year-to-date highs on June 17, as owners secured significant war risk premiums amid fears of commercial ships being targeted during the Israel-Iran tensions, market participants said.

It is only a matter of time before the "missile war" spills over into commercial shipping, making damaging accidents highly likely, a broker in the UAE said, adding that because of this "risk component," freight rates are expected to continue rising.

A chartering source also noted that the geography around the Strait of Hormuz makes it impossible to separate commercial shipping from geopolitical conflicts.

"Owners are seeking and getting that extra premium on the grounds of sending their ships to the war zone," a chartering executive in Seoul said.

"Owners are justified in extracting their 'pound of flesh,' as they are taking a huge risk," a source with a clean oil tanker owner said.

ExxonMobil's shipping arm, Seariver, has taken Greek shipowner Dynacom's 16-year-old LR1 tanker, Constantinos, at w195 for prompt naphtha loading on the Persian Gulf-Japan route, sources said.

This marked the highest freight rate paid so far this year for this global benchmark route, surpassing the w180 recorded over March 17-24, according to S&P Global Energy.

Charterers cited the need for prompt loading as a key reason for the jump in freight rates, but brokers with direct knowledge of the matter said the ship was on commercial subjects for barely three hours -- much shorter than the usual 48 -- due to the fast-approaching laycan and rapidly rising rates. They added that additional time was still required for technical clearances.

Another benchmark route, Persian Gulf-East Africa, has seen freight rates rise by over w100 since late last week. Global oil and gas major Shell placed a Vitol-relet, the Elandra Oak, on subjects at w335 for June 27 diesel and jet fuel loading on the Kuwait-East Africa route, sources said.

Every tanker fixture is now being done at rates higher than previous levels. The previous fixture on this route was secured overnight at w285, when OQ chartered the Virgo, sources added.

All tanker segments -- including VLCCs, Aframaxes and LRs -- are seeing a significant rise in freight rates.

Insurance

Freight rates have jumped at a time when insurance costs have been relatively slow to respond.

"There has not been any dramatic change in insurance premiums, but that may change if civilian maritime activity becomes a target," a major shipping insurance underwriter told Platts, part of Energy.

A tanker broker said there are already fears that ships may be attacked in the region, and the additional war risk premium is expected to at least double in the near term.

Until June 13, the AWRP for a commodity's transit through the Persian Gulf was around 0.05% of the cargo's value for companies with an annual turnover of $500 million or more and closer to 0.1% for others, sources said. With the conflict escalating and no signs of a truce in the near term, the cost is now expected to double, they added.

The AWRP for the cargo and the ships carrying it is payable separately. Until June 13, the AWRP for tankers was around 0.05% of the hull and machinery value for a seven-day transit through the Persian Gulf, though it varied widely depending on the packages purchased by shipping companies and the age of their fleets.

A chartering executive said that until last week, their company was paying a 21-day AWRP of around $40,000 for each LR2 operating in the Persian Gulf.