Strait of Hormuz: UAE, Gulf shippers, businesses start thinking options

Dubai: Businesses in the UAE, Saudi Arabia and other Gulf states are keeping close track of any developments related to the Strait of Hormuz - specifically whether the vital shipping route would remain open.

“Commercial vessels continue to pass through the Strait of Hormuz,” said Sajith Marakar, Managing Director of Consolidated Bureau, an Abu Dhabi-based marine survey and inspection company.

“Yet, there are indications that the strait could be closed, which would disrupt global oil and container trade.

“If declared a war zone, cargo insurers and P&I (Protection & Indemnity) Clubs for shipping vessels may refuse to cover the risk, halting vessel operations.”

That would mean seeking longer and more expensive shipping routes as alternatives. This for an industry that’s still struggling with reduced usage of the Red Sea routes because of the Houthi attacks.  

Now, this is the challenge that businesses in the Gulf will be facing in the days ahead. The Strait of Hormuz is vital for the global movement of oil tankers, accounting for about 20% of the world’s total oil needs.

After the US attack on Iran’s nuclear facilities Saturday, the Iranian Parliament has given its vote to block the Strait – and put a choke on the supply of oil and other shipping passing through it. As of now, this has not been put into effect at the ground level.

For the world's shipping industry, this is another crisis they have had to deal with in recent years. after November 2023, the Red Sea shipping lanes become a hot zone after Yemen's Houthis started attacks on commercial shipping. It led to re-routing of ships through the longer trips through the Cape of Good Hope off the South African coast.

"Last year, during disruptions in the Red Sea, transshipment cargo piled up in UAE ports as vessels struggled to maintain schedules, particularly to destinations like Jeddah," said Marakar.

"A closure of the strait could delay supplies to Bahrain, Kuwait, Daman, and Qatar.

"A prolonged disruption might also trigger price hikes for consumer goods in these regions."

When it comes to supply of goods within the GCC, or even transshipments, it would be best to consider trucking options.

"The area benefits from well-connected road networks, which could help restore cargo movement and supply chains through southern ports, including those in the UAE and Oman," said Marakar.