Sometime in early 1988, while the nine-year war between Iran and Iraq was still raging, veteran British publisher Abdullah Jonathan Wallace paid a visit to his old friend, Bahrain鈥檚 information minister Tariq Almoayed.
As they drove out of Manama to Tariq鈥檚 home on another island in Bahrain鈥檚 archipelago, Wallace looked seaward and was shocked to see a task force of US Navy ships moored in the Persian Gulf.
鈥淭ariq! Look! Ships!鈥 Wallace excitedly said to the Bahraini minister.
Almoayed, who was driving, kept his eyes firmly fixed on the road.
鈥淪hips? I see no ships,鈥 he replied, giving Wallace an unforgettable anecdote to later relate to his Middle East team at the United Press International news agency, which included this reporter.
That unprecedented deployment of US Navy ships in the territorial waters of a Gulf monarchy was in preparation for Operation Praying Mantis against Iranian naval assets.
The memory of the US鈥 retaliatory action against Iran for its mining of the USS Samuel B. Roberts during the so-called tanker war that Iran and Iraq waged against commercial shipping in the 1980s, weighed heavily on the maritime industry during the 12-day conflict between Iran and Israel that ended in a fragile ceasefire on Tuesday.
To shipping companies, it did not matter that Iran had taken no steps to enforce the threat of disrupting maritime traffic in the Persian Gulf, much less an attempt to close the Strait of Hormuz, which links it to the Indian Ocean via the Arabian Sea.
鈥淲hile Iran鈥檚 threat to close the strait is more likely strategic posturing than sustained action, from a maritime shipping vantage, insurance premiums, and by extension freight rates, have already begun climbing,鈥 Greek shipping firm Intermodal said in a report issued to its clients on June 17.
London-based maritime intelligence provider Kpler observed that seven tankers headed into the Gulf had changed course on June 20. Six were placed in holding patterns off Oman鈥檚 Indian Ocean coast, while the seventh, the liquefied natural gas carrier Hlaitan, made a U-turn from its signalled route to Qatar鈥檚 Ras Laffan loading terminal to leave the region altogether, Kpler said.
Major tanker operator Frontline suspended contracts for its vessels about to pass through the strait and ordered the ones already in the Gulf to exit under naval protection, Intermodal reported on June 20.
A couple of days later, Greece鈥檚 shipping ministry advised the country鈥檚 many independent tanker owners to 鈥渞eassess passage鈥 of the Strait of Hormuz until the situation in the Gulf had calmed down.
Following suit, major container shipping lines which carry cargo between Asia and Europe 鈥 including Denmark鈥檚 Maersk, CMA CGM of France, Germany鈥檚 Hapag-Lloyd and Tokyo-based Mitsui OSK 鈥 advised their clients that their vessels could be diverted if the situation in the Gulf deteriorated. The waterway is the world鈥檚 second largest for seaborne trade, after the trans-Pacific route connecting East Asia to North America.
Unsurprisingly, nerves also jangled at the Dubai headquarters of DP World, a leading global operator of port terminals and free zones including the Middle Eastern superhub of Jebel Ali. The port handled 15.5 million 20-foot equivalent (TEU) container units last year, a 6.9 per cent year-on-year increase, on the back of 鈥渞obust demand鈥 from Asia and the Indian subcontinent.
鈥淚n the unlikely event of a closure of the Strait of Hormuz, we are working closely with government authorities to ensure business continuity and are prepared with re-routing and alternative logistics strategies,鈥 a DP World spokesman told This Week in Asia on Monday. 鈥淥ur integrated supply chain infrastructure across the region gives us the flexibility to minimise disruption for our customers and protect cargo movements.鈥
Despite taking no offensive action beyond GPS spoofing 鈥 the act of faking signals to trick navigation devices 鈥 Iran had successfully taken the wind out of the sails of ships in the Gulf, analysts said.
The Persian Gulf 鈥渋s a region where Iran could cause a major disruption in commodities trades with little effort,鈥 Contango Research shipping analyst Ed Finley-Richardson told This Week in Asia.
鈥淚t would be a rational, low risk-high reward strategy鈥 because shipowners traversing the region were already 鈥渆xtremely nervous鈥. Had there been 鈥渁ny sign of material danger鈥, many owners would have chosen to avoid the Gulf entirely, Finley-Richardson said.
Peter Sand, chief analyst of ocean freight benchmarking firm Xeneta, said any closure of the Strait of Hormuz would mean a re-routing of container line services, with increased reliance on India鈥檚 west coast ports to connect other parts of Asia with the Indian subcontinent.
鈥淭he inevitable disruption and port congestion, as well as the potential for higher oil prices, would cause a spike in ocean freight container shipping rates,鈥 Sand said in a statement issued on June 13, the day Israel first launched its military operation against Iran. He warned that carriers were likely to push for a security surcharge on these trades.
Finley-Richardson said the escalation between the two countries came at 鈥渁n intriguing time鈥. On June 18, the 15,000 TEU container ship CMA CGM Osiris became the first such vessel to traverse the Suez Canal since March last year because of the threat that has been posed to Red Sea shipping by Yemen鈥檚 Houthi militants.
The Iran-allied group, which agreed to halt its attacks on commercial shipping after the US bombed its positions between March and May, had not as of Friday followed through on its threat to resume its strikes if the US bombed Iran.
Had the Houthis done so, the Red Sea would have remained disrupted for much longer, and the opening of a second front near the Strait of Hormuz would have exacerbated the shortage of container ships in the region, Finley-Richardson said.