Tanker Attacks Raise Prospects for Higher Rates, Lifting Shipping Stocks

(Bloomberg) -- Suspected attacks on two commercial vessels near the Strait of Hormuz fueled expectations for higher shipping rates, driving up shares of companies that operate tankers.

Shares of Frontline Ltd., whose ship Front Altair was damaged by explosions early Thursday, surged as much as 11% in Oslo, the most since February. Nordic American Tankers Ltd. climbed a similar amount, while DHT Holdings gained as much as 7.1%.

“The narrative is that a conflict in the region, and a possible closure of the Strait of Hormuz, would be good for tanker rates in the short term,” said Frode Morkedal, an analyst at Clarksons Platou Securities, based in Oslo. Longer term, the lost volumes from a closure would be a “killer to tankers,” he said.

Prices for crude oil soared in London and New York on concern the attacks in waters that carry Middle East crude exports would inflame tensions between the U.S. and Iran. The incidents follow damage to four oil tankers near the United Arab Emirates less than a month ago that was believed to have been caused by underwater explosive devices.

‘Intolerable Situation’

It’s unclear what exactly happened or who carried out the attacks, but some are likely to cast suspicion on Iran or groups acting under its sponsorship. The other ship damaged was the Kokuka Courageous, managed by BSM Ship Management of Hamburg and operated by Kokuka Sangyo of Japan. Crews of both ships have been evacuated and are safe.

“This suspected attack is a deeply worrying and intolerable situation,” said Guy Platten, secretary general of the International Chamber of Shipping, an industry group, in a statement. “The shipping industry, and most importantly the crews, must not be exposed to such risks.”

The tensions may inflate the cost of insuring tankers shipping Middle East crude in the oil-exporting region, and so-called “additional premium” surcharges that owners pay when sailing to the Persian Gulf are likely to rise with immediate effect, insurer Hellenic War Risks Club said. Owners could refrain from accepting charters from the region while evaluating their risks.

While political motives would suggest attackers would seek to interrupt oil flows from the region, container ships also pass through one of the world’s most strategically important choke points, between the Persian Gulf and the Gulf of Oman. Hapag-Lloyd AG, the world’s fifth-largest container shipper, said one in 10 of its scheduled services passes the strait and that it would adapt sailings as needed.

--With assistance from Verity Ratcliffe, Anthony DiPaola and Bruce Stanley.

To contact the reporters on this story: Richard Weiss in Frankfurt at rweiss5@bloomberg.net;Mikael Holter in Oslo at mholter2@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Frank Connelly

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