Shipping giant Maersk diverts from Suez route amid Iran-US tension

Danish container shipping giant Maersk said on Friday that it will temporarily reroute some of its vessels away from the Suez Canal in response to “unforeseen constraints” in the Red Sea region. The move comes amid the growing possibility of a military confrontation between the United States and Iran.

“We are currently experiencing unforeseen constraints arising from the wider operating environment in the Red Sea region,” Maersk said in a statement.

“After conversations with our security partners, it is clear that these constraints are making it challenging to avoid delays in regard to passage through the area,” the company added.

Maersk said it was redirecting the ships around South Africa’s Cape of Good Hope rather than through the shorter Suez Canal route. The South African journey is about 10 days longer and costlier than the Red Sea-Suez route. 

Following the war in Gaza, which erupted in October 2023, the Iran-backed Houthi rebels in Yemen attacked scores of commercial vessels traversing the Red Sea in what the militia said was a response to Israel's assault on the Palestinian enclave. The attacks caused hundreds of ships to divert from the Suez Canal to the Cape of Good Hope.

Why it matters: The Suez Canal is the shortest and quickest maritime route linking Asia and Europe via the Middle East. The chokepoint is essential to global trade, handling around 12-15% of all global shipments and 30% of total container traffic.

Maersk’s announcement comes as the threat of a US-Iran military confrontation looms large. The world’s largest aircraft carrier, the USS Gerald Ford, joined American military forces in Middle Eastern waters on Friday. It is the largest fighting force in the Middle East since the Second Gulf War in 2003.

US and Iranian negotiators met in Geneva for indirect nuclear talks on Thursday. After six and a half hours of discussions, American and Iranian diplomats were said to have made “significant progress,” according to Omani Foreign Minister Badr Albusaidi, who mediated the negotiations.

"We will resume soon after consultation in the respective capitals. Discussions on a technical level will take place next week in Vienna," the minister said in a statement.

On Friday, several countries, including China and Canada, urged citizens to leave Iran as tensions rose. The US Embassy in Jerusalem also authorized non-essential staff and families of embassy workers to leave. It also recommended that US citizens leave Israel.

Know more: Middle Eastern oil exporters have been accelerating crude shipments against a disruption to flows through the Strait of Hormuz in the event of a US attack on Iran. The vital waterway accounts for around 25% of all global crude shipments and around a third of all liquefied natural gas cargoes.  

Reuters reported on Wednesday that Saudi Arabia is raising crude production and exports as a precautionary measure in response to the heightened risk of a US strike on Iran. Citing sources familiar with the matter, Reuters reported that the plan will see the kingdom temporarily boost its output and export of oil.

Meanwhile, Iran’s crude oil and condensate exports rose to 2.2 million barrels per day in February, up 50% from the average of the previous three months, according to data from ship tracking firm Kpler from Thursday.

Exports from Iran’s Kharg Island terminal on Feb. 15-20 were nearly 20.1 million barrels, according to Kpler. The figure is almost three times the amount loaded over the same dates in January and is equivalent to more than 3 million bpd, much higher than Iran’s typical daily crude exports.

OPEC+, the coalition of major oil exporters, is due to meet on Sunday. Analysts expect the cartel, which is led by Saudi Arabia and Russia, to resume output hikes amid regional volatility. Analysts believe that the hikes will start with a modest increase of 137,000 bpd, the Dow Jones newswire reported.

Brent crude stood at $72.70 as of Friday, 8:42 a.m. EST.