The dry bulk market began 2026 with considerable momentum. During the first two months of the year, freight markets across all vessel segments performed significantly above typical seasonal patterns. The Capesize and Panamax segments in particular reached multi-year highs for the first-quarter period, while the Supramax and Handysize segments also maintained firm market conditions. This broad-based strength reflects steady cargo demand combined with relatively balanced fleet supply. Market performance is clearly illustrated by developments in the Baltic Dry Index and its underlying time charter assessments. In February, average Capesize earnings were close to $28,000 per day, while Panamax vessels earned nearly $16,000 per day. Conditions in the geared sectors were similarly supportive, with Supramax vessels averaging approximately $14,750 per day and Handysize vessels around $12,300 per day. Compared with the same period last year, earnings across all segments have improved markedly. Several fundamental drivers have supported this positive start. Grain exports from the Atlantic basin have provided consistent employment for Panamax vessels. At the same time, iron ore shipments into Asia have remained robust, underpinning activity in the Capesize segment. Meanwhile, the geared sectors have benefited from a wide range of minor bulk cargoes, including fertilizers, steel products, cement and agricultural commodities.
However, this favourable market environment has now been overshadowed by a sudden geopolitical escalation. During the course of this week, tensions between the United States and Iran intensified following military strikes in the region, introducing a new layer of uncertainty to global shipping markets. The situation is particularly relevant given the strategic importance of the Middle East for global energy flows and maritime trade routes. From a dry bulk perspective, attention has quickly turned to the Strait of Hormuz, one of the world’s most critical maritime chokepoints. The passage is widely recognised as a vital corridor for global oil and LNG transportation, making it especially significant for tanker markets. Nevertheless, it also plays a role in certain dry bulk trade flows. Although dry bulk exposure to the Strait is relatively limited compared with energy shipping, disruptions in the area still affect a measurable share of the market. Roughly 4 percent of global dry bulk cargo volumes and tonne-mile demand are associated with voyages that normally pass through the Strait, according to BIMCO. Sub-Capesize vessels are the most exposed to these flows. Approximately 7 percent of global Supramax demand and about 5 percent of Panamax and Handysize demand originate from voyages linked to the PG region.
A number of important commodities are involved in these flows. Imports into the Persian Gulf primarily consist of grain, iron ore and steel products, which support regional construction, manufacturing and infrastructure development. On the export side, the region is an important supplier of several specialised commodities that play a role in global industrial supply chains. In particular, limestone, sulphur and urea account for the majority of dry bulk cargoes exported from the Persian Gulf. The region’s role in certain niche markets is especially significant. For instance, around 52 percent of global limestone shipments originate from the United Arab Emirates. Similarly, the PG is responsible for approximately 45 percent of global sulphur exports and roughly 27 percent of worldwide urea shipments. As a result, prolonged disruption to maritime activity in the area could gradually affect supply chains for these commodities.
While the direct effects on dry bulk trade are currently limited to a relatively small share of global cargo flows, the broader economic consequences of the conflict could prove more significant. In particular, the escalation introduces several indirect transmission channels that may influence the global economy in the months ahead. The most immediate of these channels relates to energy markets. The Middle East remains a cornerstone of global oil and gas supply, and any sustained disruption to shipments through the Strait of Hormuz could lead to a sharp increase in energy prices. Higher oil and LNG prices would quickly filter through the global economy by raising transportation costs, industrial input prices and overall production expenses. Rising energy prices could also complicate the global monetary policy outlook. Over the past year, financial markets had increasingly expected central banks to gradually ease monetary conditions as inflationary pressures moderated. However, a renewed surge in energy prices could delay that transition. If inflationary pressures were to intensify again, central banks might be forced to maintain restrictive policy settings for longer, limiting economic expansion and dampening global trade activity.
China could be particularly sensitive to such developments. While the country has some protection against direct energy disruptions – including strategic petroleum reserves and diversified supply sources – its economy remains highly dependent on external demand. Net exports contributed roughly one-third of China’s overall GDP growth last year, underlining the importance of global consumption for its industrial sector. Should global growth slow due to higher energy prices and tighter financial conditions, Chinese exports of construction materials and industrial products could weaken, placing additional pressure on an already fragile steel sector. The implications for the United States may be more complex. As a net exporter of oil, the country may benefit from higher energy prices. Nevertheless, the broader economic environment would still be affected by rising fuel costs and renewed inflationary pressures. Such developments could complicate the policy path for the Federal Reserve, particularly if inflation were to move higher after a period of gradual improvement. Europe, meanwhile, appears especially exposed to potential energy price shocks. The region remains structurally dependent on imported oil and gas, making it vulnerable to disruptions in global energy markets. According to estimates by the European Central Bank, even moderate increases in energy prices can simultaneously slow economic growth while pushing inflation higher. Emerging economies may face similar challenges. Many developing countries remain highly sensitive to fluctuations in energy prices, and sustained increases could strain government budgets and accelerate inflation. Increases in energy costs could therefore limit the scope for interest rate cuts and constrain economic growth across several emerging markets.
For dry bulk shipping, these broader macroeconomic developments could gradually influence cargo demand. Higher energy prices, tighter financial conditions and slower industrial expansion may weigh on construction, infrastructure spending and manufacturing activity. Ultimately, the duration of the conflict will be the key factor shaping its economic and shipping market impact. Although the immediate disruption to trade flows through the Strait of Hormuz affects only a small portion of global dry bulk activity, a prolonged escalation could have wider consequences. Persistent energy price increases and weaker global growth would likely reduce industrial activity and commodity demand, potentially placing downward pressure on dry bulk freight markets in the second half of the year and beyond.
Data source: Doric