War in Israel: The new geopolitical flashpoint for ocean shipping

Wars and pandemics — geopolitical and global health crises causing widespread suffering and death — have the side effect of hiking profits in certain industries. Wars inflate returns for defense contractors. The pandemic was a bonanza for certain pharmaceutical companies.

Shipowners have profited from both. Container-line owners made fortunes during COVID. Russia’s invasion of Ukraine buoyed rates for tanker companies.

Now there’s a new geopolitical crisis — the Israel-Hamas war in response to Saturday’s terrorism attack by Hamas — and clear potential for escalation to a regional conflict.

It may seem insensitive, but it’s the job of shipping analysts and shipowner executives to provide their views on how military conflicts affect their markets and stock prices. On Tuesday, three days after war was officially declared in the Middle East, shipping analysts and executives convened at the Capital Link New York Maritime Forum in Manhattan’s Upper East Side — and there was no avoiding the subject.

“If we were talking last week, it would have been: We’ve got a war in central Europe. Well, now we’ve got a war in the Middle East,” said Robert Bugbee, president of Scorpio Tankers (NYSE: STNG).

“What could happen in the Middle East, regrettably on a humanitarian basis, is positive for the [tanker] rate structure, the same as it was with the Russian war.”