Brief your think tank

We operate a mid-size fleet of fourteen crude and products tankers, chartered primarily to trading houses and two national oil companies. Six of our vessels have standing charter obligations that require Gulf-origin loading, which means transiting the Strait of Hormuz. The Strait has been effectively closed to routine commercial shipping since the war began in late February, reopened briefly under the June ceasefire framework, and has been closed again since early July after renewed attacks on commercial vessels. A naval escort program has been running convoys through the Strait since April, and war-risk insurers are still willing to underwrite Hormuz transits under escort, at a substantially elevated premium. We are deciding whether to keep accepting and fulfilling Hormuz-transiting charters under the escort program, or to shift our Gulf-facing contracts entirely to the alternate routing around the Cape of Good Hope, which adds roughly three weeks and meaningfully higher fuel cost per voyage. We have not locked a direction yet. Two of our six Gulf-facing contracts renew in five weeks, and our customers are already asking which way we're leaning — we need a decision within this charter cycle, but we want the commercial case pressure-tested before we commit.

Three of our direct competitors with comparable fleets have continued Hormuz transits throughout the war under escort. One paused entirely in March and has not resumed. Customers have been clear that continued willingness to service Gulf-origin loads is a factor in which operators keep getting offered charters when contracts come up for renewal. War-risk insurance for Hormuz transits is available through our existing underwriters, at a premium of roughly 5% of hull value per voyage, up from a pre-war baseline near 0.05%. That's priced in to the charter rates we'd quote. Underwriters wouldn't be offering this coverage if they'd concluded the risk was uninsurable at any price — they've priced it, not declined it. The escort program requires transiting in convoy on a fixed schedule set by the naval task force, which limits our routing flexibility but has been running consistently since April. Crew compensation for Gulf transits currently includes a hazard-pay supplement, negotiated with our crewing agencies and in line with what the rest of the industry is paying for war-zone transits. That arrangement is settled and hasn't been a point of friction with the unions we work with. Fleet-wide risk profile for Hormuz transits since the war began: seventeen merchant vessels damaged in the Strait, of which seven were declared total losses or abandoned; two vessels captured and their crews detained for periods ranging from days to several weeks before release; one tugboat sunk; twelve seafarers killed or reported missing across the crisis. None of these incidents involved our fleet. Convoy transits under escort have had a materially lower incident rate than unescorted transits earlier in the war, though escorted convoys have still taken fire on at least two occasions.

FACTS (as we understand the theater mid-August 2026): Strait closed to routine commercial shipping since early July after a brief June reopen; naval escort convoys running since April; war-risk premium ~5% of hull value per Hormuz voyage vs ~0.05% pre-war; Cape adds ~three weeks and higher fuel; six Gulf-facing charters of which two renew in five weeks; industry casualty tally since the war began includes 17 damaged merchant vessels (7 total losses/abandoned), 2 captures with crew detention, 1 tug sunk, 12 seafarers killed or missing — none involving our fleet; escorted convoys have taken fire at least twice. ASSUMPTIONS (want tested — treat as open, not settled): that the escort program's safety record so far is a useful guide to near-term risk; that insurers' willingness to keep underwriting these transits is a reasonably informed signal about risk; that our crew hazard-pay arrangement is adequate; that customers' preference for operators who keep servicing this lane will persist rather than soften as the war continues. Our own clean incident record is a fact about the past; we are not treating it as proof about the next transit.

Whether the cost gap between Hormuz-under-escort and the Cape route will narrow or widen over the next two quarters, and which way that should push contracts we'd be locking in now. Whether losing this lane to competitors now would be recoverable later if we wanted back in, or whether wartime customer relationships would make re-entry costly. Whether the escort program's schedule and capacity would even support shifting more of the fleet this way if the commercial case held — and conversely, what we give up if we step back for a cycle and later want in again.