The Daily View: Place your bets on length of Hormuz disruption ​

THERE was a 60% chance that Strait of Hormuz traffic will be “normal” by the end of next month, according to the Polymarket prediction platform, as of 11am on Wednesday morning.

Polymarket defines “normal” as a seven-day moving average of 60 or more transits per day, as measured by IMF Portwatch. The IMF Portwatch moving average was 70-80 ships in January through mid-February, and 100-110 in the two weeks before the strait was effectively closed.

The geopolitical situation could change overnight, but the Polymarket odds seem optimistic, even under this generous definition of normality.

For the shipping industry, the practical bar of normality is much higher.

The strait is not functioning properly if most of the transits are vessels fleeing the Middle East Gulf, shadow fleet ships serving Iran and a sprinkling of tonnage operated by risk-loving Greeks.

The strait will truly be back to normal when a VLCC owned by a conservative US-listed owner can negotiate a fixture loading inside the strait, in Saudi Arabia or Kuwait, enter the waterway safely on the ballast leg from Asia, load the crude and depart safely to its destination.

The risk of becoming stuck inside the strait would have to be minimal, so normal demurrage terms would apply.

There must be no US sanctions risk from Iranian tolls.

There must be no concern that seafarers and vessels are at high risk. An owner prefers an asset earning in the market over insurance proceeds from a casualty.

There also must be a typical distribution of spot tankers between the basins. Deployments are now heavily weighted to the Atlantic. That will take time to correct due to the distances involved.

An industry definition of normality would also have to encompass container shipping.

Liner executives need assurances that a resolution will stick, because boxship strings are less flexible than tramp voyages and string changes are costly.

Two and a half years after the Houthis first attacked ships in the Bab el Mandeb strait, container shipping transits of the Red Sea remain very limited.

Iran proved yet again on Wednesday that it effectively controls transits through the Strait of Hormuz, attacking and claiming seizure of two MSC-operated containerships.

The US, as of Wednesday morning, was sticking to a waiting game, extending the ceasefire and betting that its own blockade would force Iran to open the strait.

But the longer Iran keeps transits constrained, the more leverage it has. The world’s energy reserves have held up so far, but reserves are finite — and declining.

The shipping industry needs to prepare for the possibility that Hormuz transits could remain abnormal, not just through the end of May, but for months beyond.

Greg Miller
Senior maritime reporter, Lloyd’s List

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