The Impact of the Iran Conflict on BAF¶
inInternational Shipping News30/06/2026
According to Ship & Bunker, the Global 4 Ports Average VLSFO price rose from $506/mt on 27 February 2026 to $961.5/mt on 19 March 2026, representing an increase of approximately 90% in less than three weeks. Faced with rapidly rising fuel costs and increased uncertainty, ocean carriers responded by introducing the Emergency Bunker Adjustment Factor surcharges (eBAFs).
Prior to the conflict, BAF levels remained relatively stable. The average BAF values on the East-West headhaul trades increased modestly from $449/40ft dry in 3Q-2025 to $470/40ft dry in 4Q-2025 before declining to $419/40ft dry in 1Q-2026.
The impact of the conflict became evident in 2Q-2026 (see chart below). While standard BAF fell to $406/40ft dry as the fuel adjustment formulas had not yet fully reflected the surge in bunker prices, the introduction of eBAF increased total fuel-related charges to $798/40ft dry, almost double the underlying BAF level.
The lagged nature of BAF calculations means that the full impact of the bunker price spike becomes visible in 3Q-2026 with the standard BAF increasing to $696, while the total BAF including eBAF reaches $1,088.
This development raised a concern for shippers. Standard BAF mechanisms are designed to capture increases in bunker and oil prices, albeit with a time lag. However, the introduction of eBAFs creates the potential for duplicate fuel cost recovery, whereby carriers recovered higher fuel costs immediately through emergency surcharges and subsequently through increased standard BAF levels as bunker price movements were incorporated into quarterly calculations.
Notably, Hapag-Lloyd have agreed to withdraw emergency fuel surcharges once the higher BAF takes effect in July, reaffirming its commitment to avoiding duplicate recovery of fuel costs.
Looking ahead, the justification for eBAFs appears to be weakening. The temporary US–Iran agreement has eased immediate concerns over further disruption to oil and bunker fuel markets, while the Global 4 Ports Average VLSFO price has retreated significantly from its March peak, falling from $961.5/mt on 19 March 2026 to $764.5/mt on 18 June 2026, according to Ship & Bunker.
As a result, shippers are likely to be in a stronger position to negotiate the removal of eBAFs and a return to normal indexed quarterly BAF mechanisms. With the underlying BAF already capturing fuel price movements through established adjustment formulas, maintaining emergency surcharges in the current environment would be increasingly difficult to justify.
For shippers, this highlights the importance of closely monitoring surcharge structures and ensuring that emergency measures do not remain in place after the underlying BAF has adjusted to market conditions. In an environment of extreme fuel price volatility, BAF increases can place considerable pressure on supply chain budgets, reduce margins, and complicate carrier contract negotiations.Source: Drewry
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