By Ulf Bergman
There is an agreement in place between the US and Iran to end hostilities and fully reopen the Strait of Hormuz. However, many questions remain about the deal’s details. At this stage, it is more of a memorandum of understanding with a 60-day ceasefire attached, with many details still to be clarified through what promises to be challenging diplomatic negotiations. Hence, there is a risk that circumstances may deteriorate, at least temporarily, over the coming months. Market participants are likely to keep a close eye on developments, with freight rates and commodity prices remaining susceptible to bouts of volatility.
Assuming all parties adhere to the agreement, traffic through the contested waterway will gradually return to something resembling normality. However, “gradually” is likely a key word in this context, and a new normal will develop. While a political framework for reopening is broadly in place, immediate issues such as physical safety in the Strait amid mines, insurance, and trust will keep many shipowners and operators from joining a surge of activity. In addition, toll-free passage through the strait is only guaranteed for 60 days. Beyond getting trapped vessels moving, more than three months of severe trade disruptions have dislocated parts of the global fleet as alternative flows have developed.
A resumption of trade through the Strait of Hormuz will, to a large extent, centre on more crude oil and natural gas reaching the global marketplace, putting downward pressure on prices. Declining energy prices will ease the headwinds facing the global economy. However, some lasting damage has already been done and will continue to accrue during the recovery. Beyond the headline-grabbing crude oil and LNG exports, dry bulk imports for discharge in ports within the Arabian Gulf have dropped dramatically since the end of February.
Dry Bulk Imports Set for a Recovery
Since the commencement of hostilities more than three months ago, dry bulk imports passing through the Strait of Hormuz have fallen sharply. Between March and May, volumes declined by 77 per cent year-on-year, according to data from Signal Ocean. Hence, a rebound in demand for seaborne transport of dry bulk commodities to ports in the Arabian Gulf can be expected if developments proceed as outlined in the agreement framework.
During the March to May period last year, nearly 28 million tonnes of dry bulk commodities were discharged at ports in the Arabian Gulf that had to pass through the Strait of Hormuz. Grains made up a quarter of the total, while iron ore and steel products accounted for 22 and 16 per cent, respectively. Bauxite and alumina together accounted for 12 per cent of demand. Dry bulk imports have also seen significant growth in recent years, with Signal Ocean’s data indicating annual growth exceeding ten per cent in 2024 and 2025. The expansion also carried into the early stages of the year, with year-on-year growth in both January and February. However, this was brought to an end by the US and Israeli attacks on Iran.
Looking ahead to the second half of the year, assuming the peace accord holds without significant disruptions, a combination of pent-up demand and demand destruction will shape developments in the coming months. For iron ore, bauxite and alumina, demand destruction is likely, with the best-case scenario for dry bulk shipping being a return to pre-war levels, as buyers sought alternatives during the disruption. Still, in the alumina and bauxite trade, reports of damage to major smelters suggest the rebound may take some time.
In contrast, the grains trade may see a surge in buying activity as importers in the region seek to address months of deferred purchases. Signal Ocean’s data indicate that imports fell by about 3.9 million tonnes year on year over the three-month period ending in May. While smaller quantities of grains may have taken alternative routes, the scale of the shortfall suggests that only seaborne imports can address it. Assuming annual demand for grains in the region remains steady, and given that second-half volumes last year totalled approximately 15.9 million tonnes, seaborne volumes would need to rise by nearly a quarter in the second half of the year to address the shortfall.
Mid-Sized Vessels to Benefit from A Grain Import Recovery
If the grain imports not realised earlier in the year translate into a surge in purchases in the second half of the year, the panamaxes and, to a lesser extent, the supramaxes will benefit, as they dominate the grain trade to the Arabian Gulf. However, depending on commercial agreements, the higher demand may not fully replace lost tonne-miles, as the upcoming harvest season in the northern hemisphere could shift trade flows. While the Arabian Gulf grains trade accounts for only four to five per cent of the global flow, a recovery of previously lost imports would add to competition for tonnage as the northern hemisphere harvest season approaches.
The loss of import demand during the recent months primarily affected seaborne shipments from faraway shores. In 2025, Brazil and Argentina accounted for around 60 per cent of shipments during the March to May period. Should commercial agreements maintain these flows for the coming months, it will provide a sizeable boost to tonne-mile demand. However, replacing lost imports with grains from the Black Sea region would moderate the boost to tonne-mile demand. Still, political considerations could lead to increased demand for American grains, as the US administration may put pressure on governments amid continued uncertainty over agricultural shipments to China.
Data source: Ocean Analytics