The impact of escalating tensions in the Middle East is no longer simply a matter of "rising oil prices."

For the dry bulk shipping market, this round of shocks is rapidly transmitting to deeper operational logic: surging bunker fuel costs, increased difficulty in voyage quotation, charterers' preference shifting toward energy-efficient vessels, reassessment of the value of scrubber-fitted ships, renewed scrutiny of the geopolitical security of alternative fuels, and older, high-fuel-consumption vessels being pushed more quickly toward demolition.

In its latest weekly report, BRS highlighted that the sharp rise in oil prices is fundamentally disrupting the existing fuel economy balance in the dry bulk sector.

A geopolitical shock is rewriting the cost curve for dry bulk shipping

BRS noted that following the outbreak of the Middle East conflict, global oil prices and bunker fuel prices have experienced sharp volatility amid concerns over a potential closure of the Strait of Hormuz. The Strait of Hormuz normally handles approximately 20 to 21 million barrels per day of crude oil and refined product shipments, making it one of the world's most critical energy shipping chokepoints. Against this backdrop, international oil prices rose rapidly, with ICE Brent front-month contracts trading above USD 100 per barrel at the time of writing. Price movements have become highly sensitive to news flow, with intraday volatility hitting record levels.

This shift quickly transmitted to the bunker fuel market. BRS specifically noted that bunker fuel prices are highly correlated with crude oil prices, and fuel costs account for a significant proportion of voyage costs in the dry bulk sector. As a result, sharp fluctuations in fuel prices are eroding shipping companies' ability to provide stable quotations for new voyages. The report even mentioned that some operators have defaulted on contracts due to an inability to complete bunkering within agreed laycan windows. This indicates that the market is experiencing not merely simple "cost increases," but mounting pressure across the entire execution chain.

Clarksons' recent market observations reflect the same trend. Its latest weekly report showed that as the Middle East conflict entered its second week, volatility in global energy markets continued to intensify, with Brent crude briefly approaching USD 120 per barrel before retreating, though it climbed back to around USD 100 per barrel by the end of the week. Meanwhile, VLSFO prices in Singapore surged 62% week-on-week to USD 1,126.5 per tonne, while Rotterdam VLSFO rose 25% to USD 765 per tonne. For the dry bulk market, this is no longer ordinary oil price inflation; rather, volatile bunker fuel prices are reshaping voyage costs and commercial decision-making.

The Singapore HSFO-LSFO spread widens rapidly, leading to a reassessment of scrubber-fitted vessels

During this round of fuel price increases, the price movements across different fuel grades have not been uniform, directly altering the economics of vessels equipped with scrubbers.

BRS pointed out that a significant portion of the crude oil affected by the current conflict is medium-sour crude, while alternative supplies are largely sourced from light crude in the Atlantic basin. This shift in crude oil composition has resulted in divergent price reactions between high-sulfur and low-sulfur fuel oils. Consequently, the spread between high-sulfur and low-sulfur fuel oil has widened rapidly. The report showed that since the outbreak of the conflict through the second week, Singapore IFO380 prices rose by 65.4%, while Singapore VLSFO increased by 57.7% over the same period, with the spread expanding to USD 100.5 per tonne.

The implications of this widening spread are straightforward. For vessels fitted with scrubbers, they can continue to utilize cheaper high-sulfur fuel oil, thereby maintaining lower unit voyage costs in the current high-fuel-price environment. BRS clearly stated that as the HSFO-LSFO spread continues to widen, scrubber-fitted vessels are regaining a clear advantage in fuel costs. This advantage is reflected not only in cost savings but also in greater operational flexibility and enhanced risk resilience. (BRS data shows that currently only 19.6% of the dry bulk fleet is fitted with scrubbers, with installation concentrated among larger vessels: 92.1% of VLOCs and 47.1% of Capesize vessels have scrubbers installed.)

In other words, amid this round of oil price increases, scrubbers are no longer merely an environmental compliance device but have once again become a critical asset determining commercial competitiveness. Particularly against the backdrop of rapidly rising voyage costs and charterers' increased focus on actual execution costs, the market value of scrubber-fitted vessels is undergoing a systematic reassessment.

Fuel's share of voyage costs reaches an eight-month high

The most direct consequence of rising fuel prices is the significant increase in fuel's share of total voyage costs. BRS calculations show that under the current fuel price environment, the fuel cost share on typical long-haul routes for Capesize vessels has increased notably. On the C3 route (Brazil-China), fuel accounts for 33.1% of voyage costs;

on the C5 route (West Australia-China), this proportion has reached 24.7%. Both routes have recorded their highest levels in nearly eight months.

This shift indicates that the profit logic in the dry bulk market is being rewritten. In the past, market attention focused more on cargo volumes, fleet tightness, and chartering sentiment, whereas now fuel has re-emerged as one of the core variables determining voyage profit margins. Especially on typical long-haul routes such as Brazil-China, each significant fluctuation in fuel costs has a more direct and pronounced impact on actual earnings.

Consequently, market preference for large vessels, energy-efficient vessels, and scrubber-fitted vessels is noticeably strengthening. On long-haul routes, higher fuel efficiency translates directly into greater ability to preserve profit margins in an era of high oil prices. Fuel cost is no longer just a line item on financial statements but is directly determining whether a vessel remains competitive.

The dry bulk market is diverging: energy-efficient vessels are gaining favor, older vessels face increasing challenges

BRS's weekly report presents a structural signal worthy of close attention: currently, approximately 19.6% of the global dry bulk fleet is fitted with scrubbers, though this proportion is significantly higher among larger vessel segments. Among VLOCs, the installation rate reaches 92.1%; for Capesize vessels, it is approximately 47.1%; for Kamsarmax, 37.7%; and for Ultramax, 30.8%. This data reflects that the market is clearly stratifying different vessel types.

The logic behind this is straightforward. Larger bulk carriers typically undertake longer-distance intercontinental voyages, where fuel costs account for a higher proportion of total voyage costs. Therefore, the cost savings from scrubbers are more easily realized. For these vessels, energy efficiency is not merely an added benefit but a critical factor directly impacting commercial performance.

Additionally, BRS noted that installing scrubbers during newbuilding is far easier and more cost-effective than retrofitting. Equipment supplier data indicates that scrubber installation costs have decreased by nearly 39% over the past six years. This also explains why an increasing number of newbuilding Kamsarmax and Ultramax vessels are being fitted with scrubbers directly. The market has clearly recognized that in an era of high oil prices and high volatility, the "technological gap" within fleets will increasingly translate into an "earnings gap."

This means the dry bulk fleet is being re-stratified. On one side are energy-efficient, modern, scrubber-fitted vessels suitable for long-haul operations; on the other are older, high-fuel-consumption vessels that will face increasing maintenance and compliance costs. As fuel re-emerges as a core variable, this divergence will only become more pronounced.

Older, high-fuel-consumption vessels are being pushed more quickly toward demolition

Against this backdrop, the recent resurgence of activity in the demolition market is unsurprising.

According to previous market information, at least five bulk carriers have been reported sold for demolition in the past week. Market participants generally view this not as an isolated event but as a direct reflection of high fuel prices beginning to squeeze the economic viability of older, high-fuel-consumption vessels. Earlier market commentary noted that since the outbreak of the Middle East crisis, bunker fuel prices have risen by 30% to 35%, making older, high-fuel-consumption bulk carriers significantly less attractive to charterers.

For these vessels, the issue is not simply that fuel has become more expensive; rather, the marginal returns from continued operation are rapidly narrowing. On one hand, voyage profit margins are being eroded by high fuel costs; on the other, many vessels are facing upcoming dry-docking, special surveys, and environmental compliance expenditures. In this context, many shipowners are compelled to reassess whether it remains worthwhile to continue operating these vessels.

This logic is concretely reflected in recent demolition transactions. Whether it is MOL's sale of the 2001-built 106,000 dwt self-unloading bulk carrier Energia Centaurus, or the sale by a Hong Kong shipowner of the 2000-built 173,000 dwt Capesize vessel Jin Jiang, to a series of small and medium-sized older bulk carriers sold by Sole Shipping, Just Power Holdings, and Indonesia-related companies, these vessels share common characteristics: advanced age, uncompetitive fuel consumption, rising maintenance and compliance costs, and still-attractive demolition prices.

Therefore, the current warming of the demolition market essentially results from the combined effects of high fuel prices, shifting charterer preferences, and deteriorating marginal returns for older vessels. High oil prices are not merely reducing shipowners' profits; they are accelerating the exit of a cohort of uncompetitive older vessels from the market.

Not just traditional fuel: the "geopolitical security" of LNG is also being reexamined

It is worth noting that the shocks from the Middle East have raised issues that extend beyond traditional fuel prices and cost logic; they are also beginning to challenge assumptions about the security of alternative fuel supply.

BRS noted that the Strait of Hormuz normally handles approximately 23% of global LNG trade, serving as a critical chokepoint in the natural gas supply systems of Asia and Europe. The current conflict has led QatarEnergy to halt LNG production and declare force majeure on certain supply contracts. Considering that Qatar itself accounts for nearly 20% of global LNG supply, even a short-term disruption would be sufficient to rapidly push up natural gas prices in both Asia and Europe. Meanwhile, LNG carrier charter rates have reportedly surged by 500%, reaching their highest levels since 2022.

This serves as a very practical reminder for the shipping industry. Over the past several years, discussions regarding dual-fuel vessels have focused primarily on fuel-switching economics, carbon reduction potential, and future regulatory trends. However, a new question is now being brought to the forefront: under geopolitical shocks, can these alternative fuels truly provide stable and reliable supply security?

BRS noted that LNG dual-fuel bulk carriers currently account for only approximately 0.65% of the global dry bulk fleet, with about 77 units among Capesize vessels. This indicates that alternative fuel propulsion remains far from mainstream in the large bulk carrier segment. In the current environment, shipowners' future decision-making criteria may shift from simply "which fuel is cheaper" to "which fuel remains accessible amid conflicts, sanctions, and supply disruptions."

Who will benefit in the future? The answer may not be a single fuel, but energy-saving technologies

In BRS's view, this round of shocks may ultimately drive greater market attention toward technological pathways that reduce energy consumption without relying on any specific fuel supply.

The report clearly states that higher fuel prices and greater geopolitical uncertainty will increase market interest in wind-assisted propulsion systems, hull airflow optimization, and other energy-saving technologies that directly reduce fuel consumption. These technologies do not depend on the supply conditions of any particular fuel, nor are they directly affected by sharp fluctuations in the price of any single fuel. Regardless of whether vessels ultimately use LNG, VLSFO, HSFO, or future alternatives such as methanol or ammonia, as long as they can stably reduce fuel consumption, they hold tangible value.

This assessment is significant. At the current stage, the market may not soon reach a definitive answer regarding "what the mainstream fuel of the future will be." However, at least one thing is becoming increasingly clear: in an era of higher fuel prices, greater volatility, and more uncertain supply, "burning less fuel" is itself the safest commercial strategy.

In other words, the future beneficiaries may not necessarily be shipowners who bet correctly on a single fuel, but rather those who are the first to integrate energy efficiency, consumption-reduction technologies, and operational efficiency into a systematic competitive advantage.

The new reality for dry bulk shipping: fuel is not just a cost, but a dividing line

In summary, the most important change currently underway in the dry bulk market is not simply freight rate fluctuations, but the fact that fuel costs are redefining the competitive boundaries among vessels.

In a high-price, high-volatility environment, energy-efficient, modern, scrubber-fitted vessels are gaining clear advantages; older, high-fuel-consumption vessels are finding it more difficult to attract charterers, facing increased challenges in voyage quotation and execution. Meanwhile, the demolition market is beginning to absorb more uncompetitive older tonnage, and the evaluation logic for alternative fuels is shifting from "economy-first" toward "supply security-first." Against this backdrop, various energy-saving technologies and methods to reduce unit fuel consumption are becoming more realistic and actionable solutions.

Put another way, the geopolitical crisis has pushed up not only oil prices, but is also accelerating a selection process within the dry bulk market. Those who are more fuel-efficient, more flexible, and better able to navigate volatility will be better positioned to maintain competitiveness in the new market environment. For vessels that are already aging, have high fuel consumption, and are facing impending maintenance and compliance expenditures, this selection process may arrive faster than many anticipate.