Via Financial Times

The US’s assassination of Qassem Soleimani has heightened security concerns about shipping in the oil-rich Gulf as countries across the Middle East warily wait to see how Iran responds to the killing of the military commander. 

The UK has announced that the Royal Navy will offer to accompany British-flagged commercial vessels through the Strait of Hormuz, the region’s main waterway, because of the increased threat caused by Soleimani’s death. 

The Gulf’s waters have been considered vulnerable to Iranian retaliation ever since President Donald Trump withdrew the US from the 2015 nuclear deal Tehran signed with world powers and imposed swingeing sanctions on the Islamic republic. Even before Soleimani’s killing, Iran had repeatedly vowed to disrupt oil and petrochemical flows through the Strait of Hormuz — through which about a third of the world’s seaborne oil passes — if it was unable to export its crude. 

John Thompson, co-founder of UK-based Ambrey, the largest provider of security personnel to ships, said that even before Friday’s killing, there had already been “increased enquiries from tanker owners” who are “wary of the change in threat”. “More and more are starting to take unarmed security advisers on board when going through the Gulf,” he said.

In a sign of the increased nervousness across the Gulf, the region’s stock markets slumped on Sunday — their first day of trading since Soleimani was killed in Baghdad on Friday by US air strikes.

Kuwait’s index led the declines as it closed down 4 per cent, while Saudi Arabia’s Tadawul exchange ended down 2.4 per cent. Saudi Aramco fell 1.7 per cent, bringing the newly-listed oil company’s shares to its lowest level since its stock market debut last month.

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Insurance underwriters are likely to hike rates when western markets open on Monday to reflect perceptions of greater war risk for shipping in the Gulf, said one Dubai-based maritime broker.

Neil Roberts, head of marine underwriting at Lloyd’s Market Association, said he “anticipated” the Joint War Committee would hold an extraordinary meeting in the next two days.

The JWC normally meets on a quarterly basis to evaluate risks to shipping around the world, and in May widened the area around the Gulf for “enhanced risk for marine insurers” after a series of attacks on tankers.

“Naval escorts would be welcome as risk mitigation but as that would only extend to UK ships, underwriters will also be considering how vulnerable vessels of other nationalities may be,” Mr Roberts said.

Washington blamed Iran’s elite Revolutionary Guards for two sabotage attacks on tankers in the Gulf in May and June. In July, the guards seized a British-flagged tanker in the Gulf in retaliation for the UK’s detention of an Iranian tanker off the coast of Gibraltar, after which the UK navy escorted vessels through the Strait of Hormuz. The escorts had ended in November after the tankers were released and tensions eased. 

Iranian officials have also previously threatened the US’s Arab allies, notably Saudi Arabia and the United Arab Emirates, as the US ramped up pressure on the Islamic republic. Washington blamed Tehran for missile and drone attacks that struck Saudi Arabia’s oil infrastructure in September, temporarily knocking out half the kingdom’s crude output. 

Both Saudi Arabia and the UAE — which back Mr Trump’s maximum pressure strategy against Iran — have called for restraint since Soleimani was killed. 

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Gerry Northwood, a former Royal Navy captain who is chairman of MAST Security, said the likely asymmetric nature of any response from Iran meant shippers needed to take precautions but also “be prepared for the unpredictable”. 

Mr Northwood said he expected Iran would stop short of trying to close the Strait of Hormuz as the country is reliant on the same waterways to export its own crude, even though shipments have been severely curtailed by US sanctions. 

“They’d be cutting off their own nose to spite their face if they closed the Strait of Hormuz, and the amount of military effort required would be enormous.”

Windward, an Israel-based ship-tracking and intelligence company, said not enough time had passed to observe meaningful changes in shipping patterns in the Strait of Hormuz. But on Friday and Saturday a total of 275 vessels passed through the Strait, compared with 259 on December 27-28. 

In the UAE, the region’s trade and tourism hub, there have been concerns that any broader conflagration could be devastating for the economy. Western media warnings about safety in regional countries hosting large expatriate populations prompted alarm on social media and in schools. 

Nigel Lea, chief operating officer of intelligence and logistics provider Sicuro Group, said clients had been in close contact since the killing and were “understandably concerned at how further escalation may pan out”. 

The US embassy in Saudi Arabia on Sunday warned American nationals, especially those in the oil-rich eastern province and near the border with Yemen, of “heightened risk of missile and drone attacks”.

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