Surging bunker prices are reshaping freight dynamics, with fuel costs now accounting for a significantly larger share of freight than usual. While all vessels are exposed to high prices, scrubber-fitted ships remain relatively better positioned. This creates further upside risk for freight rates despite limited disruption to dry bulk fundamentals.

While the US/Israel–Iran conflict has had a limited impact on trade flows and vessel supply, its indirect effect on bunker prices is becoming increasingly significant. The escalation in the region has pushed up crude prices and tightened supply chains, driving up bunker prices across major hubs. This has shifted the market dynamic away from vessel availability towards rising input costs.

The impact is now visible in freight markets. Using Singapore VLSFO as a benchmark, bunker prices have risen by more than 100% from the February 2026 average, feeding directly into voyage economics. On the C3 route, freight rates have spiked by around 24% over the same period. However, the more significant change lies in cost structures. For a non-scrubber fitted Capesize vessel carrying 170,000 tonnes of iron ore, bunker costs rose from less than 50% of total freight in February to over 85% in March.

This signifies a shift in cost dynamics, with fuel costs now accounting for a much larger share of freight than usual. While all vessels are exposed to high bunker prices, the widening spread between compliant fuels and high-sulphur fuel oil means scrubber-fitted vessels are better positioned, whereas non-scrubber-fitted vessels face a higher cost burden.

Importantly, this creates further upside risk for freight rates. Even without additional disruption to cargo flows or vessel availability, sustained strength in bunker prices could push rates higher. In essence, this remains an uncertainty-driven market, not a fundamentally-driven one.

Conclusion

The dry bulk market remains fundamentally stable, but rising bunker prices are reshaping freight dynamics. As fuel costs increasingly dominate voyage economics, freight rates could strengthen further despite steady trade flows. Unless bunker prices soften, cost-driven gains may persist, marking a shift from geopolitical disruption to fuel-led market pressure.
Source: Drewry Shipping Consultants