CITIC Securities: Iran geopolitical conflicts strengthen shipping cycle momentum; leading tanker profits expected to hit new highs by 2026

CITIC Securities Research Report states that geopolitical influence has become the dominant factor in oil shipping cycle freight rates and valuations. Overseas shipowners are driving increased concentration, which is reshaping the formation mechanism of tanker freight rates. In the week of March 1, 2026, the one-year VLCC charter rate broke through $100,000 per day, and the spot rate for TD3C approached a historic high of nearly $200,000 per day. In a previous report on February 23, 2026, titled “CMB Financial (601872.SH) Deep Tracking Report Three—Revisiting the Explosive Power of the Oil Shipping Cycle, Multiple Resonances Catalyzed by Geopolitics,” we analyzed that “overseas shipowners increasing capacity control and rising concentration may reconstruct the pricing mechanism.” A quasi-alliance formed by Sinokor, MSC, and Trafigura, including shipowners and major traders, has expanded VLCC capacity by purchasing second-hand ships and locking in time charter capacity, controlling over a quarter of global VLCC capacity, forming the largest VLCC capacity pool in history. On one hand, the industry supply side is evolving from a fragmented market to a “quasi-alliance” structure, significantly enhancing shipowners’ bargaining power; on the other hand, even without considering other funding sources like MSC, the fleet’s rental income surplus further boosts the alliance’s capacity to expand VLCC capacity, with concentration expected to further increase. Under the dominant geopolitical factors, Iran’s geopolitical conflicts strengthen the momentum of the oil shipping cycle, and leading tanker profits are expected to reach new highs in 2026.

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Oil Shipping | Freight Rate Mechanism Reshaping, Geopolitical Events Strengthen Cycle Momentum

Geopolitical influence has become the leading factor in oil shipping cycle freight rates and valuations. Overseas shipowners are driving increased concentration, which is reshaping the formation mechanism of tanker freight rates. In the week of March 1, 2026, the one-year VLCC charter rate exceeded $100,000 per day, and the spot rate for TD3C approached a historic high of nearly $200,000 per day. In our February 23, 2026, report titled “CMB Financial (601872.SH) Deep Tracking Report Three—Revisiting the Explosive Power of the Oil Shipping Cycle, Multiple Resonances Catalyzed by Geopolitics,” we analyzed that “overseas shipowners increasing capacity control and rising concentration may reconstruct the pricing mechanism.” A quasi-alliance formed by Sinokor, MSC, and Trafigura, including shipowners and major traders, has expanded VLCC capacity by purchasing second-hand ships and locking in time charter capacity, controlling over a quarter of global VLCC capacity, forming the largest VLCC capacity pool in history. On one hand, the industry supply side is evolving from a fragmented market to a “quasi-alliance” structure, significantly enhancing shipowners’ bargaining power; on the other hand, even without considering other funding sources like MSC, the fleet’s rental income surplus further boosts the alliance’s capacity to expand VLCC capacity, with concentration expected to further increase. Under the dominant geopolitical factors, Iran’s geopolitical conflicts strengthen the momentum of the oil shipping cycle, and leading tanker profits are expected to reach new highs in 2026.

▍ Reviewing history, geopolitical conflicts often lead to short-term rapid increases in VLCC freight rates and valuations. Currently, VLCC freight rates and valuations are expected to further rise, with the potential for accelerated disorder effects.

The Strait of Hormuz is a critical global energy strategic channel. According to EIA data, crude oil and condensate flow account for 35.9% of global shipping volume, mainly heading to China and other Asian countries. Attention is on how long geopolitical conflicts will continue to reduce the strait’s transit capacity. Geopolitical conflicts will directly increase insurance premiums, and capacity distribution adjustments combined with operational efficiency impacts can cause short-term regional supply-demand imbalances, often acting as key accelerators for rapid freight rate increases. During the Gulf War, VLCC TCE rose from $27,400 per day on November 26, 1990, to a peak of $65,300 per day on February 24, 1991, highlighting the effect of energy security concerns in the bargaining between shipowners and cargo owners, with disorderly effects continuing to manifest. As of the week of March 1, 2026, the one-year charter rate has broken through $100,000 per day, and the spot rate for TD3C approached a historic high of nearly $200,000 per day. The increase in capacity control by overseas shipowners and rising concentration are expected to reshape the pricing mechanism. It is anticipated that Iran’s geopolitical conflicts will further strengthen the momentum of the oil shipping cycle, with leading tanker profits reaching new highs in 2026.

▍ Increasing concentration continues to reshape the freight rate mechanism, with Iran’s geopolitical conflicts strengthening the cycle momentum.

Under geopolitical conflicts, the difficulty of operating non-compliant ships increases further, making compliant capacity more favored, and floating capacity may increase in the future. According to Clarksons, in 2026, 35 VLCCs are planned for delivery. If the conflict persists longer than expected and the black market capacity share in Iran remains high, operational efficiency may further decline. VLCC capacity concentration could reach historic levels, and the freight rate pricing mechanism is being reshaped. On one hand, the “quasi-alliance” enhances shipowners’ bargaining power; on the other hand, the quasi-alliance formed by Sinokor, MSC, and Trafigura, assuming breakeven at $50,000–$60,000 per day in 2024–25, and current one-year time charter levels at $100,000 per day, each ship could generate nearly $20–30 million in operating cash flow annually. The fleet’s rental income surplus enables the alliance to further expand VLCC capacity, with concentration expected to increase further.

▍ In Q1 2025, 46% of crude oil transported through the Strait of Hormuz was destined for China, and geopolitical conflicts are restructuring supply chains. VLCC freight rates are gaining new momentum, and alternative compliant demand is expected to accelerate shift.

According to EIA data, in Q1 2025, oil transported through the Strait of Hormuz reached 20 million barrels per day, with 5.351 million barrels per day headed to China, accounting for about 46% of China’s imports. Escalating geopolitical conflicts are promoting trade route adjustments and increasing East Asia’s demand for compliant oil transportation, while also amplifying oil producers’ supply chain security needs, with willingness to pay premiums remaining strong. In June 2025, following Israeli strikes on Iranian military facilities and U.S. airstrikes on Iran, market concerns over “Hormuz Strait blockage” surged. Based on China Customs data for H2 2025, China’s crude oil imports from Malaysia and the U.S. decreased by 815,000 barrels per day year-on-year, while imports from Brazil, Canada, and the Middle East (Saudi Arabia, UAE, Kuwait) increased by 965,000 barrels per day. We estimate that imports from the Middle East and U.S. Gulf regions could increase by 700,000–800,000 barrels per day, as geopolitical conflicts reshape supply chains. VLCC freight rates are gaining new momentum, and the shift toward alternative compliant demand is expected to accelerate.

Risk Factors:

• Large-scale resumption of non-compliant ships
• Rapid resolution of geopolitical conflicts
• Lower-than-expected transportation demand
• Trade pattern adjustments below expectations

Investment Strategy:

Structural opportunities in oil shipping valuations and assets are expected to continue. The supply chain restructuring driven by geopolitical conflicts will be the core driver of this cycle. The Strait of Hormuz accounts for about 30% of global crude and petrochemical transportation. Any fluctuations are likely to serve as a “bullish option” for the tanker cycle, with VLCCs leading resilience. The freight rate formation mechanism is being reshaped, with weak seasonality features diminishing. Under the dominant geopolitical influence, conflicts will reinforce cycle momentum, and leading tanker profits are expected to reach new highs in 2026.

(Source: People’s Financial News)