Orient Securities released a research report stating that the transportation industry is being driven by three factors—increased production, sanctions, and rising concentration—which are pushing oil shipping sentiment upward. The U.S.-Israel strike on Iran could accelerate the realization of geopolitical options, further boosting market conditions. Since 2026, VLCC acquisition activities by long-established shipping companies have significantly increased industry concentration. Rising crude oil production, ongoing sanctions, and greater industry concentration have gradually materialized, helping freight rates reach new highs over the past five years, with one-year time charters hitting record levels, reflecting the industry's optimistic outlook on future oil shipping sentiment. The U.S.-Israel strike on Iran may speed up the realization of geopolitical options. If sanctions on Iran are lifted in the future, the industry could see accelerated scrapping of older vessels. It is expected that oil shipping supply and demand will continue to improve, driving sentiment further upward. Key views from Orient Securities are as follows: The U.S.-Israel strike on Iran has intensified geopolitical conflict. On February 28, 2026, the U.S. and Israel launched military strikes against Iran, triggering large-scale retaliation from Iran and a sharp escalation of tensions in the Middle East. Since December 2024, the U.S. has continued to strengthen sanctions on Iran's shadow fleet. Escalating U.S.-Iran tensions may drive further tightening of sanctions. The report attempts to outline three possible future scenarios for the oil shipping market, though the complexity of geopolitics makes full coverage difficult. From a final outcome perspective, the report suggests that oil shipping sentiment may continue to rise under the current Middle East situation, with geopolitical options likely to be realized sooner. Scenario 1: After the conflict, the U.S. and Iran return to negotiations. The U.S. continues to tighten sanctions on Iran's shadow fleet. Following the conflict, the U.S. and Iran may maintain the status quo through negotiations or prolonged military conflict. The U.S. may further increase sanctions on the shadow fleet. Since December 2024, the U.S. has intensified sanctions on Iran's shadow fleet, with the proportion of sanctioned VLCCs globally rising from 8% to 17%. The scope of sanctions has gradually expanded from individual vessels and owners to independent Chinese refineries and oil service companies to enhance effectiveness. The report expects stricter U.S. sanctions on Iran to impact the efficiency of Iranian crude oil exports, potentially further reducing them in the future. Crude oil importers may replace Iranian oil through compliant markets, driving oil shipping sentiment higher. Scenario 2: The U.S. resolves the conflict through military or diplomatic means, potentially lifting sanctions on Iran. After the conflict, the U.S. and Iran reach a solution through military or diplomatic means. If an agreement leads to the lifting of sanctions, Iran would re-enter the international oil market on the demand side. On the supply side, with the normalization of crude oil exports from Venezuela and Iran, the shadow fleet would lose its purpose. Older vessels in poor condition from the original shadow fleet could face mass scrapping, significantly boosting oil shipping sentiment. Scenario 3: Continued blockade of the Strait of Hormuz, causing major disruptions to global crude oil markets. The U.S. launches a large-scale attack, followed by significant retaliation from Iran, including attacks on regional oil facilities and attempts to blockade the Strait of Hormuz. If the Strait of Hormuz is blocked, it could have a major impact on crude oil and oil shipping markets. Major OPEC members such as Saudi Arabia, Iran, the UAE, Kuwait, and Iraq rely on the Strait of Hormuz for seaborne crude oil exports. According to Kpler, approximately 30% of global seaborne crude oil exports and over 70% of Middle Eastern seaborne exports passed through the strait in 2025, making it critical for crude oil exports. A blockade would severely affect Middle Eastern seaborne crude oil exports. Iraq, Iran, Kuwait, and Qatar rely entirely on the Strait of Hormuz for their seaborne crude oil exports. Freight rates could spike short-term due to rush shipments but plummet long-term as seaborne volumes are constrained and demand falls. Given the magnitude of the impact, a prolonged blockade of the Strait of Hormuz is relatively unlikely. A more plausible scenario is a long-term restriction on traffic through the strait, similar to the "Tanker War" between Iran and Iraq from 1981 to 1988. The U.S. would be forced to protect freedom of navigation, and tankers could enter and exit the Persian Gulf under military escort, potentially leading to sustained increases in tanker freight rates. Related stocks: COSCO SHIPPING Energy Transportation and China Merchants Energy Shipping. Risks include economic fluctuations, geopolitical tensions, oil price volatility, and safety incidents.
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