Strait of Hormuz Scenarios: Dry Bulk and Geopolitical Risk in the Middle East
- rorykevinproud
- Jun 26
- 3 min read
26 June 2025 Signal
Escalating tensions between Iran and Israel are analysed for their potential effects on dry bulk markets, particularly concerning the Strait of Hormuz. While historical data indicates a full closure by Iran is improbable, disruptions via attacks, mines, or vessel harassment could significantly affect shipping routes and freight rates, but unlike in oil, it will have a negligible effect on dry bulk commodities. Iran and China have a strategic relationship in the oil market, but in terms of dry bulk, Iran is not a notable exporter. The report details two scenarios: a complete closure and a partial disruption, examining their respective consequences and possible mitigation strategies.
Current view of the dry bulk market in the Strait of Hormuz
The dry bulk market is expected to be less affected by the ongoing situation between Iran and Israel; however, examining the current situation can help determine the best way to position oneself in the market. Given that the region bordering the strait is a net importer of dry bulk, particularly of raw materials needed for the construction sector, and grain, we see many more laden vessels enter the strait, east to west, than exit, west to east.
Currently, the vessel count in the Strait moving in both directions sits within the recent year averages, and follows the typical seasonality, indicating the market is currently comfortable with the risk presented by the situation. The Strait appears to be more resilient against the wider geopolitical uncertainty in the Middle East than other nearby passages, such as the Red Sea. The Suez Canal has seen a real decline in traffic since the beginning of 2025, when the security of vessels became a key concern, yet the Strait of Hormuz has continued with consistent levels of vessel traffic.
Scenario A: Full Closure of the Strait
The worst-case scenario for shipping due to the ongoing tensions would be a complete closure of the Strait of Hormuz, preventing any vessels from entering or exiting. This would have a real impact on trade flows, and although not large in tonnage terms, it would have a significant effect on many of the Gulf countries. Reduced grain imports would weaken food security, and fewer arrivals of raw materials would interrupt the vast construction projects ongoing in the region. This would then have a wider impact on the Gulf countries' GDP and be quite inflationary if the blockade were to persist.
The UAE would be particularly vulnerable to a complete closure of the Strait. So far in 2025, the country has received 25% of all dry bulk tonnage arriving in the Arabian Gulf, but only around 5% of those imports have arrived at Fujairah, a port accessible without passing through the Strait. Other importers in the Gulf, mainly Saudi Arabia and Oman, have ports outside the Strait, so the impact will be more in terms of logistics that need to be adapted.
The UAE also leads in terms of dry bulk tonnage export from the Arabian Gulf, leaving the Arabian Gulf at close to 42%. Again, only a small amount of these exports leave from Furjariah. A full closure would lead to much higher congestion at this port, likely leading to higher freight rates due to the bottlenecks, higher risk premiums, and scarce loading capacity.
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