Episode #36: The Sixty-Day Peace Clock and the June Rate Monster

It's been a busy few days, and it finally seems like Iran and the US are going to agree to reopen the Strait of Hormuz.

At least according to President Trump, it'll be fully reopened by this weekend.

How long do you think it will be until traffic finally returns to normal?

So it will probably be a while, but basically, as you said, the US and Iran are set to sign an interim peace agreement or a memorandum of understanding at the end of the week.

And so it's going to include as part of the agreement, the agreement to reopen the Strait of Hormuz, meaning both blockades will be removed.

Reports are that that will be required within 30 days.

And that's going to start the clock on 60 days that the sides have to arrive on a final deal, a final peace agreement.

But the text hasn't been released.

So there's really a lot of uncertainty about what all this means and what this means, the timeline for reopening.

As you said, President Trump said the state will be fully open by the time of the signing.

It is possible that the blockades will be removed by then.

But even so, the consensus is that for a full return of traffic is likely going to take weeks and possibly months because the narrow passage is made even narrower by the fact that there are possible mines in various places.

So there are only a couple kind of.

verified safe channels and for an already narrow waterway which is not big enough for all these vessels to exit at once normal traffic is something like 150 vessels a day so it will be a while till till we get there experts are saying it's going to take several weeks for daily transits to recover to just half of the normal level so it's going to be a while

Okay.

What will the reopening of the Strait mean for the container market in general?

Right.

So as we've said from the beginning, they're kind of two different groups.

There's the smaller group, which is container traffic going in and out of the Gulf, servicing the Gulf states and kind of the broader market.

And so for the Gulf states, this could mean you know it might take a while again because it's just not the availability for all these vessels to to pass at the same time or when they want to but it's coming that there'll be a resumption of port calls back to these gulf container ports it's possible that there won't be the same number as there normally were because you know this is an interim agreement and vessels don't want to get stuck there again or maybe as we approach the 60-day mark but who knows but it will ease ocean logistics for the Gulf states.

There have been these alternative ports and then land bridges set up, but they're not really structured to handle everything.

And there are long delays.

Maersk has kind of stopped receiving bookings to some of the services through Saudi Arabia, and they're now only going through UAE.

So that's been a problem.

So that will probably start to improve.