Institutional Investors Move Into Shipping as Gulf Conflict Lifts Tanker Earnings

Long-term investors are increasing allocations to shipping as the conflict around the Strait of Hormuz raises freight earnings, the Financial Times reported, with asset managers describing interest from institutions seeking exposure to hard assets.

The earnings case rests on disruption. The Middle East Economic Survey reported earlier this year that the cost of chartering a very large crude carrier from the Gulf to China reached six-year highs near $200,000 a day, equivalent to close to $5 a barrel of shipping cost alone. When tankers avoid Hormuz or take longer routes, the same volume of oil consumes more vessel days, and the fixed global fleet cannot expand quickly.

The risk is symmetrical, and shipowners know it. Lloyd's List reported that shipping investors fear the geopolitical premium unwinds, and that vessel owner shares already pulled back on perceived progress in Russia-Ukraine talks. A functioning market absorbs disruption by pricing it, and every dollar of that price is revenue for someone. It is also a cost borne by refiners and, eventually, by consumers of refined products.