Why Commercial Shipping Continues Through the Strait of Hormuz Despite Attacks

The Strait of Hormuz remains a critical maritime route for commercial shipping, even after recent attacks on two Singapore-registered container vessels heightened concerns about safety in the region. The strait, a vital chokepoint for global energy supplies, continues to see traffic largely because of persistent demand for Middle Eastern oil and the commercial significance of maintaining trade flows.

This week, two container ships flying the Singapore flag, the GFS Pride and GFS Giselle, were targeted in separate incidents. The GFS Pride was hit by a projectile, caught fire, and sank, while the GFS Giselle sustained damage. Fortunately, all crew members from both vessels were reported safe. These events have stirred worries about the security of shipping lanes through the Strait of Hormuz, a narrow waterway off Iran’s southern coast near Bandar Abbas.

Despite these incidents, maritime analysts suggest that shipping through the strait is unlikely to cease entirely. Collin Koh, a senior fellow at Singapore’s S. Rajaratnam School of International Studies, explained that operators are still inclined to pursue transit opportunities in the area. "I don't see in the short term that Singapore flagged ships or Singapore shipping companies would necessarily avoid taking the transit if there is an opportunity," Koh said in an interview with CNBC.

Data from maritime analytics firm Kpler shows a drop in crossings through the Strait of Hormuz, from 176 in the week ending October 7 to 131 by October 14. However, the decrease cannot be solely linked to the attacks. Dimitris Ampatzidis, Kpler’s maritime risk and compliance manager, noted that the attacks highlight Iran’s ongoing capability to threaten commercial vessels, posing risks that extend beyond just oil and gas transports.

Commercial incentives continue to drive traffic through the strait. Shipping companies worldwide are still seeking to capitalize on trade in the region, ready to accept heightened risks and elevated costs. Koh pointed out that strong demand for oil, especially from Asian markets, motivates tanker operators to keep moving energy supplies from the Persian Gulf despite security challenges. This sometimes involves paying premiums to offset added dangers.

Singapore’s Foreign Minister Vivian Balakrishnan illustrated the economic rationale behind these risky voyages during the Milken Institute Asia Summit last week. He cited a Gulf official who described a "Hormuz shuttle" system involving about 20 very large crude carriers. These vessels essentially self-insure against attacks, with the higher prices of crude oil making the risky transit financially viable. "Sometimes you get hits, but it is still worthwhile to run the 'Hormuz shuttle,'" Balakrishnan quoted the official as saying.

Ampatzidis emphasized that the continued movement of vessels through the Strait of Hormuz reflects its importance, especially for energy supplies heading to Asian consumers. Yet, he acknowledged that further attacks might discourage more operators from using this route and that the impact would vary depending on the type of vessel and each company's risk evaluation.

The Singapore Shipping Association weighed in, downplaying the likelihood of a widespread commercial withdrawal from the region. Its president, TS Teo, said that the recent incidents are more likely to cause adjustments in trading patterns rather than a complete exit. Shipowners would continue balancing commercial benefits against security concerns and crew safety when deciding on their operations.

While some shipping companies continue to transit the Strait of Hormuz, many major container lines have rerouted to avoid the area since the conflict escalated in February. Jayendu Krishna, director at Drewry Maritime Advisors, noted that no leading container operators have resumed regular services through the strait. Instead, only a few regional operators maintain sporadic service using smaller feeder vessels. This trend limits the immediate impact of the attacks on container shipping.

However, Krishna warned that if violence spreads into the Gulf of Oman, it could severely disrupt supply chains. Ports such as Khorfakkan in the United Arab Emirates and Sohar in Oman have become crucial alternatives for cargo destined for Gulf countries. Should these hubs be affected by conflict, a significant portion of supplies to the region could be cut off, posing broader risks to regional trade stability.

In summary, the Strait of Hormuz remains a highly contested but indispensable passage for global shipping, particularly for the energy sector. Despite recent security challenges, the economic imperatives tied to the strait ensure that commercial vessels will continue to navigate these waters, weighing risks against the pressing demand for Middle Eastern resources.