Shipping Corp Shares Skyrocket 15% As Israel-Iran Conflict Fuels Hopes of Higher Freight Costs

Shares of Shipping Corporation of India soared as much as 15% on June 13 as the deepening geopolitical crisis between Israel and Iran stoked hopes of an uptick in freight costs.

Israel’s airstrikes on Iran rattled global financial markets, with investors bracing for the conflict deepening in the coming time. The crisis around the Middle East also puts the Strait of Hormuz into focus. The narrow waterway is a crucial chokepoint for world oil trade, transporting much of the crude supplies from the Middle East.

Over 20 million barrels of crude oil pass through the strait daily, making it the lifeline for exports from major producers like Saudi Arabia, the UAE, and Kuwait. Given Tehran’s history of threatening to block the passage during periods of conflict, fears are mounting that it could follow through if the current crisis deepens.

These concerns have not just heightened the risk of supply disruptions through one of the world’s busiest shipping corridors, but also raised expectations of a spike in shipping and freight costs due to the ongoing crisis.

Even though the probability of any disruption actually happening to the Strait of Hormuz remains low, it still was enough to fuel a rally in shares of Shipping Corp today. The buying frenzy was also reflected in the trading volumes of the counter. As many as nine crore shares of Shipping Corp of India changed hands on the exchanges, a meteoric jump from the one-month daily traded average of 82,000 shares.

Solid buying through session helped the stock end the session 11% higher at Rs 229, though off its highs, but still firm in the green. Sentiment for the shipping stock has also been running high, largely due to the buoyancy around defence and shipbuilder stocks in recent months. The stock has delivered over 30% returns in the last month alone.