Iran Implications for Container Shipping

Morgan Stanley assesses the impact of Iran tensions on container shipping, concluding that disruptions at the Strait of Hormuz have a much smaller effect on global container trade than disruptions at the Suez Canal. While the Suez Canal handled approximately 22% of global container traffic in 2023, the Strait of Hormuz accounts for a significantly smaller share. Despite recent attempts by carriers like Hapag-Lloyd, CMA CGM, and Maersk to partially resume Suez routings, transits remain roughly 90% below pre-disruption levels from late 2023. Recent security concerns have prompted rerouting, but the incremental impact remains limited due to already depressed transit volumes. Under the base case scenario, container shipping continues to face persistent oversupply, keeping freight rates under pressure. Morgan Stanley expects that if Suez transits normalize by mid-2026, effective supply growth will reach 6.2%, nearly double the projected demand growth of 3.3%. Even if Suez transits fail to recover, effective supply growth would align with fleet deliveries at 3.8%, still outpacing demand. Therefore, freight rate risks remain skewed to the downside despite potential short-term service dislocations. Regarding Maersk, the stock has recently decoupled from the SCFI freight rate index. However, analysts see no fundamental justification for this divergence to persist. The firm maintains an Underweight rating on Maersk, supported by a DCF valuation with an 8.3% WACC and a 1% terminal growth rate.