The global shipping industry once again faced a major setback in getting back to a sense of normalcy in the Middle East this week as risks again increased in the Strait of Hormuz and the Middle East at-large.
The alert level for ships traversing the Strait of Hormuz was raised to the “severe” level after attacks against vessels earlier this week.
New Iranian military action against ships in the Strait of Hormuz
Earlier this week, Iran attacked a cargo ship that was using the Strait of Hormuz to transport goods in the region. Then, yesterday, Iran also attacked a Qatar-flagged oil tanker transporting oil through the Strait of Hormuz. Together, both of the attacks signaled a new level of volatility in the strait after weeks of an uneasy détente and attempts to keep together the fragile ceasefire agreed to between the U.S. and Iran last month.
President Trump’s reaction doesn’t point to a new détente – yet.
On Wednesday, U.S. President Donald Trump made remarks while in Europe that pointed to skepticism from the U.S. and the Trump Administration that Iran wanted lasting peace in the region. In his words, Trump said he believed the fragile ceasefire was “over”. Trump also had tough words for the Iranians after weeks of conciliatory statements, saying that he thinks the Iranians are “wasting their time” regarding negotiations and the ceasefire, and feeling they don’t really want peace in the Middle East region.
Trump also hinted at more military action, including air strikes, from the U.S. against Iran as a result of the latest attacks on ships in the Strait of Hormuz. If attacks escalate, it could further endanger any ships currently in the region.
Oil prices skyrocketed as the shipping of oil is now in question in the Middle of East
Almost immediately after Trump made his comments, markets reacted with oil rising to some of the highest prices in weeks. There were already concerns about a supply chain crunch for oil prior to this week’s developments. If the Strait of Hormuz sees further violence by Iran against vessels there, the U.S. may re-impose a unilateral naval blockade against Iranian ships.
The latest round of attacks and U.S. comments signals Iran’s leverage with the Strait of Hormuz
Clearly, the Iranians see the Strait of Hormuz as their strongest leverage in the Middle East, and globally. Iran has shown the U.S. it is willing to use the Strait of Hormuz to choke-off regional shipping and create a climate of uncertainty.
With Iran’s perspective of the Strait of Hormuz as leverage, ships in the region will once again have to resort to alternative routes, and the recovery towards normalcy will be pushed back weeks or months further. Things were already unsafe, but the latest attacks have increased the risks to a point where shipping giants may choose to avoid the region altogether.
