-- Tanker freight rates surged in the wake of the Middle East conflict, but crude and refined product markets are now moving in different directions as exposure to the Strait of Hormuz reshapes pricing dynamics, Vortexa strategists said in a note on Sunday.
Freight markets initially rallied across vessel classes as disruption risk in the Middle East Gulf forced shipowners and charterers to reassess transit exposure through the chokepoint, said Wanying Zhang, freight analyst at Vortexa.
However, while crude tanker rates are beginning to lose momentum, the clean tanker market remains more firmly supported. Crude tankers reacted first and most strongly, led by very large crude carriers, which dominate exports from the Middle East Gulf.
Operators rapidly priced in a geopolitical risk premium, while charterers rushed to secure cargoes, driving a sharp increase in earnings on Arabian Gulf-linked routes.
Vortexa said the rally briefly spilt over into smaller crude segments, with Suezmax and Aframax tankers benefiting from a shift toward Atlantic Basin crude and from the splitting of cargoes due to limited Very Large Crude Carrier availability.
"Disruption at the top of the crude tanker market cascaded down the fleet, tightening availability and pushing dirty freight higher across vessel classes," Zhang said.
However, the rally in smaller crude tankers has since faded. Suezmax and Aframax rates have retreated toward pre-conflict levels as initial urgency has subsided and vessel availability has improved, particularly in the Atlantic basin, where an influx of ballasting ships has eased tightness.
Furthermore, competition from LR2 tankers switching into dirty trades further pressured rates.
VLCC earnings tied to Middle East Gulf and Pacific routes, in contrast, continue to reflect a stronger risk premium linked to Hormuz uncertainty, including potential delays and tighter forward availability.
Gains in Atlantic-origin crude routes have been more muted due to a build-up of ballast tonnage, limiting owners' pricing power.
Rates in clean tanker markets have also climbed but shown far less correction. Zhang attributes the resilience to structural factors that have tightened effective vessel supply rather than to disruption risk alone.
Vortexa said a key driver has been a large-scale repositioning of medium-range and long-range product tankers from the Pacific to the Atlantic, as weaker Asian refining demand contrasts with stronger export flows from the US Gulf and Europe.
Longer-haul routes have increased vessel utilization, keeping ships tied up for extended periods. "Record ballast repositioning of MRs, LR1s and LR2s from the Pacific into the Atlantic reflects a clear reallocation of employment," said Zhang.
Meanwhile, supply has been further constrained by LR2 tankers temporarily switching into crude trades, reducing the availability of coated vessels for refined products. Though higher clean earnings are now discouraging additional switching, the earlier shift has already tightened the market.
Vortexa said the Atlantic Basin initially outperformed, supported by demand for replacement fuel cargoes away from the Middle East Gulf, but the premium has recently narrowed as additional tonnage has entered the market and inquiry has softened. Pacific rates, meanwhile, remain supported by lingering Hormuz-related risk.
Going forward, the consultancy said reopening of the Hormuz could ease some of the geopolitical premium, but is unlikely to trigger a full reset in freight markets.