Hormuz physical flow disruption: mapping the actual cargo rerouting impact beyond crude futures

Crude futures are getting all the attention but the physical flow disruption through Hormuz is more structurally interesting.

Hormuz handles roughly 17-18 million bbl/d of crude and condensate, plus approximately 20% of global LNG. The crude rerouting story is well understood — tankers go around the Cape, add 10-14 days, freight rates spike. But there are a few physical market dynamics that aren't getting enough attention:

LNG rerouting is more disruptive than crude rerouting. LNG carriers are less flexible than crude tankers. Voyage economics for LNG around the Cape are materially worse because of boil-off losses on longer transits. Qatar, the world's second-largest LNG exporter, ships primarily through Hormuz. A sustained closure doesn't just raise LNG spot prices — it could force cargo cancellations and contract defaults that restructure Asian and European LNG supply for months.

The compound chokepoint problem. Hormuz disruption is happening simultaneously with Red Sea/Houthi disruption. For any cargo moving between Asia and Europe, both major routing options (Suez and Hormuz) are now compromised. The Cape route handles the overflow from both disruptions. Expect Cape-routed freight rates to spike disproportionately.

Refined product flows. Saudi Arabia and UAE export significant volumes of refined products (diesel, jet fuel, naphtha) through Hormuz. Diesel cracks in particular are worth watching — European diesel supply is already structurally tight post-Russia sanctions, and a Hormuz closure removes another supply source.

I've been tracking the transmission from these physical disruptions into financial asset prices on a free daily briefing page I built (marketontology.com/today) — tracks the regime state, active transmission chains, and which assets are overextended relative to what the macro regime would predict. Currently showing crude and VIX both overextended against regime expectations.