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The Iran-Hormuz conflict is causing a permanent rerouting of about 20 million barrels a day. With WTI at $91.48, up 9.7% in a week, investors are bidding up oil producers. Pipeline and export operators that earn fees on rerouted flows, such as ONEOK, Kinder Morgan and Williams, have not moved.
Source: OilPrice.com ↗
Oil producers have jumped, with WTI up 9.7% in a week. A lasting rerouting of 20 million barrels a day means years of building spare routes and capacity around an unreliable chokepoint. The VIX fear gauge at 14.5 suggests investors still see a brief spike. The toll collectors gain from that, not the producers. Longer voyages around Africa tie up more tanker days per cargo. Saudi Arabia's East-West Pipeline and the UAE's Abu Dhabi Crude Oil Pipeline can carry only so much, so the rest must go by longer sea routes. Buyers of Middle Eastern liquefied natural gas (LNG) turn to US supply. US pipeline and terminal operators that serve Gulf Coast export plants, such as ONEOK (OKE), Kinder Morgan (KMI) and Williams (WMB), carry more of that gas and gas liquids. Investors are watching the oil price, not these fees.
Investors believe Hormuz disruption pushes up crude prices and so helps oil producers. In this view, the integrated majors and producers are the place to be, and pipelines and terminals matter less.
Why that may be wrong
Tanker and pipeline stocks are followed mostly by income investors focused on dividends, who are slow to account for higher day rates. The analysts who cover oil are not the ones who cover tanker stocks. The point that longer routes tie up more ships takes weeks to travel from shipping specialists to general fund managers. Oil producers, meanwhile, get money right away, since every oil-focused fund jumps on a supply shock.
A fast ceasefire or a deal that reopens Hormuz within weeks would undo this. Tanker day rates would return to normal and the building cycle would not happen. Watch Hormuz transit volumes, which the EIA and IEA (the US and global energy agencies) publish monthly. If volumes recover above 15 million barrels a day within 60 days, the case for a lasting reroute fails. And if Saudi Arabia and the UAE announce big expansions of their bypass pipelines (Petroline, ADCOP), less oil would need tankers.
Tanker stocks may already reflect part of this risk after the 2024 Red Sea episode, when investors piled into shipping. If the conflict cools faster than expected, day rates would drop quickly and infrastructure gains would reverse sharply. Hormuz threats have rarely led to sustained full closures. The weakest assumption is that the rerouting is permanent. Every earlier Hormuz threat, from the 1984-1988 Tanker War to the 2012 Iranian closure threats, ended with the strait open and most of its oil still shipped through it. If Iran's leaders signal they will negotiate safe passage within 30-60 days, the case falls apart. A report of Hormuz traffic back above 12 million barrels a day would suggest the disruption is temporary.
The closest parallel is the 1956 Suez Crisis. After Egypt nationalized the canal, war broke out and the canal closed. Tanker rates jumped 300-500% within weeks, because voyages around the Cape of Good Hope took far more ship-days. Tanker owners made windfall profits while oil companies faced higher costs. In 2024, Houthi attacks pushed 60-70% of Red Sea container traffic around Africa, and tanker and dry-bulk day rates rose 40-80% in the first quarter of 2024. Both times, shipping and infrastructure companies gained faster and for longer than the commodity, because route costs stayed high while the chokepoint stayed unreliable. Hormuz is bigger, about 20 million barrels a day, far more than either of those routes carried, so the gain could be larger.
Hormuz disruption cuts about 20 million barrels a day of normal transit, pushing producers and importers to look for other routes at once. WTI jumps, already up 9.7% in a week, as supply doubts set in.
Other sea routes, around the Cape of Good Hope or bypassing the Red Sea, mean much longer voyages, adding 10-20 ship-days per round trip. That ties up tanker capacity without any change in fleet size, so supply tightens and day rates for the largest crude tankers jump. US Gulf Coast LNG export terminals take on buyers who used to get Qatari and Emirati LNG through Hormuz.
Tanker owners and US pipeline companies that feed Gulf Coast LNG export terminals gain value as investors see the rerouting as lasting. The longer the conflict runs, the more shipping contracts reset at higher day rates, locking in 12-24 months of earnings. US LNG export capacity, already near full, commands a premium as European and Asian buyers seek non-Hormuz supply. Investors have not separated these gains from the broad energy rally.
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