STOCKS | Middle East Conflict Lifts Shipping Returns as Long-Term Investors Add Exposure

Shipping rates and vessel prices remain elevated as the Middle East conflict continues, drawing more long-term institutional investors into the sector. According to Sina Finance, asset managers said pension funds and large investors have sharply increased demand for hard-asset allocations, with shipping assets becoming a key focus. Nicholas Tsirogaras, chief executive of Tufton Investment Management, said investors who met with the firm over the past two quarters increased their holdings in the company. Andreas Povlsen, head of maritime at private credit firm Hayfin, said investors have recognized the value of shipping as a cash-generating hard asset closely tied to global trade, and some capital previously allocated to aviation and real estate is shifting into shipping. Hayfin is now raising a new maritime fund with a target that is twice the $620 million raised in the previous fund. The renewed interest is also being driven by institutional investors seeking hard-asset, low-depreciation exposure unrelated to the artificial intelligence boom. Although shipowners had expected a wave of new vessel deliveries this year to push the industry into a downturn, the de facto closure of the Strait of Hormuz and continued disruption on Red Sea routes have forced ships to reroute, lengthening voyage times and tightening capacity. Freight rates and asset prices across shipping segments remain at or near record highs, and industry participants expect the trend to continue if the Middle East conflict persists. Breakwave Tanker Shipping, an exchange-traded fund focused on tanker rates, has risen more than 23-fold this year. Veson Nautical data showed that equity investment by U.S. and U.K. institutions in listed shipping companies was unchanged from a year earlier, after last year reached a 20-year high. Some market participants, however, warned of risks. One shipping asset manager said institutional money is entering the market at current highs, and although shipowners believe postwar reconstruction and oil restocking demand will support elevated rates, downside risk may outweigh upside potential. Tsirogaras remained bullish on the dry bulk market, saying it was still far from a peak. Vessel asset prices, especially tanker prices, are already close to the record highs set in 2008. Olivia Watkins, deputy director at Veson Nautical, said exceptionally high chartering returns are one of the main drivers of rising ship prices, allowing shipowners to recover vessel purchase costs within a few years. Asset managers are also buying ships directly. Hayfin has ordered seven product tankers and two liquefied natural gas carriers this year. According to Argus, JPMorgan Asset Management has ordered at least eight very large crude carriers with a total value of about $1.26 billion and holds options on two more.