Freightos Baltic: Transatlantic rates spike 50% as Hormuz blockade inflates global bunker costs

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Geopolitical risk is now dictating global freight pricing. Ceasefire negotiations that briefly raised hopes for a reopened Strait of Hormuz collapsed late last week, resulting in a US naval blockade targeting Iran-linked traffic. With the waterway tightly restricted, vessels exiting the Persian Gulf are expected to remain outside until maritime security stabilises.

The initial Iranian closure had already removed an estimated 10% of global oil supply; the added US enforcement is expected to deepen this energy squeeze, prompting importing nations to implement stock conservation measures.

This oil shock is translating directly into operational friction for ocean carriers. Dwindling bunker fuel supplies in key Asian hubs are forcing vessels to reroute to alternative refuelling ports, ironically increasing total fuel burn and journey inefficiency.

Escalating fuel costs have triggered sharp, albeit uneven, repricing across major trade lanes. The most aggressive movement is in the transatlantic market, where emergency fuel surcharges and Peak Season Surcharges (PSS) of $500 to $1,000/FEU introduced in March have now taken effect. Consequently, transatlantic spot rates surged 50% last week, climbing from $1,400/FEU to over $2,100/FEU. Carriers are signalling further increases of $1,000 to $2,000/FEU targeting late April and early May.

Transpacific lanes remain firm but more contained. US West Coast rates rose 3% to $2,500/FEU, while East Coast prices climbed 10% to $3,678/FEU—both sitting roughly $700/FEU above pre-war baselines. While carriers are targeting further hikes of $500 to $2,000/FEU into early May, sustainability is questionable given market resistance elsewhere.

Asia-Europe remains the softest segment, exhibiting weak pricing traction despite broader market tightening. Rates have edged only $200 to $400/FEU higher since the conflict began. Last week, Northern Europe pricing slipped 4% to $2,800/FEU, while Mediterranean rates held flat at $3,800/FEU. Both benchmarks remain over $1,000/FEU below earlier General Rate Increase (GRI) targets, underscoring carrier struggles to enforce hikes in a low-demand environment.

US import demand remains fundamentally steady. The National Retail Federation (NRF) projects flat volumes through June before a 5% seasonal lift in July, with total year-to-date imports through August tracking 3% lower year-on-year.

Crucially, shippers are not frontloading cargo despite looming trade policy shifts. The Trump administration's temporary 10% global tariff—enacted under Section 122 following the Supreme Court’s invalidation of earlier IEEPA measures—is set to expire or escalate in July. However, this policy faces mounting legal challenges in the same court that struck down the IEEPA, adding profound uncertainty to forward trade planning just as the IEEPA tariff refund process begins.

Written by: Farid Muzaffar