The signing of a memorandum of understanding (MoU) between the United States and Iran has improved sentiment across the Gulf steel market, raising hopes for the gradual restoration of trade flows through the Strait of Hormuz. However, market insiders caution that the physical recovery of regional supply chains is likely to take several months despite the easing of geopolitical tensions.
The agreement includes provisions for reopening the Strait of Hormuz and restoring commercial shipping, developments that could provide significant relief to steel producers and traders across the GCC. Since the escalation of tensions in the region, mills have faced higher freight rates, increased marine insurance costs, vessel shortages and disruptions to raw material supply chains.
During the disruption, several GCC steelmakers increased purchases of imported billet as shortages of metallics constrained production planning. Saudi buyers, for example, imported billet through western ports and incurred substantial inland transportation costs to move material to facilities located in the eastern part of the kingdom. Market insiders expect demand for such emergency billet imports to ease once raw material flows through the Gulf return to normal.
Nevertheless, industry sources warn that logistical bottlenecks remain a major obstacle. A regional steel trader noted that more than 500 vessels are still waiting to move through regional shipping networks, while major ports including Jeddah, Fujairah and Sohar continue to experience heavy congestion.
The trader said it could take several months to clear the backlog, noting that vessel owners and crews were still waiting for assurances that the waterway was free of mines before attempting the crossing. The trader added that many containers remained stuck at various ports or were still in transit, meaning the situation on the ground had yet to change significantly.
Industry sources noted that cargo traffic through the Strait of Hormuz remains severely limited despite the improvement in sentiment. While some energy tankers have resumed transits, commercial container ships and bulk carriers continue to adopt a cautious approach pending the implementation of the agreement and further security assurances. Market participants said cargo vessel movements through the waterway remain well below normal levels, highlighting the gap between improving market sentiment and the slower recovery of physical trade flows.
The trader also noted that several steel cargoes were diverted or transhipped to third countries during the disruption, while other shipments remain anchored in open waters awaiting further instructions. As a result, even after shipping routes reopen, cargo owners and logistics providers will need time to reposition vessels and redirect material to their intended destinations, delaying the full normalization of regional supply chains.
Steel buyers across the region remain cautiously optimistic. Several regional steel buyers that imported material through alternative ports during the disruption said they hoped to see a positive impact from the agreement and gradually resume normal business operations in the coming months. Market participants noted that some cargoes were cleared through Jeddah and Sohar as vessels avoided affected Gulf routes. However, high inland transportation costs and limited truck availability significantly increased logistics expenses, prompting some buyers to consider selling material in the local markets where the cargoes were discharged rather than transporting them to their intended destinations. As a result, many importers continue to prefer waiting for vessels to resume regular calls at major regional hubs such as Jebel Ali, Dammam and Kuwait.
Market sources also expect freight rates and marine insurance premiums to decline gradually rather than immediately. International buyers continue to apply a risk premium when evaluating steel purchases from the Middle East following months of shipping disruptions and delivery uncertainty.
For now, market insiders expect the most immediate impact of the US-Iran agreement to be an improvement in sentiment rather than a rapid recovery in physical trade. While the reopening of the Strait of Hormuz is expected to ease pressure on supply chains and production costs, port congestion, vessel backlogs, diverted cargoes and lingering logistics disruptions are likely to keep regional steel trade operating below normal levels in the near term.