The global shipping industry is split on how best to police the Strait of Hormuz as it braces for potential trade disruption through one of the world’s most important waterways.
The UK said its response to Iran’s seizure of a British-flagged tanker on Friday would be “considered and robust”.
A third of the world’s seaborne oil passes through the Strait of Hormuz and for shipowners, brokers and industry groups the latest incident was a clear contravention of international regulations and the freedom of navigation which underpins global trade.
The confrontation ratcheted up tension between Iran and the west after Britain detained a tanker earlier this month on suspicion of smuggling oil to Syria in violation of EU sanctions. It happened a day after Washington claimed to have shot down an Iranian drone that ventured too close to an American warship in the Strait, which Iran has denied.
Oil prices rose on Friday after the incident, deemed a retaliatory effort by Iran.
Shipowners are already facing higher insurance costs to transit the Strait of Hormuz, with premiums having risen eight to 10 times in the past eight weeks, according to Jonathan Moss, head of transport and marine at law firm DWF.
While the Stena Impero chemicals tanker had a UK flag, its owner was Swedish, its crew was multinational and its business was international, Bob Sanguinetti, the chief executive of the UK Chamber of Shipping, said. “This is not a UK-specific issue.”
Some are calling for military intervention in order to protect merchant ships while others fear the move could backfire, worsening Iran’s already fractious relationship with the west.
The diverging views are indicative of the challenge governments face as they grapple with how to protect commercial ships without being seen to be acting provocatively. One shipping executive said these vessels had become “pawns” in a diplomatic spat.
While finding a diplomatic solution has to be the priority, greater security in the Gulf was also necessary, Mr Sanguinetti said.
He called for an international military coalition to allow the safe passage of commercial vessels. “If its mandate was to provide security and stability, it would be a good thing,” said Mr Sanguinetti.
Basil Karatzas, of shipping finance advisory firm Karatzas Marine Advisors, said ship owners or charterers hiring armed guards alone could not protect vessels from state actors.
“We need an Interpol for the seas,” said Mr Karatzas. “There is an urgent need for international scale security, for the Strait of Hormuz and other strategic shipping chokepoints worldwide. How do you protect merchant vessels from a sovereign state?”
“Hopefully logic will prevail, but it is not inconceivable that this situation could escalate,” he added.
Relations between Iran and other governments have become increasingly fraught since the US pulled out of the 2015 nuclear deal and imposed crippling sanctions on Iran.
While Jeremy Hunt, the UK foreign minister, has said the government was not looking at military options, British ships have been advised to stay out of the Strait of Hormuz “for an interim period.”
Richard Meade at Lloyd’s List, the shipping journal, said even as the shipping industry wants the promise of security from the UK government “it’s not the easiest stretch of water to police “.
“You can’t just shut down the Strait,” he added.
The shipping lane between Iran and Oman links the Persian Gulf to the Gulf of Oman and Arabian Sea and is just 21 miles wide at its most narrow point.
“It’s already a concentrated waterway and military escorts would only exacerbate the situation given the heightened geopolitics,” said Mr Meade.
War risk cover will continue to rise in the coming weeks, Mr Moss said, amid “a cocktail of instability” in the region.
Analysts and shipping executives have also warned about a slowdown in trade through the region with any meaningful disruption to oil supplies leading to a sharp rise in crude prices.
Despite the risks for the international shipping industry, it’s the UK-linked vessels that are in the line of sight. There are 30 UK-flagged vessels that operate in the Gulf each day of which five transit through the Strait of Hormuz.
UK-flagged tankers have already been dealt a blow from uncertainty over Britain’s departure from the EU, with some owners transferring vessels under UK flags to other countries.
UK companies are also owners and managers of a host of other tankers, including the Liberian-registered Mesdar oil tanker, which was also boarded by Iranian forces on Friday before being allowed to continue its journey.
One shipbroker said charterers were assessing more carefully the risk of using a UK vessel. “Why would you hire a UK tanker when others are less of a target?”