The effective closure of the Strait of Hormuz in the second quarter of 2026 forced charterers, owners and traders of very large crude carriers (VLCCs) to rebuild logistics around a rerouted market, with Fujairah, the Gulf of Oman and the Red Sea emerging as the de facto arteries of Middle Eastern crude, according to an analysis by Mette Frederiksen, head of research and insight at Tankers International, published by Splash247.
Hormuz closure reshapes VLCC trading patterns
The geopolitical conflict in the Middle East continued to shape freight markets throughout Q2. A ceasefire announcement in April briefly stoked optimism, easing oil prices and rallying equity markets, and a wave of prompt Arabian Gulf cargoes appeared. However, as details of the ceasefire became clearer, optimism faded. The Strait of Hormuz remained effectively closed to normal VLCC transit, and any cargoes quoted for inside-AG (Arabian Gulf) loading failed to convert into actual fixtures, Splash247 reported. Owners, unwilling to commit vessels into restricted waters without clearer political guarantees, largely stayed on the sidelines.
New benchmark reflects Gulf of Oman shift
In response to the rerouting, the Baltic Exchange introduced a new benchmark route tracking Mina al-Fahal (Oman) to Ningbo (China) cargoes, designated TD34. This formalised what the market had been reflecting for weeks, treating the Gulf of Oman as the new Middle Eastern baseline, according to Splash247. The new route traded in closer alignment to Atlantic Basin pricing, carrying a lower geopolitical risk premium than the traditional Arabian Gulf benchmark.
Freight rate movements across key lanes
Freight rates reflected both underlying supply and demand fundamentals and rapidly shifting political headlines, Splash247 stated. Gulf of Oman benchmark rates held relatively steady through April and into May before softening as tonnage availability outweighed accessible cargo demand.
| US Gulf to China crude route | Rate level |
|---|---|
| Early Q2 (April opening) | ~$25 million |
| Late April | ~$16 million |
| May (stabilisation) | ~$17 million |
| June | Atlantic position list tightened |
In the US Gulf, April was characterised by front-loaded fixing activity, with charterers having secured much of their second-decade May requirements in March, leaving the spot market quiet and rates under pressure. US Gulf to China freight levels fell from around $25 million at the quarter's opening to $16 million by late April. The market stabilised in May, with steady tender activity supporting levels near $17 million. However, by June, the Atlantic position list tightened considerably.
Atlantic Basin gains strategic importance
Against the backdrop of uncertainty in the Middle East, the Atlantic Basin gained strategic importance, Splash247 reported. Brazil was the key driver of activity during the quarter. Enquiry levels remained steady, while the number of ballasters gradually declined as many owners delayed repositioning vessels from the Middle East in anticipation of a Hormuz-related improvement that ultimately did not materialise. Rates remained relatively stable through April and May before strengthening in June.
By contrast, West Africa was largely quiet throughout the quarter. Charterers covered the limited activity through contract of affreightment (COA) programmes with minimal engagement in the spot market.
Outlook and operational implications
As peace talks gathered momentum again in June and sporadic reports suggested vessels were transiting the Strait of Hormuz under specific conditions, owner sentiment briefly strengthened and the market gained upward momentum, according to Splash247. The most striking signal came from a handful of charterers bold enough to quote inside-AG cargoes loading from Zirku and Basrah with offers at extreme Worldscale rates being circulated, although no fixtures were concluded. The pattern of progress in negotiations supporting rates, only for setbacks to quickly reverse sentiment, repeated throughout the quarter.
"Continued uncertainty became the defining feature of the quarter, and any owner or charterer seeking a stable baseline to build positions around faced an almost impossible task," according to Splash247.
For logistics operators and freight forwarders, the key takeaways are the need to monitor geopolitical developments closely and to consider alternative supply routes via the Gulf of Oman and Red Sea ports such as Fujairah. The Atlantic Basin, particularly Brazil, now plays an amplified role in global crude supply, which may require adjustments to fleet deployment and chartering strategies. The absence of fixtures for inside-AG cargoes underscores the continued risk aversion among owners, and the new TD34 benchmark provides a more stable reference for pricing on the revised trade lane. Port authorities and terminal operators in Fujairah and other Gulf of Oman hubs should prepare for sustained increased throughput as the market adapts to the new normal.
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