Very large crude carriers willing to load through the Strait of Hormuz saw earnings approach $470,000 a day in late June, OilPrice.com reported on June 24, within reach of the all-time records set during the pandemic. The trigger was diplomatic rather than commercial: the June 17 ceasefire between the United States and Iran, and a memorandum of understanding on reopening the strait, sent charterers scrambling for any hull positioned to lift the backlog of Gulf crude.
The number matters because of what it is not. This is no demand boom; in a healthy conventional market a VLCC earns roughly $40,000 to $100,000 a day. Nearly all of the distance between that range and $470,000 is the price of sailing a laden supertanker past an unresolved conflict, which makes the current freight market one of the cleanest readings of geopolitical risk anywhere in commodities.
A scramble measured in multiples
The repricing took days, not months. Gulf VLCC hire jumped from $106,000 to more than $190,000 a day within a week, according to the OilPrice.com report by Tsvetana Paraskova. One VLCC was provisionally booked to move 2 million barrels from the Gulf to India at 897 percent of the MEG-India benchmark, about nine times a normal rate. Sinokor, which controls around 120 VLCCs, led the chase alongside PetroChina and Chinese and Indian state refiners hunting replacement barrels.
Not every charterer joined in. A PetroChina executive told Reuters, in remarks carried by OilPrice.com, that "it's too expensive and there is no guarantee you can exit the strait." That hesitation frames the whole market: the marginal fixture was paying nine times normal not for the steel but for someone else's willingness to carry strait risk.
Two markets, one fleet
The clearest evidence that this is a geographic risk premium is the split between loading zones. Fixtures loading in the Gulf of Oman, which avoid the strait transit entirely, were concluded at $220,000 to $230,000 a day, per the same reporting: enormous money by any historical standard, yet roughly half the rate commanded by ships that go through Hormuz. The gap between those two numbers is the strait premium expressed in dollars per day. Identical ships were earning several times more for accepting one stretch of water, a spread driven not by cargo demand but by insurance, crew availability and the simple question of whether a vessel that enters the Gulf can be sure of leaving it.
How war built this market
The path to these numbers began with insurance, not tonnage. Rates first touched all-time highs in March, a CNBC backgrounder noted at the time, when insurers withdrew Middle East war-risk cover. The strait carries roughly a fifth of the world's oil, according to the US Energy Information Administration, so there is no meaningful substitute at sea for the barrels that move through it. The previous modern benchmark came in spring 2020, when collapsing demand turned VLCCs into floating storage and produced the last record spike. That was a contango play in which ships were paid to sit still. This one pays them to move through contested water, a categorically different proposition for owners, masters and underwriters alike.
The windfall funds the next glut
Tanker booms have a habit of financing their own undoing, and the mechanism is already visible: the VLCC orderbook now sits above its historical average, Breakwave noted, a supply response taking shape while rates remain elevated. Ships ordered into this market will deliver into whatever market follows it. The things to track from here are whether Gulf of Oman loading hardens from workaround into permanent structure, whether the spread between Hormuz-exposed and Atlantic routes compresses if diplomacy holds, and how fast the orderbook grows while owners bank earnings that few of them will see again in a career.
Cover image: ImagePerson, CC BY 4.0, via Wikimedia Commons.
