Gagan Ranu on Strait of Hormuz Disruption
The conflict in the Middle East is sending shockwaves through global energy markets, the shipping industry, and the legal landscape. International Dispute Resolution Partner, Gagan Ranu, warning that the consequences could be far-reaching and long-lasting.
The Strait of Hormuz – the narrow waterway through which approximately 20 per cent of global oil supplies and one-third of global seaborne crude flows transit – has been effectively brought to a standstill.
Multiple maritime insurers have removed war risk cover for ships in the region as of 5 March. International Dispute Resolution Partner Gagan Ranu commented on the developments.
“The impact on the shipping industry and global oil and gas markets of the effective closure of the Strait of Hormuz cannot be understated. The Strait is a critical artery for the flow of crude exports from the Gulf accounting for approximately 20% of global supplies, and therefore any disruption would have a significant impact on international markets and global trade. The impact has already been felt as oil and gas prices have surged in the past 48 hours causing global stock markets to tumble.”
War-risk premiums for tankers operating in or near the Gulf have surged dramatically, and a number of major shipping and cargo insurers have withdrawn coverage altogether, forcing shipowners to suspend voyages. Around 200 internationally trading tankers are currently stranded in the Gulf, according to Lloyd’s List, with many carriers considering costly re-routing around the Cape of Good Hope.
Gagan warns that the disruption is set to generate a significant wave of legal disputes across multiple areas of shipping and trade law.
“This will inevitably give rise to a huge surge in legal disputes in relation to coverage, as well as those arising under charterparties, bills of lading, and finance agreements. Wider issues are also likely to arise such as where shipowners simply refuse to proceed to the region, as well as what will happen to the cargo on board vessels that are currently stranded there if the underlying contracts have effectively been frustrated. It would be fair to say that Shipping and International Trade lawyers are likely to be very busy for the foreseeable future.”
