Geopolitical Overview: The Strait of Hormuz Remains the Defining Story
The conflict in the Middle East continues to reshape the global crude tanker market in ways not seen in modern shipping history. The closure of the Strait of Hormuz, the world's most critical oil chokepoint, has now entered its fourth week of effective operational disruption, and there are no credible signs of a near-term resolution.
In a development closely watched by market participants, three Omani-controlled vessels, two very large crude carriers and one LNG carrier, exited the Strait on April 2 via the normal navigation channel, bypassing the IRGC-controlled re-routed corridor that has been in place since March 14. However, any optimism must be tempered. The UAE has formally requested that the United Nations authorise measures to restore freedom of navigation, including the potential use of force, language that signals how far the region remains from a negotiated return to normalcy. Meanwhile, sanctioned tonnage continued to dominate what little traffic did move through the strait, with Western-sanctioned ships comprising approximately 62% of transits on April 1, as Iran's shadow fleet positioned for further inbound loadings.
The Supply Shock: West of Hormuz Export Collapse
Oil loadings at ports west of the Strait of Hormuz collapsed 76% in March compared to February. Total crude, condensate, clean and dirty products loaded on tankers fell to approximately 5.28 million barrels per day, against 22.2 million bpd the prior month, a reduction of nearly 17 million barrels per day in a single month. Crude and condensate loadings alone fell from 16.6 million bpd in February to 4.3 million bpd in March.
Of the volumes that were loaded, the vast majority remain trapped. Of the approximately 142.5 million barrels tracked as having been loaded, some 128 million barrels remain either in transit or in floating storage, a direct consequence of the inability of laden VLCCs to exit the Strait and deliver their cargoes. This creates an enormous, latent tonnage demand overhang: once the strait reopens, even partially, a wave of cargo delivery and positional repositioning will need to occur simultaneously, and the freight market will need to absorb it.
The IEA has launched a dedicated tracker to monitor policy responses to the energy market impacts of the conflict, reflecting how seriously governments and institutions are treating the sustained disruption to global crude flows.
Read more by Signal Ocean: Weekly Tanker Market Monitor: Week 14, 2026
Baltic Exchange Establishes Emergency Route TD34
In a historically significant development, the Baltic Exchange has introduced an emergency VLCC assessment route — TD34 — assessed on a 270,000mt basis from Mina al Fahal (Gulf of Oman) to China. This route effectively re-anchors the market benchmark outside the Strait of Hormuz, offering a transparent and commercially viable reference point for owners and charterers who cannot or will not contemplate a Hormuz transit under current conditions.
This is a meaningful institutional response. The TD3C route, the traditional 270,000mt Middle East Gulf to China benchmark, remains in publication but is increasingly difficult to assess with confidence given that access to loading ports west of Hormuz is severely curtailed and transit risks remain elevated. TD34, loading from Mina al Fahal on the Omani coast, reflects where actual cargo flow capability exists today. That the Baltic has moved to formalise this route underscores that the market is not treating this as a short-lived disruption but is instead adapting its infrastructure to a potentially sustained new geography of crude trade.
WTI Premium To Brent
Traditionally, Brent commands a premium to WTI due its global benchmark pricing status and seaborne relevance. Currently, this relationship appears to have flipped, raising eyebrows among the market.
At the core of the inversion is the severe disruption of crude flows through the Strait Of Hormuz. With a significant share of oil supply either physically blocked or at risk, buyers are scrambling to secure barrels that are accessible. WTI is logistically insulated, as it is produced, transported and exported without relying on disrupted shipping lanes. This has brought an accessibility premium to WTI.
Another factor currently playing a significant role in the above is the steep backwardation observed among both Dated Brent and WTI. This is caused due to tight near-term supply and refiners paying up for prompt delivery of barrels. This essentially means that near-term future contracts command a significant premium over longer-dated ones. And since WTI front-month traded contract is currently May while Brent has now rolled over to June, there is a contract mismatch that has caused a temporal inversion in their usual relationship.
Steep backwardation and physical market stress will continue to result in short-term dislocations as refiners across the globe, and particularly in Asia, are scrambling to secure any available barrels.
Current Market Tone: Easter Week
As markets return from the Catholic Easter holidays, the VLCC segment finds itself in a steady-to-softer tone on the eastbound leg, while the Atlantic basin, and in particular the US Gulf, remains the dominant source of market support.
Middle East / Indian Ocean: Yanbu and Gulf of Oman stems are drawing heavy charterer attention as the preferred loading option in the absence of viable Hormuz transits. Owners of well-positioned tonnage in the Gulf of Oman are receiving solid interest, though rates have softened at the margin as the market digests the continued uncertainty and some pockets of ballasting tonnage begin to accumulate outside the strait.
Atlantic / US Gulf: The principal pull for VLCC tonnage globally remains the Atlantic, with the US Gulf in particular offering strong fundamentals. The 25–26 million barrel cargo levels achievable ex-USG are attracting interest, supported by robust US crude export economics, competitive pricing against other loading regions, and firm intermodal support from tighter Aframax and Suezmax markets. Owners with Atlantic-position tonnage are in a strong negotiating position, and the basin continues to act as the floor under global VLCC sentiment.
The Easter period has temporarily subdued fixing activity, as is customary, but expectations are for a busier week ahead as charterers return to the market and the geopolitical picture continues to evolve rapidly.
Outlook
The duration of the Hormuz disruption is now the single most important variable in the freight market. If the Omani diplomatic channel produces a workable navigation protocol that allows safe, non-sanctioned transits to resume, even partially, the effect on VLCC supply-demand balances could be rapid and significant. Equally, any further escalation, whether through military incidents, UN action, or a broadening of the conflict, would extend and deepen the dislocation already seen in March.
For the near term, expect continued bifurcation between the Middle East and Atlantic markets, sustained elevated interest in Gulf of Oman load options, and the Baltic's TD34 route to become an increasingly central market reference. The tonnage overhang building outside Hormuz, laden and ballast, will create significant volatility the moment the situation changes.
Market participants are advised to monitor the Omani-Iranian protocol negotiations, AIS data around Hormuz transits, and any UN Security Council developments closely. The next two to three weeks will likely be definitive in setting the trajectory for the second quarter.
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Authors: Maria Bertzeletou (Senior Market Analyst), Georgios Sakellariou (Freight Analyst)
