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News of an interim US-Iran memorandum of understanding to wind down the conflict in the Arabian Gulf has raised hopes that shipping through the Strait of Hormuz could gradually recover.
But analysts cautioned that elevated freight costs, war-risk insurance premiums and alternative logistics routes are likely to persist well beyond any formal de-escalation.
Sabyasachi Mishra, business head of the trading division at JSW International Tradecorp, said the cost impact of the conflict is unlikely to unwind quickly, even if crude oil prices ease in the short term.
“Even if you see bunker prices coming down, under the pressure of crude prices gradually tapering down once Arabian Gulf oil supply comes online, I see the war risk premium staying high for quite some time. I don’t think the insurance companies are going to change that in a hurry,” he said.
Mishra added that freight rates along the affected corridor are likely to “remain high” for the next six to 12 months, with any decline dependent on the durability of the ceasefire.
This view was echoed by Alexis Ellender, senior lead of Dry Bulk Insights at Kpler, who said at the Singapore Iron Ore and Steel Forum on Tuesday June 16 that shipping activity could take up to six months to return to pre-conflict levels.
Even after that, freight, insurance and other operating costs in the region could remain 10-20% above pre-war norms for a prolonged period.
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The disruption has already forced a structural shift in regional logistics, with Gulf-based steelmakers leaning on ports outside the strait to keep cargoes moving.
Ayesha Gaglani, head of sales for the iron ore vertical at ArcelorMittal Nippon Steel India, said steelmakers located inside the Persian Gulf are more exposed to disruptions in the Strait of Hormuz than producers along the region’s periphery.
“The steelmakers are looking at the alternative logistics routes, with some routing their cargos through Sohar port or Fujairah port, followed by the inland logistics to their plant,” Gaglani said, adding that the workaround has increased logistics costs for Gulf producers.
Gaglani said Oman’s growing role as a transit hub could outlast the conflict itself.
“I believe that Oman could become a major strategic raw-material hub for iron ore, helping steelmakers build inventories and diversify their supply chains,” she said.
Mishra echoed this view, pointing to a broader rerouting trend that has emerged in recent months.
“Alternative logistics routes have emerged in Oman. Obviously, the three ports in Oman have stood out as vital transit routes for steel mills in the Gulf area, which I think will remain important routes,” he said.
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