European carriers caught between Hormuz crisis and EU-ETS final phase-in

European shipping operators are confronting their toughest cost environment in a generation, as the prolonged closure of the Strait of Hormuz compounds the final phase-in of the EU Emissions Trading System.

Bunker fuel prices in Singapore, the industry's largest refuelling hub, have climbed above $800 per tonne, up from roughly $500 before Iran shut the strait on 4 March, according to commodity site OilPrice. The European Federation for Transport and Environment estimated the conflict is costing the global shipping industry around €340 million a day.

Ocean spot freight rates on routes touching the Middle East have surged three to four times pre-conflict levels, with more than 1,550 vessels stranded in or near the Gulf and around 22,500 mariners trapped, freight forwarders reported. Maersk, MSC, CMA CGM and Hapag-Lloyd have rerouted fleets around the Cape of Good Hope, adding up to 14 days to transit times and squeezing capacity at Rotterdam, Antwerp and Hamburg. War risk insurance premiums have more than doubled to between 0.2 and 0.4 per cent of hull value per voyage.

For Europe-listed carriers, the pressure is amplified by the final phase-in of the EU-ETS, which from January now requires 100 per cent allowance coverage, up from 70 per cent in 2025. Compliance costs per tonne of very low sulphur fuel oil consumed on intra-EU voyages are projected to reach $319 this year, against $185 in 2025, according to Ship & Bunker analysis, with methane and nitrous oxide emissions added to the calculation for the first time.

ING analysts said the shock is accelerating fuel-mix decisions, with LNG and methanol-ready vessels now markedly more competitive against marine gasoil. Brent fell 3.8 per cent on Thursday on signs of progress in US-Iran talks, although Eurasia Group warned smaller European operators may not withstand a prolonged disruption.