VLCC: From Pricing Risk to Pricing Utilisation¶
inInternational Shipping News06/07/2026
The shift is already visible in freight assessments. Middle East Gulf to China VLCC rates have fallen sharply from their post conflict highs and recently traded below the equivalent Atlantic basin to China assessment for the first time since early April. This decline is significant. Throughout the disruption, Middle East Gulf export routes commanded a substantial premium as charterers sought to secure vessels willing to operate in a hostile environment.
This adjustment suggests the market is increasingly repricing freight on fundamentals alongside risk, with a sustained period of smooth Hormuz transits lowering perceived operational risks and undermining support for the elevated freight levels seen immediately after the agreement. While developments over the coming days could quickly reintroduce a risk premium should security conditions deteriorate, recent freight performance suggests the market is becoming increasingly reluctant to sustain elevated rates based solely on geopolitical concerns.
To understand why freight has corrected despite continuing uncertainty around Hormuz, it is worth examining how vessel behaviour has evolved since the signing of the US Iran MOU.
Owners Are Returning to the Gulf, But Confidence Has Yet to Fully NormaliseOne of the clearest indications of the market’s transition can be seen in vessel movements through the Strait of Hormuz.
Since the signing of the US Iran MOU, transit activity has recovered steadily across the energy shipping complex, reflecting improving confidence among shipowners and charterers operating in the region. However, VLCCs remain at the centre of this recovery. Of the 308 recorded transits since 15 June, 130 were undertaken by VLCCs, accounting for more than 40% of all vessel movements through the Strait.This highlights the continued importance of Gulf crude exports in driving overall transit activity. The recovery has been led by VLCCs, reflecting both the strategic priority of maintaining crude exports from the region and the greater willingness of owners and charterers to deploy tonnage as transit conditions stabilise.
A closer examination of VLCC transits reveals a more nuanced picture.While transit activity has recovered, outbound departures have consistently exceeded inbound arrivals since the agreement was signed. This likely reflects the sequencing of vessel movements following the easing of disruptions. Cargoes and vessels already positioned within the region were able to depart relatively quickly once transit conditions improved, while the return of replacement tonnage has been more gradual.
The same trend is visible in vessel repositioning patterns. VLCCs that accumulated around India’s west coast and other waiting areas during the disruption have gradually returned towards regions in the East of Hormuz area, contributing to a steady increase in available tonnage across the Middle East Gulf. The willingness to reposition vessels back into the region suggests that many owners increasingly view a prolonged disruption scenario as unlikely. However, the pace of inbound replenishment indicates that confidence has yet to fully normalise. Freight therefore sits in an uncomfortable middle ground where accessibility concerns are fading, but owner caution has not disappeared entirely.
Tonnage Rebalances Back Towards East of SuezThe recovery in Hormuz transits has been accompanied by a broader shift in VLCC positioning. Since the signing of the US Iran MOU, vessel availability in the Middle East Gulf has increased as owners progressively return tonnage towards traditional loading regions. At the same time, the number of VLCCs repositioning towards the Atlantic Basin has declined sharply, close to pre conflict levels.
The reversal suggests that owners are becoming less inclined to pursue alternative employment opportunities outside the region as confidence in Gulf operations improves. During the disruption, uncertainty around Middle East exports encouraged longer repositioning voyages and greater fleet dislocation, providing an indirect driver of support to global freight rates. As vessels migrate back towards East of Suez markets and positioning patterns normalise, these inefficiencies are gradually unwinding, leaving freight increasingly dependent on underlying utilisation rather than fleet dislocation.
Temporary Supports Continue to Cushion Freight RatesGiven the increase in vessel availability, a natural question is why freight rates have not corrected more aggressively.Part of the answer lies in the fact that not all available tonnage is competing equally. A significant proportion of prompt VLCC supply remains concentrated among a relatively small number of owners and operators. This concentration provides greater flexibility over fixing strategy and vessel deployment, helping to moderate competition and provide a floor on rates.At the same time, some disruption related trading patterns remain evident. Shuttle and ship to ship transfer activity around the Gulf increased during the conflict, with some vessels making repeated movements in and out of the strait of Hormuz to conduct transfers outside. The persistence of these arrangements suggests that market participants continue to account for potential disruptions, even as transit conditions improve. This lingering uncertainty has helped keep a degree of risk premium embedded in freight rates.
While supportive for freight, this form of utilisation is inherently temporary. As trading patterns continue to normalise and conventional export routes resume, some of this employment is likely to disappear. Vessels currently engaged in shuttle and STS operations may gradually return to mainstream spot trading, increasing effective supply even if the overall fleet size remains unchanged.
Normalisation Is Underway, But Not Yet CompleteThe recent correction in VLCC freight rates reflects improving confidence around transit conditions in and around the Strait of Hormuz. Transit activity has recovered, vessel availability has increased and owners are gradually positioning tonnage closer to traditional loading areas, reducing the accessibility constraints that supported freight during the disruption.
Looking ahead, the pace of inbound VLCC replenishment will be a key indicator for freight direction. A faster rebuilding of vessel supply would add downward pressure on rates, while any renewed security concerns could quickly restore a risk premium to the market.Source: Vortexa
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