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. During the week of March 1, 2026, the one-year time charter for VLCCs exceeded $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 Dive 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 through secondhand ship purchases and time charter lock-ins, controlling over a quarter of global VLCC capacity, forming the largest VLCC fleet 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 enables further expansion of VLCC capacity within the alliance, further increasing concentration. Under the dominant influence of geopolitics, 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 | 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. During the week of March 1, 2026, the one-year time charter for VLCCs 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 “CMB Deep Dive 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 through secondhand ship purchases and time charter lock-ins, controlling over a quarter of global VLCC capacity, forming the largest VLCC fleet 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 enables further expansion of VLCC capacity within the alliance, further increasing concentration. Under the dominant influence of geopolitics, 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 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 flows account for 35.9% of global shipping volume, mainly heading to China and other Asian countries. Attention is on how long geopolitical conflicts will reduce the strait’s transit capacity. Geopolitical conflicts will directly increase insurance premiums, and capacity redistribution 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 effectiveness of energy security concerns in negotiations between shipowners and cargo owners. The disruptive effects of chaos continue to manifest in steps. As of the week of March 1, 2026, the one-year charter rate has surpassed $100,000 per day, and the spot rate for TD3C approached a historic high of nearly $200,000 per day. With overseas shipowners increasing capacity control and rising concentration, which may reconstruct the pricing mechanism, it is expected that Iran’s geopolitical conflicts will further strengthen the momentum of the oil shipping cycle, and leading tanker profits in 2026 could reach new highs.

▍ Concentration increase continues to reshape the rate mechanism; Iran’s geopolitical conflicts strengthen the momentum of the oil shipping cycle.

Under geopolitical conflicts, the operational difficulty of non-compliant ships increases further, making compliant capacity more favored, and floating capacity may increase in the future. According to Clarksons, 35 VLCCs are scheduled for delivery in 2026. If replacement demand cannot be met and conflicts last longer than expected, the high proportion of black market capacity in Iran could further reduce operational efficiency. VLCC capacity concentration may reach historic levels, and the rate-setting 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 a breakeven line of $50,000–$60,000 per day in 2024–25, and current annualized time charter levels of $100,000 per day, suggests each ship could generate nearly $20–30 million in operating cash flow annually. The fleet’s rental income surplus enables further capacity expansion within the alliance, with concentration expected to increase further.

▍ In Q1 2025, 46% of crude oil transported through the Strait of Hormuz was destined for China, reshaping supply chains amid geopolitical conflicts. VLCC freight rates are gaining new momentum, and alternative compliant demand may 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 promote trade route adjustments and increase East Asia’s demand for compliant oil transportation, while also amplifying oil producers’ supply chain security needs, making willingness to pay premiums more resilient. In June 2025, following Israeli strikes on Iranian military facilities and U.S. airstrikes on Iran, concerns about “Strait of Hormuz 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. Using H2 2025 data, we estimate imports from the Middle East and U.S. Gulf regions could increase by 700,000–800,000 barrels per day. Geopolitical conflicts are reshaping supply chains, and VLCC freight rates are gaining new momentum. The shift toward compliant demand may accelerate.

▍ Risks:

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

▍ Investment Strategy:

Structural opportunities in oil shipping valuation and asset structure 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, and the characteristic of low seasonality is weakening. Under the dominant influence of geopolitics, geopolitical events will reinforce cycle momentum, and leading tanker profits are expected to reach new highs in 2026.

(Source: People’s Financial News)