Relief as Trump backs down on Hormuz toll, but fear of escalation in Gulf conflict re-ignited

There was a huge sigh of relief among ocean carriers, forwarders, and shippers when the news came that President Trump had backed away from plans to charge a 20% toll fee on cargo going through the Strait of Hormuz. But fear of an escalation in the Gulf conflict has been re-ignited over the past few days, creating an uncertain outlook once again for ocean and air freight.

BIMCO, the global maritime trade association, told AJOT that its analysis of the proposed fees indicated that the financial impact on shipping could have been substantial; for a Very Large Crude Carrier (VLCC), approximately $27M per voyage.

For container shipping, BIMCO estimates the fee could have ranged from $65million to $260 million per voyage, depending on vessel size, from 5,000 TEU to 20,000 TEU.

Jakob Larsen, BIMCO's Chief Safety & Security Officer, told AJOT that the proposal to fund security through a levy on cargo transiting the Strait of Hormuz had been innovative and well-intentioned. However, the increased cost would have constituted a further disincentive to transiting the Strait, which could only have been outweighed by a significant reduction in the threat from Iran.

Heightened Threat to Commercial Shipping, Critical Infrastructure

However, short of a resolution between the US and Iran as to how the transit of vessels through this strategic waterway will be managed in the future, the outlook remains one of considerable uncertainty for anyone engaged in and dependent on the maritime sector in the Persian Gulf.

And reaching a deal on this issue would appear to be as far away as ever, given that the US claims that the Strait is currently open while Iran considers it to be closed.

Earlier this week, the US launched strikes on Iran following Tehran’s attacks on ships moving through the Strait on a ‘corridor’ overseen by the American military.

Iran retaliated with missiles and drones, which targeted US allies in Bahrain, Jordan, and three tankers transiting the Strait.

The situation has since escalated with the US military resuming its blockade of the waterway to Iranian ships, effective midnight Wednesday, Dubai local time.

“Following the resumption of hostilities between the United States and Iran, the reintroduction of a naval blockade against Iran was widely anticipated,” BIMCO’s Larsen noted.

“Measures such as a blockade that further increase pressure on Iran are likely to heighten the threat posed by Iran to both commercial shipping and critical infrastructure across the Gulf region.

“Given the many uncertainties associated with the proposed way ahead, we are very concerned with the potential for serious escalation of the security situation in the Strait of Hormuz and beyond.”

MoU in Serious Peril

The Memorandum of Understanding (MoU) signed in June gave negotiators 60 days to reach a final agreement, but close to half of this allotted period has already elapsed with little sign of progress.

The developments of the past few days have put the interim deal in serious peril. Behind the scenes, regional mediators are reported to be working around the clock to offset the return of full-scale war and get the two sides back to the negotiating table.

At this juncture, neither the Trump Administration nor the Iranians seems seriously ready to return to the negotiating table. And the question of not only whether hostilities between the US and Iran will escalate, but whether the war will expand in the Middle East.

Houthi militia and Bab el-Mandeb

The focus of the conflict is now firmly on the Strait, Iran having long realized that it represents massive leverage in its dealings with the US.

However, Iran has also signaled that it could use its ally in Yemen, the Houthis, to close the Bab el-Mandeb strait at the southern entrance of the Red Sea, opening a new front in the conflict. And the recent attack by the Saudi-supported official government of Yemen on Sanna International Airport could easily spark a widening of the conflict and put the Bab el-Mandeb strait in the crosshairs of the Iranian-supported Houthis, effectively cutting off both critical chokepoints to international trade.

Ocean shipping lines are steadily returning to itineraries via the Suez Canal – a major point of transit for oil and containerized shipments -as attacks on ships by the Houthis, which began in November 2023, have ceased completely in recent months.

The attacks saw ocean carriers take a much longer route around the Cape of Good Hope at the southern tip of Africa, adding a couple of weeks to journeys and driving up fuel and other operating costs.

Return to Air Cargo Disruption?

Meanwhile, an escalation in the conflict is also posing a fresh threat to air transport services to and from the Gulf.

The European Union Aviation Safety Agency issued a Conflict Zone Information Bulletin on July 14, warning airlines against operating in the airspace of Bahrain, Kuwait, Qatar, and the United Arab Emirates, as well as over the Gulf of Oman.

"Unpredictable military developments, combined with the possible use of missiles, drones, combat aircraft, and air-defense systems, create a high risk to civil flights, it added.

DHL, which operates an extensive air network in the Gulf region, was approached for comment.

Earlier in the week, in a response to questions from AJOT, it said: “Due to the volatile security situation in the Middle East, there may be occasional interruptions or restrictions on air traffic within the region.

“We are continuously monitoring and evaluating the situation and have implemented measures to minimize disruptions for our customers. The safety of our employees and our customers' cargo is of utmost importance to us.”

New Port and Container Terminal

Returning to ocean shipping, DP World is planning to build a new port and a container terminal on the United Arab Emirates’ east coast that would reduce Dubai’s dependence on its flagship Jebel Ali hub and bypass the Strait of Hormuz, according to The Financial Times.

It said the Dubai-based port operator was in talks to develop a brand-new multipurpose port in the coastal area of Fujairah and a new terminal at the existing harbor in the same emirate, quoting people familiar with the matter.

Shifting some of the port’s capacity outside Dubai marks a seismic change for the emirate, which has established itself as a global trade and finance hub partly off the back of Jebel Ali’s growth, the report noted.

But DP World’s plans align with a broader UAE government initiative to attempt to “bulletproof” its economy against future hostilities with Iran by reducing its dependence on the Strait of Hormuz

Activity at Jebel Ali, the largest container port in the region, fell between 90 and 95% after Iran closed the Strait following US-Israeli attacks, triggering a response from DP World to find alternatives to the waterway.

DP World declined to confirm details of any East Coast projects but said that “there are plans in the works around diversification to get through this disruption,” the FT underlined.