Container Bytes #42: The Iran-Oman Framework and the Transpacific Rate Rebound

Welcome back to Container Bytes! 📍 We hope you didn't miss us too much during our one-week hiatus—we are back in action.

In this episode, Julia Frohwein and Judah Levine examine a potential new diplomatic development: a proposed bilateral agreement between Iran and Oman aimed at reopening the Strait of Hormuz. Under this proposal, vessels would coordinate entry through the northern Iranian channel and exit via the southern Omani channel, without transiting tolls for 60 days. We analyze what this means for ocean carriers, why long-haul container vessels will likely remain cautious until stability is guaranteed, and how recent energy market shifts have brought crude oil prices down while bunker fuel costs remain 50% above pre-war baselines.

We also dive into the ocean freight spot market, where major trade lanes are beginning to diverge. Asia-Europe and Mediterranean rates have dropped roughly 15% from their July peaks, with Asia-North Europe falling to $5,000/FEU. Conversely, Transpacific West Coast rates spiked by $1,000 to $7,000/FEU following August 1st GRIs, supported by low inventory levels and ongoing front-loading activity.

Finally, we look at the tariff landscape following the July 24th expiration of Section 122 tariffs, as the White House rolls out Section 301 forced-labor replacement tariffs ranging from 10% to 12.5% across 60 trading partners.

Chapters: 

• 00:00:00 — We're Back: Returning from hiatus. 
• 00:00:25 — The Iran-Oman Framework: A new proposal to reopen Hormuz. 
• 00:02:12 — Carrier Caution: Why mega-ships are waiting out the diplomatic process. 
• 00:04:00 — Energy Market Shift: Crude prices drop as bunker fuel costs remain elevated. 
• 00:05:15 — Rate Divergence: Asia-Europe rates ease while Transpacific rebounds. 
• 00:07:36 — Tariff Transition: Section 122 expires as new Section 301 tariffs take effect. 
• 00:10:32 — Weather Gridlock: Consecutive typhoons maintain pressure on port capacity.

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For more detailed weekly freight updates delivered straight to your inbox, check out our weekly freight email. Want the freshest freight data on demand? Hit up terminal.freightos.com.

Episode Transcript

SPEAKER_00 (00:00):
Hi and welcome to today's episode of Container
Bites, your 10 minute update onthe latest in freight.
Hope you didn't miss us toomuch.
Last week we were off, but goodnews is we are back.
I am Julia Frowine, as alwaysjoined by Judah Levine, our
freight expert.
Judah, how are you doing today?

SPEAKER_01 (00:15):
I'm good, how are you?

SPEAKER_00 (00:16):
I'm doing okay, yeah.
It's good to get off, but nowwe're back.
Alright, let's get back tofreight.
So it looks like there isanticipation once again that the
Strait of Hamous could reopen,but this time through an
Iran-Oman agreement.
So what's the latest appear andwhat's different this time?

SPEAKER_01 (00:31):
So as you said, this time it's an Iran-Oman
initiative.
Whereas before uh Oman wasn'treally directly involved or
officially involved.
And this is really um anagreement between these two
sides.
I'm sure there's input fromother parties, but it's kind of
this bilateral agreement.
And it's a big change in that itis set to allow transits through
the Omani side.
So when we've seen attacks onvessels in the last you know

(00:54):
month or so, it's really been onvessels trying to use this uh
lane that is not via the Iranianlane, which is to the to the
north.
So this deal would reopen theHormuz without tolls or fees on
transiting vessels for 60 days,and this would have ships
entering the Persian Gulf incoordination with Iran through
that northern lane and exitingthe Gulf in coordination with

(01:17):
Oman through that southern lane.
So it is recognizing authorityother than Iran over the Strait
of Hormuz to some extent, butit's also validating at least
partially Iranian authority overthe strait, which the US as well
as several other Gulf stateshave been really opposed to.
It would also mark a big changeto the status quo if it uh takes

(01:37):
effect and if it is part of amore permanent settlement, that
would be a a real, uh realshift.
But the hope is that this willmaybe take the place of what the
memorandum of understanding wasmeant to do back in June, which
is kind of create stability, um,open the strait, which is in the
interest of a lot of the partiesinvolved, um, and create that a
space that the sides US and Irancan negotiate towards a final

(02:01):
peace deal, which would tackleother issues like Iran's nuclear
program and things like that,which so far have just been
sidelined because the Hormuz hasbeen the big issue for now.

SPEAKER_00 (02:08):
Okay, so what would the reopening of this type of
deal mean for ocean freight?

SPEAKER_01 (02:12):
So, first of all, it's not indefinite that it will
happen, even if it's signed byboth the sides, Iran and Oman,
and maybe contingent on the USremoving their blockade, which
again would be kind of a uhtacid or really explicit
recognition of Iranian controlover, or at least partial
control over the strait.
Um, if it is reopened, though,probably see what we started to
see when it kind of reopenedlast time back in June, which

(02:33):
would be uh a rebound intraffic, but one that would be
gradual.
Even if this goes into effectcompletely, we're still having
just this northern and southernchannel, which are much which
are kind of the narrowerchannels, and the main central
lane were main closed because ofthe um concern over Iranian
mines.
So we might not have trafficreturned to normal levels, even

(02:54):
if this goes into kind of fulleffect.
For the container market, we'llprobably see some of those stuck
vessels start exiting beforewe'll see a lot of traffic
entering the Persian Gulf forobvious reasons that you know
carriers don't want thosevessels to get stuck again, as
long as there's so muchuncertainty or possible
instability.
Once there's more um kind ofconfidence in the solution, you
might see more uh containervessels entering the Persian

(03:17):
Gulf.
And this would ease pressure onthose uh land bridge solutions,
which are really kind ofoverwhelmed, um, these
alternatives to going throughthe strait.
And so that might start to kindof ease some of the some of the
problems there, but it might bea while until you see kind of a
resumption of regular trafficand those big vessels and
long-haul vessels making callsum in the Persian Gulf, again,
until cars are really uhconfident that that this is

(03:40):
going to cake.
It's possible if this goessmoothly and if somehow this
involves uh developments uhbetween Saudi Arabia and and the
Houthis meeting a de-escalationthere, this could be a step
towards the resumption of RedSea transits as well, which is
what we started to see back inJune as well.
Um, but again, a lot ofunknowns.
The biggest impact, as we'vesaid before, on you know, global

(04:03):
economy and on logistics as wellis the price of oil.
So if crude prices that hadeased back to kind of pre-war
levels when the first ceasefiretook place in late June, um they
had shot up by 35% past$90 abarrel by late July.
Um, the recent de-escalation hasseen prices come down about 18%
since late July.

(04:24):
There's only about 10% above uhthe pre-war baseline now.
A reopening would push crude oilprices down lower.
Bunker prices climbed 16% sinceearly July when the ceasefire
collapsed.
They've leveled off over thelast couple weeks, but they're
still 50% higher than they werebefore the war.
So if the resumption of crude umflows takes place because this
reopening, that will, and maybenot immediately, but put

(04:46):
downward pressure on bunkerrates, which will be the biggest
impact for the broader cocainemarket.

SPEAKER_00 (04:51):
And would fooling bunker cuffs then mean fooling
container rates too?

SPEAKER_01 (04:55):
So it would change the the rate floor.
So maybe the floor will belowered compared to what we saw
in the first few months of thewar.
In the first few months of thewar, we had kind of a low demand
period, but we saw rates kind ofgradually increasing for some
lanes or staying at about thatuh lunar year level for other
lanes and not falling, as whatthey probably would have.

(05:16):
And so this might change whatthe floor will be once we have
kind of remove other factors.
But the big factors now are uhpeak season demand, and that's
been the case really since lateMay.
As we know, ocean peak seasonstarted early this year.
We had surging demand, and thatkind of consistently pushed
reefs up across all the majoreast-west lanes from about late
May through early July.

(05:37):
We had BAF increases andmanufacture price hikes that
were set for Q3, and thatprobably drove some of that
early demand, some of that frontloading.
And we had some shippers in theUS also pulling peak season
orders forward uh ahead of thelate July tariff deadlines.
Since early July, though, andkind of despite some uh
announced GRIs and peak seasonsurcharges that were meant to go

(06:00):
into effect in mid-July and inAugust 1st, for most of these
lanes, rates have eased or atleast leveled off.
And so that suggests that thatkind of the early start in that
front loading is meeting kind ofan early end peak season as
well.
Especially if we look at AsiaEurope, Asia Europe rates um
decreased slightly last week,but just this week we dipped by
another$500 per FEU percontainer.

(06:22):
So so far this week.
So Asia and North Europe pricesare at about$5,000.
Um, to Mediterranean, they'reabout$6,000.
Those are both about 15% lowerthan their peaks in July and
about back to mid-June levels.
Some carriers have additionalincreases announced for
beginning of August ormid-August for these levels as
well.
But given the fact that we seerates easing and there are

(06:42):
reports of kind of easing demandand increases in blank sailings,
there's a lot of uh suspicionthat or or um skepticism that
these additional rate increaseswill take.
On the Trans-Pacific, though, wehave East Coast rates.
They've been stable, but stillat their peak level, about$9,000
per container since early July.
West Coast rates, though, kindof reached a peak of more than

(07:04):
$7,500 in early July.
Through last week, they hadeased 20% from that level.
So it looked like rates werepast the peak of peak season on
this lane, down to$6,000 percontainer.
But just this week we had theseAugust 1st GRIs pop rates back
up to$7,000 per container, so athousand dollar jump just to
start the month, which if itsticks, makes it seem like

(07:25):
there's still some peak seasonuh strength left.
We even have some forwardersreporting kind of surprisingly
strong demand, even thoughexpectations were that that uh
demand would cool by now.

SPEAKER_00 (07:33):
Okay, why are Trans-Pacific rates behaving
differently then?

SPEAKER_01 (07:36):
Yeah, it's a good question.
So, first first of all, youknow, Trans-Pacific rates of the
West Coast at least declinedpretty uh sharply in the last
few weeks, and now they'vepopped back up.
One speculation for why theyeased instead of, you know, as
opposed to why they'reincreasing, is that there was
some capacity additions, right?
So rates were high, so carrierswere adding capacity to to
service the volumes and alsokind of captured those spot

(07:57):
rates.
So it's possible that kind ofthe dip was the anomaly and and
it didn't really reflect easingdemand more than it reflected
increase in the capacity.
But why are our rates kind ofdemand staying strong?
Let's say if at least ratesaren't maybe increasing relative
to where they were earlier,there are multiple possible
reasons and probably multiplereasons why this is happening.
Or uh one is that there's beenmaybe unexpectedly low inventory

(08:21):
levels in some uh segments ofretail.
It's also maybe been strongerthan anticipated consumer
demand, or or carriers or uhimporters that were kind of
being hesitant and cautious andnow are seeing signs and now are
deciding to order more.
Another part may be the issue oftariffs, and this might be why
we're seeing this differencebetween Asia Europe and
Trans-Pacific.

(08:41):
Um, July 24th was a tariffdeadline.
That's when the section 122, uhwhich were uh which were set at
10% global tariffs, were set toexpire.
And then this was kind of thetariffs that were that were put
in place immediately after EPAwas invalidated.
Those expired on July 24th, andimmediately on July 25th, I'm
sorry, immediately after thatexpiration, the White House

(09:02):
implemented section 301 tariffsof about 10% to 12.5% on about
60 trading partners, and theseare aimed at addressing uh
forced labor and manufacturing.
But you know, if we comparethose, it's 10% for a lot of
nations, it's still 10% comparedto section 122.
Uh and for others, it's another2.5%, which isn't you know
insignificant, but it isn'tisn't a huge jump.

(09:25):
Um, so really tariffs haven'tchanged that much.
The USTR, the US traderepresentatives has recently
stated that some of their other301 investigations, uh, this
went into excess manufacturingcapacity, which is focusing on
kind of the 16 largest tradingpartners, that that
investigation is wrapping up andthey'll give those
recommendations soon.
But even once those those kindof findings are released,

(09:46):
there's still a comment period,there's still kind of at least
several weeks of process beforethose uh tariffs could go into
effect, and those could pushtariff rates back up to NEPO
levels, which for a lot ofcountries are not hugely
different than that to 12.5%,maybe 15%, sometimes higher, but
still lower.
So it's possible that you knowthere was this anticipation of
higher tariffs starting July25th.

(10:08):
That hasn't come to pass.
So shippers who were kind offront loading ahead of that
deadline and now see that thattariffs are more or less
unchanged are continuing toorder, and that might be one of
the one other reason.
Just uh one last thing in termsof all the different trade lanes
and rate behavior, even on theselanes where we're seeing rates
come down, they're still quiteelevated, right?
Like$6,000 to Mediterranean orwhatever it was.

(10:28):
Um, and one other factor on kindof the capacity side has been
congestion.
So there have been two reallysignificant typhoons that have
hit in the in the Far East,especially some of the major um
ports in China, and these are,you know, one right after the
other, are causing quitesignificant delays in
congestion, and that's tying upcapacity.
So it's possible that all thingsbe equal, we would see rates

(10:48):
falling more significantly onlanes where demand is is
falling.
Um, but across lanes there'sstill kind of this upward
pressure element, even ifthere's downward pressure from
from demand trends because ofthis uh congestion delays at
some of these major ports.

SPEAKER_00 (11:00):
Okay, makes sense.
All right, interesting.
All right, thank you, Judah.
That's all we have time fortoday.
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