by Dave Akers, IHSA
The pending Memorandum of Understanding (MOU) to end the conflict and reopen the Strait of Hormuz which was heavily brokered by Pakistan between the U.S. and Iran was signed on June 17. However, it is still considered a “pending” document in the trade world due to it being an interim framework agreement and not a finalized treaty. While it represents tentative good news, it introduces a complex set of operational challenges that will persist long after the ink dries.
Even as the agreement moves forward and initial steps to reopen the Strait begin, recovery across the global logistics network will be a gradual, step-by-step process. The global supply chain has been profoundly rerouted for over three and a half months; reversing a disruption of this magnitude takes considerable time.
The Phased Timeline for Port & Waterway Recovery
A general rule of logistics is that a major disruption takes at least twice its duration to fully unravel. S&P Global and other industry analysts do not expect a true return to pre-crisis operational normalcy until early to mid-2027.
The recovery is projected to unfold across several distinct operational windows:
Phase 1: Strait Clearance & Initial Traffic (Days 1–30)
The immediate focus is clearing the backlog of an estimated 500 commercial vessels waiting to enter and the 1,550+ vessels stranded inside the Gulf. Industry groups project it will take at least a month just to reach 50% of pre-war daily transit volumes as operators cautiously test the waters and await mine-clearing verification.
Phase 2: Emergency Surcharge (EFS/BAF) Easing (Days 30–60)
While global crude spot prices dropped immediately upon the MOU’s announcement, shipping surcharges operate on a lag. Major carriers (such as MSC, Maersk, and CMA CGM) review their Bunker Adjustment Factors and Emergency Fuel Surcharges on a rigid monthly cycle. Shippers should not expect meaningful surcharge relief on the China to U.S. lanes until late summer at the earliest.
Phase 3: Bunker Reserves Restored (Months 1–3)
Bunker fuel is a byproduct of oil refining. Because regional refining output was heavily disrupted and facilities were damaged during the conflict, global supplies remain tight. Restocking major maritime hubs (like Singapore and Rotterdam) and allowing nations to replenish drawn-down strategic reserves will require several months of uninterrupted crude flow.
Phase 4: Fleet Repositioning & Empty Containers (Months 2–4)
Once the stranded ships finally exit the Gulf, they will simultaneously flood destination ports, causing secondary congestion. Getting those vessels back into regular service rotations and repositioning thousands of trapped empty containers back to manufacturing hubs in Asia will consume the remainder of the year.
The China Export Bottleneck: The Deficit of Empty Boxes
China’s export engine relies on a continuous, finely tuned global loop: full containers leave for Western markets, and empty containers return to be reloaded. When a major disruption traps vessels, that loop breaks, creating severe bottlenecks that cascade from shipping ports all the way back to factory floors.
Here is how the empty container backlog continues to impact logistics and manufacturing networks:
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Export Capacity Crunch
Available space on a vessel departing Shanghai or Ningbo is useless to a shipper if there is no physical box to put the goods inside.
- “Rolled” Cargo and Cascading Delays: When exporters cannot secure an empty container in time for their booked sailing, cargo gets “rolled” (bumped) to the next available ship. This creates a compounding backlog at origin ports, frequently turning standard transit times into multi-week delays.
- Skyrocketing Rates and Surcharges: As the laws of supply and demand take over, carriers implement Equipment Imbalance Surcharges to fund the expensive process of moving empty boxes. High premium fees are also levied on shippers seeking a “guaranteed” empty container and no-roll status.
- Spillover to Alternative Transit: Desperate to move high-margin or time-sensitive goods, exporters pivot to alternative routes. This leads to massive demand spikes for overland rail freight (like the China-Europe rail networks) and air freight, maxing out capacity across every transport mode.
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The Ripple Effect on Manufacturing Hubs
The container deficit quickly transforms a logistics problem into an industrial and financial one for manufacturers.
- Warehouse and Factory Overflow: Manufacturing facilities are largely designed for “just-in-time” outbound logistics. When containers aren’t available, finished inventory stacks up, filling warehouses to capacity and spilling onto the factory floors.
- Production Pauses: Once physical storage space runs out, factories have no choice but to halt or slow down production lines, leading to reduced shifts and temporary operational pauses.
- Severe Cash Flow Squeezes: Because factory payments are heavily tied to logistics milestones (such as the issuance of the Bill of Lading), capital becomes trapped in unshipped inventory. This cash flow freeze makes it difficult for factories to pay their own raw material suppliers, straining the entire supply chain.
The Insurance Trap: Why Costs Will Remain Artificially High
Even as physical waterways open, the financial bottleneck created by the marine insurance market will keep overall ocean freight costs artificially elevated through the remainder of the year.
Total invoices are a combination of base freight rates and various surcharges. While base rates are subject to market volatility, the War Risk Surcharge (WRS) is a direct, non-negotiable pass-through cost from the carrier’s insurance provider straight to the shipper.
The Persistence of “High-Risk” Designations
Signing an MOU does not automatically lift high-risk classifications from bodies like the Lloyd’s Joint War Committee. Historically, unwinding these designations takes years, not weeks, due to two structural realities:
- Mine-Clearing Delays: Marine insurers will not normalize rates until the Strait is verified as entirely free of naval mines. Security analysts project that deploying specialized minesweepers and underwater drones to scour the waterway will require a minimum of 40 to 50 days of uninterrupted work.
- The 7-Day Clause: During the crisis, insurers heavily utilized cancellation clauses that allow them to revoke war-risk coverage with just seven days’ notice and reissue it at higher premiums. Insurers will keep these short-leash policies active to protect themselves against any sudden collapse of the U.S.-Iran agreement, effectively locking in high premiums.
The Surcharge Math: Before the conflict, an additional war risk premium for a Gulf transit was roughly 0.1% of a vessel’s hull value. Post-ceasefire, insurers are settling those premiums at approximately 1% of hull value. Because these surcharges are universally applied by all major lines operating in the zone, shippers cannot avoid them by shopping around.
The Bottom Line
If base ocean freight rates soften later this year due to returning capacity, shippers may not actually feel immediate financial relief. The base rate discount will likely be entirely consumed by lingering War Risk Surcharges and the continued cost of rerouting certain lanes around Africa.
The persistent risks in the Middle East, compounded by the Red Sea crisis and the subsequent disruptions in the Strait of Hormuz, have fundamentally changed the Cape of Good Hope from a temporary emergency detour into a permanent, structural pillar of global trade networks.
While War Risk insurance is not typically a direct concern for IHSA members, the increased insurance costs to tankers have a direct ripple effect on the cost of all bunker carriers transiting the region. These operational expenses are heavily “baked” into global fuel pricing, stabilizing fuel costs at higher baselines and slowing the resolution of Emergency Bunker Fuel charges across all global shipping lanes.
IHSA
Navigating this highly volatile, front-loaded market requires constant vigilance and a strategic approach to carrier relations. While the landscape shifts rapidly, IHSA members can move into June with the confidence that their logistics foundation is backed by collective scale. If you are not currently an IHSA member and want to learn how our shared volume, contracted protections, and deep industry expertise can help your supply chain from sudden rate spikes, please reach out to team@shippersassociation.org for more information.
