Our positions had more than doubled before the Hormuz situation, and now the sector has become even more mainstream. We believe the visibility of a continued upcycle in the industry has increased, making the sector a compelling investment.

This report is built on more than just sitting behind a Bloomberg desk.

We spent time on the ground conducting field research at a major North American port, speaking directly with the CEO of DHT Holdings (NYSE: DHT), the CFO of Nordic American Tankers (NYSE: NAT), and trusted industry experts to understand what is actually happening on the water.

Today we are re-entering TORM (NASDAQ: TRMD) in the Aurelion Index.

We have also created a Shipping Basket on Plutus, diversified among the best companies across the sector. We believe it is a strong risk-reward way to play the theme. You can access it here.

“Give me a ship and I shall move the Earth.”

Nearly everything we use, consume, or depend on has spent time on a ship. Shipping connects continents, carries economies, and keeps the world moving. It is the link between where things are made and where they are needed, and it never gets boring. That is why it is one of our favorite industries to cover.

This 2026 Shipping Primer is for investors who want to understand how this industry actually works, how shipping companies make money, and why the sector behaves so differently from most other businesses. More than that, it is a practical playbook for what is happening right now. The geopolitical disruptions reshaping global trade routes, the uncertain status of the Strait of Hormuz and the Suez Canal, and the macro forces driving rates and valuations all create real opportunities for those who understand the mechanics behind them.

Strait of Hormuz: A View From Space

One thing we want to establish early: in shipping, long-term value comes from how much cash a business generates for shareholders over time.

For decades, the industry has been fixated on Net Asset Value (NAV), which we think often leads companies to buy ships at peak prices with too much debt, treating shipping like a trading game rather than a business.

That mindset is part of why shipping companies remain small players in global capital markets despite moving the vast majority of world trade. We believe the companies worth owning are the ones that have moved past that approach.

Whether Hormuz and the Suez Canal normalize or remain blocked through 2026, this report is intended to give you all the tools you need to understand what is happening in the shipping market and how to position your portfolio accordingly.

Table of Contents

0. Introduction:

1. Iran is Running Out of Time

   1.1 The UAE Has Held Up Well

   1.2 The China Narrative Does Not Hold

   1.3 The Clock Is Running

2. Are Kharg Island’s Oil Docks Empty?

   2.1 What it Means for Oil

   2.2 What it Means for Shipping

3. Inside One of North America's Largest Ports

4. The Main Segments of the Shipping Industry

   4.1 Dry Bulk Shipping

   4.2 Tanker Shipping

   4.3 Container Shipping

   4.4 Specialized Segments

5. What We Learned From Speaking With Shipping Executives

   5.1 CEO of DHT

   5.2 CFO of NAT

6. 2026 Outlook for Shipping Market

   6.1 Crude Tanker Market

   6.2 Dry Bulk Market

   6.3 Product Tanker Market

   6.4 Container Market

7. 2026 Outlook for Shipping Rates

   7.1 Crude Tanker Rates

   7.2 Dry Bulk Rates

   7.3 Product Tanker Rates

   7.3 Container Rates

8. Our Favorite Shipping Stocks

   8.1 Top Idea #1: Okeanis Tankers

   8.2 Top Idea #2: TORM Shipping

9. Additional Stocks Worth Following

   9.1 Himalaya Shipping (Dry Bulk)

   9.2 Star Bulk Carriers (Dry Bulk)

10. Our Final Take on the Shipping Market

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1. Iran Is Running Out of Time

Before diving into shipping, we need to step back and look at the bigger picture. The situation in Iran is the single most important factor shaping global markets and the shipping industry right now, and we think the market is misreading it. Most people believe this conflict will last a long time. We do not, and here is why.

Before the conflict began, Iran's economy was already under severe pressure. Inflation was running above 40% annually, the rial had lost a significant portion of its value, and the country was running persistent budget deficits. The chart below shows just how long Iran has been borrowing to fund its operations, with primary deficits stretching back decades and government debt rising steadily.

Since the conflict started, things have gotten considerably worse. The IMF now projects Iran’s economy will shrink by 6.1% in 2026, with inflation approaching 70%. What makes this particularly telling is that despite all the geopolitical noise around Iran’s military capabilities, its defense spending as a share of GDP has actually been modest and declining for years, sitting at ~2% in recent years.

Stockholm International Peace Research Institute (SIPRI).

The 2026 figure is a research estimate adjusted for domestic inflation. Note that official figures exclude off-budget spending, including direct IRGC oil revenue allocations used to fund drone and missile programs.

The Limits of Iran’s Missile Stockpile

US intelligence estimates that Iran holds the largest domestic missile stockpile in the Middle East, including over 3,000 ballistic systems. However, a stockpile is only as useful as the industrial base behind it. Recent military strikes heavily targeted four critical production facilities, destroying the specialized industrial mixers needed to blend solid fuel. This operational damage effectively freezes Iran’s capacity to build new short and medium range ballistic missiles.

We believe financial constraints prevent a quick recovery. Replacing high precision mixers requires specialized imports that demand hard currency.

With oil revenues restricted, the regime must choose between military funding and internal stability. In our view, the legacy stockpile creates an immediate threat, but the lack of replacement capacity prevents a prolonged conflict.

More than 90% of Iran's international trade flows through the Strait, and the US blockade has cut off nearly 70% of the regime's export revenues. By restricting all commercial traffic traveling to or from Iran's Gulf coast, the naval action hits the country's primary economic source of income.

US Blockade of Iran’s Gulf Coast

Oil & Gas sales account for 60% to 80% of total government income. This revenue streams directly into everything from military deployments to basic social services for a population of over 91M people. We believe the regime cannot maintain its current military posture without triggering domestic instability.

In our view, the loss of hard currency forces a severe budget crisis, meaning Iran cannot keep the Strait closed without accelerating its own economic collapse.

For a more detailed analysis of the US-Iran conflict and its impact on the tanker market, we published two dedicated thematic research reports on the subject.

1.1 The UAE Has Held Up Well

The UAE air defense network has intercepted most of the 500 ballistic missiles and 2,000 drones launched by Iran. Casualties remain limited and infrastructure damage is manageable. In our view, this success proves that heavy investment in military hardware has protected core economic assets.

Saudi Arabia & UAE Move Oil Through Pipelines After Attack

We believe this security allows the country to maintain significant oil potential. Following its exit from OPEC, the UAE holds the largest volume of unused production capacity among recent departing members.

Output fell to 2.2M barrels per day during the conflict, but the country can pump close to 5M barrels per day. Pipeline logistics remain vital for bypassing naval threats. Saudi Arabia has sent 60% of its Gulf oil exports overland via the East-West Pipeline to the Red Sea port of Yanbu. Concurrently, the UAE routes crude through the ADCOP pipeline to Fujairah, avoiding the Strait entirely.

In our view, while localized drone strikes have targeted major refining complexes like Ruwais and Samref, these alternative transport routes are operating near maximum capacity, preventing a total collapse in regional export volumes.

While the Ministry of Energy states it will increase production in a gradual manner, we believe the actual return of this oil will be slow. The government will likely pace its extra volume to avoid driving prices down too quickly.

In our view, the UAE will most likely phase in this extra capacity over a full year, balancing global supply shortages against its own financial goals.

1.2 The China Narrative Does Not Hold

The idea that this conflict is primarily designed to weaken China does not reflect what is actually happening. China has continued buying Iranian oil throughout, sourcing discounted barrels through established networks, and the US threat of 25% tariffs on nations trading with Iran has not changed that behavior in any meaningful way. This conflict is about Iran’s nuclear ambitions and its broader regional influence. China is a factor in the sanctions picture, but framing the entire conflict as a move against Beijing misreads what is driving it.

1.3 The Clock Is Running

Restricting transit through the Strait of Hormuz is Iran’s main source of geopolitical leverage, but the strategy has hit a physical limit. With naval enforcement constraining tanker transit through Gulf exit routes, export throughput has collapsed significantly. Vessel-tracking data from Vortexa shows that departures fell by over 80% in late April compared to the March baseline.

Tankers Anchored in the Strait of Hormuz (April 18, 2026)

Because onshore storage facilities at Kharg Island and Sirri Island are filling rapidly, the regime has been forced to act. The U.S. Department of Energy confirmed that Iran has cut crude oil production by ~400,000 barrels per day.

We believe this infrastructure backlog severely shortens Tehran’s timeline.

While the country can distribute these cuts across multiple fields to prevent immediate, permanent damage to its reservoirs, the financial strain is immediate. In our view, these compounding economic and physical pressures will force a diplomatic resolution much sooner than the market currently expects.

2. Are Kharg Island's Oil Docks Empty?

Iran’s main oil export terminal at Kharg Island has gone quiet.

Satellite imagery from May 8, 9, and 11 shows no tankers at the facility, marking the longest stretch without activity since the conflict began. In the 73 days since attacks started on February 28, tankers were visible at the jetties on 33 days. While Iran previously loaded ships for floating storage, that activity has stopped.

Oil Slick Reported Off Kharg Island's West Coast (May 6, 2026)

The backlog is growing quickly.

The number of tankers anchored east of Kharg Island rose from 3 on April 11 to at least 18 by May 11, with others anchored off Chabahar. These ships cannot leave the Gulf without risking seizure or attack by the US Navy.

Satellite Comparison: Kharg Island Oil Tanks (April 6 & May 11, 2026)

With tanker loadings paused, storage tanks on Kharg Island are filling up. Satellite analysis of tank roof shadows shows spare capacity at the facility is approaching zero. Kpler estimates Tehran can only keep pumping until late May before running out of space entirely.

Once that happens, Iran must cut production at additional fields. While political posturing continues, the financial pressure only moves in one direction. A regime that cannot sell its oil, cannot store its crude, and is watching its tanker fleet pile up inside the Gulf has a massive incentive to resolve the conflict quickly.

2.1 What it Means for Oil

For oil, this supports our view that prices will not stay elevated over the long-term. The economic pressure on Iran is building to a point where a resolution becomes more likely than the market assumes. A country that cannot export its oil, cannot store its crude, and is watching its revenue dry up does not have the luxury of holding out indefinitely. We think that reality will force movement on the Strait sooner than most expect, quickly erasing the geopolitical premium from prices.

2.2 What it Means for Shipping

For shipping, the outlook is more interesting. When the Strait reopens, a large amount of stranded oil will move at once. As routes normalize, the shadow fleet loses its premium, and compliant tankers will capture the returning volume. The longer the blockade lasts, the more significant that rebound will be for the sector.

We also published a dedicated report on April 8 covering the broader Iran War playbook, including our views on chemicals, fertilizers, and two new high conviction stock ideas we added at the time.

If you want to understand how we were thinking about the conflict from an investment perspective beyond shipping, that report is worth reading.

3. Inside One of North America’s Largest Ports

We always like to prioritize on-the-ground research whenever possible. Whether it involves visiting retail storefronts or sampling every flavor of a new consumer brand, we prefer real-world data over desk analysis.

Shipping demanded a more comprehensive field study, and frankly, it was far more engaging. We spent time at the Port of Montréal in Québec (Canada), a major North American gateway and the home base for Aurelion Research.

As the largest container port in Eastern Canada, it handles massive volumes of dry bulk, liquid bulk, and containerized freight. Because its daily operations touch almost every key segment of maritime logistics, it offers a clear look at how global trade works and the broader challenges facing the market, which is exactly why we wanted to visit it firsthand.

Cape Redirection & Schedule Breakdown

Talking with port operators highlighted how deeply global logistics are shifting. Ongoing conflict in the Middle East and disruptions at vital choke points like Bab el Mandeb and the Strait of Hormuz have upended global shipping schedules.

Most container vessels moving from Asia to Europe or the North American East Coast now bypass the Suez Canal entirely, routing instead around Africa’s Cape of Good Hope. This detour adds ten to fourteen days of sailing time to a standard round trip, which ties up global ship capacity and pushes container freight rates higher worldwide. For the Port of Montréal, the breakdown of predictable weekly arrival schedules creates severe operational challenges. Terminals experience days of unnatural quiet followed by a sudden, heavy bunching of vessels. This uneven flow strains dock labor and terminal yard capacity, forcing rail operators like CN and CPKC to constantly adjust their freight handling on the fly.

Crude Volatility & Shipping Costs

Port workers also emphasized that with oil prices frequently crossing $100 a barrel this year due to tensions in the Persian Gulf, the cost of marine fuels like VLSFO and HSFO has surged. Shifting to longer routes around Africa on top of these high prices means daily running costs for shipping lines are skyrocketing. To protect their margins, companies are strictly enforcing emergency fuel surcharges and telling their ships to slow down to save fuel.

The Shift to Smarter Routing

The constant supply chain shocks of the last few years have forced managers to give up old, “just-in-time” delivery models that left no room for error. Companies no longer want to rely on a single path for their goods. Instead, they are spreading their freight across different coasts and ports. This helps them avoid getting stuck if one location faces problems, whether those problems are caused by politics, strikes, or low water levels, like we have seen in the Panama Canal.

Linking Ocean Alliances to Local Rail

We took these photos during our visit, showing Maersk and Hapag Lloyd containers loaded onto train cars right next to the docks. Seeing these two brands side by side highlights a major trend in global shipping. These companies operate under a massive partnership called the Gemini Cooperation, which was created to keep shipping schedules tightly managed and reliable.

When global tensions force ships to take the long route around Africa, those strict schedules fall apart. When delayed ships finally arrive at the port all at once, it puts immediate pressure on the tracks and rail cars shown here. It is a great example of how ocean delays quickly become land problems, forcing local rail systems to quickly adjust to handle the sudden flood of cargo.

4. The Main Segments of the Shipping Industry

The shipping industry comprises several distinct segments, each driven by its own unique supply and demand dynamics.

While some sectors provide predictable cash flows tied to long term contracts, others experience high volatility and depend entirely on fluctuating daily spot rates. Examining these individual sectors shows how different fleets operate and why certain segments are better positioned to handle shifts in global trade.

4.1 Dry Bulk Shipping

This segment handles the transport of raw, unpackaged commodities.

The market splits these goods into major bulks like iron ore, coal, and grain, and minor bulks like fertilizers, steel, and construction materials. Trade flows typically move from large producing regions in Australia, Brazil, and North America to major consumption hubs in China, Japan, and Europe. To handle these diverse cargoes, the global fleet varies significantly in size.

Handysize vessels are smaller, versatile ships that typically carry between 15,000 and 35,000 DWT. Because they have their own onboard cranes, they can operate in smaller ports or shallow rivers without loading infrastructure. This flexibility makes them the standard choice for regional trade and minor bulk commodities.

Capesize vessels sit at the largest end of the bulk carrier segment, usually carrying 150,000 DWT or more. They get their name because their size historically forced them to sail around Cape Horn or the Cape of Good Hope instead of using major canals. These ships do not have onboard loading gear and rely entirely on deepwater terminals to load and unload cargo. They primarily transport long-haul iron ore and coal.

4.2 Tanker Shipping

Tankers transport liquid cargo, focusing primarily on crude oil and refined petroleum products like gasoline, diesel, and jet fuel.

The segment also includes specialized vessels for chemicals and liquefied natural gas (LNG). To maintain operational efficiency, most tankers specialize exclusively in a single cargo type rather than switching between different liquids.

In the crude oil market, the industry relies heavily on Very Large Crude Carriers (VLCCs) to transport unrefined oil from major production regions to global refining centers. Product tankers serve the clean segment of the market, moving refined fuels from those refineries to international consumer markets. LNG carriers represent a growing share of the global fleet as the international trade of natural gas continues to expand.

To monitor the health and pricing dynamics of these segments, the industry tracks two core benchmarks. The Baltic Dirty Index (BDTI) measures the spot market strength for raw crude transportation, while the Baltic Clean Index (BCTI) tracks the rate environment for refined products.

4.3 Container Shipping

Container shipping moves manufactured and finished goods from factories to consumer markets. Everything from electronics to clothing is packed into standard steel containers and loaded onto vessels that run on fixed, predictable liner schedules, much like commercial airlines.

The busiest trade lanes connect manufacturing hubs in Asia to major consumer markets in North America and Europe. While ocean carriers historically focused just on moving cargo from port to port, the industry has increasingly shifted toward integrated logistics, with many lines now handling the inland journey all the way to the final warehouse.

Freight rates in this segment split between long term annual contracts and the immediate spot market. To monitor pricing trends and capacity demand, the industry relies heavily on benchmarks like the China Containerized Freight Index (CCFI), which tracks rate fluctuations across major global export routes.

4.4 Specialized Segments

Beyond the main bulk and container markets, several specialized segments rely on vessels designed for specific operational roles. These markets are driven by distinct economic factors and trade flows rather than standard freight cycles.

Offshore Vessels provide critical support to the marine energy sector. This segment includes a range of specialized assets such as deepwater drilling rigs, subsea construction platforms, and support vessels that transport crews and supplies to offshore fields. While historically tied to oil and gas, these assets are increasingly used in offshore wind and renewable energy projects.

Car Carriers are specialized vessels serving the global automotive industry. These include Pure Car and Truck Carriers (PCTCs) and Roll-on/Roll-off (Ro-Ro) ships, designed with multi-deck structures to transport finished vehicles efficiently from manufacturing hubs to consumer markets. The segment requires flexibility to handle shifting export flows and the growing share of electric vehicles.

Cruise Ships differ from cargo vessels as they transport passengers rather than goods. These ships operate as floating resorts, where onboard services and the travel experience are the primary commercial product. Demand is driven by leisure spending, seasonality, and route selection.

Ferries are key components of regional transport networks, particularly in coastal and island regions. Operating over short, fixed routes, they carry both passengers and freight, providing essential links where land is limited or unavailable.

5. What We Learned From Speaking With Shipping Executives

When you do a Primer on an industry, even if you know the space well, speaking with experts, management teams, owners, and analysts is always one of the best ways to get direct, on the ground insights on what is actually happening and what the people who work in the industry see every day.

That is exactly what we did for this shipping Primer.

We spoke with DHT CEO Svein Moxnes Harfjeld and NAT CFO Bjørn Giæver, two experienced operators who have been in this business for a long time and know it inside out. We will not quote them directly, but we will share the most important things they told us, in our own words.

5.1 Svein Moxnes Harfjeld, CEO of DHT

One of the first things that stood out to us about DHT Holdings is how seriously they think about the long-term sustainability of their business.

They engaged leading energy research firms to understand where oil demand is heading over the next few decades, asking hard questions about which technologies could realistically displace oil and at what cost.

In the tanker business, you are ordering ships that will be on the water for decades. If the demand picture changes materially, the economics of those assets change with it. Studying that question before committing capital is a rational and necessary step for any operator thinking beyond the next few years.

Their conclusion is that peak oil demand is likely to occur sometime in the mid-2030s, followed by a plateau of roughly a decade before any meaningful decline begins. That view directly shapes how they think about vessel investments.

They calculate the time charter equivalent earnings required to generate a 10% return on capital employed and compare that to historical earnings adjusted for fuel efficiency improvements. They only move forward when there is a clear gap between those two numbers. Simple, but disciplined.

On risk, DHT ranked global GDP and geopolitics as the two most important threats to their business, in that order. We think that is the right way to look at it.

The two are deeply connected. Geopolitical instability weighs on economic growth, and a weak global economy can itself create the conditions for conflict. For a business that depends on the volume of oil moving around the world, both factors hit in the same direction.

On capital allocation, DHT thinks the way we do. Models and frameworks are useful, but running a business well requires judgment and the confidence to act on experience when the numbers alone do not give you a clear answer.

We believe that is when management quality really makes the difference, and why the trust an investor places in a management team is so important over time.

Finally, DHT has a clean governance structure, and in shipping, that is worth highlighting. All services required to run the company are handled by people employed directly by DHT. No privately owned companies billing the public entity, no conflicts of interest. The board is independent, management are shareholders, and they act like it. That is not always the case in this industry.

That is what they told us, and it is something we also heard often from other shipping experts and industry participants we spoke with.

5.2 Bjørn Giæver, CFO of NAT

When we spoke with management, our first question focused on their strict commitment to a single asset class. Unlike competitors that diversify, NAT operates Suezmax tankers exclusively. This pure-play approach delivers distinct operational and commercial advantages, and we agree with their strategy.

From an investor perspective, a pure play fleet makes the company easier to understand and the equity story easier to communicate. There is no ambiguity about what you own when you buy Nordic American Tankers (NAT) shares, and you know exactly what kind of dividend policy comes with it. That consistency is a big part of why NAT's founder and CEO Herbjorn Hansson has earned the nickname the King of Dividends on Wall Street.

From an operational perspective, running a uniform fleet simplifies everything. Daily operations, maintenance, procurement, crewing, and scheduling all become more efficient when every ship in the fleet is essentially the same, and that translates directly into lower costs. The Suezmax carries ~1M barrels of oil per voyage, making it the second largest class of crude tanker behind the VLCC which carries ~2M. They think the size of a Suezmax sits in a sweet spot. Large enough to offer real economies of scale for oil companies and traders, but small enough to access a much wider range of ports than a VLCC can.

Many ports have restrictions on ship dimensions and storage capacity, and a Suezmax gets into places a VLCC simply cannot, giving traders more flexibility in where they can deliver their cargo. In the fast-moving geopolitical environment of the last few years, that versatility has proven particularly valuable.

On the demand side, NAT is more bullish on the long term than DHT. Their thinking is grounded in demographics. Around 100M people per year have been moving out of poverty and into the middle class over the last decade, mostly in developing Asia. When a country's demographic profile shifts in that way, energy consumption rises rapidly. They see that trend continuing, and they believe it supports sustained demand for oil transportation over the years ahead.

On supply, the new ship order book has been relatively quiet for several years, which should gradually shift the market balance in shipowners favor. That process has taken longer than expected, and the main reason is the shadow fleet.

On capital structure, NAT's philosophy is simple. The tanker business is highly cyclical and capital intensive. The biggest mistake a shipping company can make is to take the profits from a good cycle and pour them back into ships at peak prices, acquire competitors with high leverage, or buy back shares at inflated valuations. Many have done exactly that and ended up in financial difficulty when rates fell. NAT made a deliberate choice to avoid that from the start.

NAT made an early decision to return excess cash to shareholders through dividends rather than reinvest it at peak cycle prices. Those dividends vary significantly with the cycle, but shareholders who have held since the original listing have received over $50 per share in cumulative cash dividends.

Their view is that paying out excess cash creates discipline within management. Keeping too much money inside the company tends to lead to poor decisions.

6. 2026 Outlook for Shipping Market

The global shipping market entered an upcycle in 2026, driven by geopolitical realignments and tight supply and demand dynamics. Maritime equities rose, with the BI Global Marine Shipping Peer Group gaining 31% year to date, outperforming broader benchmarks like the S&P 500 and the Hang Seng Index.

Bloomberg sector tracking shows a divergence within the industry, as the surge is led by the BI Tanker and BI Dry Bulk indices while the BI Liner Index continues to lag. In our view, this performance gap indicates that current market drivers are specific to commodity transport and route dislocations rather than a recovery in global containerized trade. Consequently, viewing the shipping industry as a single market hides the actual trend. Earnings growth and rising asset values remain concentrated within the tanker and dry bulk fleets.

The Hormuz Disruption & Route Redrawing

The main catalyst altering global trade patterns is the March 2026 closure of the Strait of Hormuz due to the war on Iran. Displacing a flow of 15M barrels of crude oil per day from the Persian Gulf forced a reorganization of international oil logistics. High income and security sensitive Asian buyers face the most exposure to this disruption. Data from Poten and Partners highlights that Japan relies on the Middle East for 95% of its crude imports, South Korea for 72%, and Taiwan for 70%. Smaller regional importers like Pakistan, the Philippines, and Sri Lanka source nearly 100% of their crude from the Gulf.

To replace these volumes, these nations are turning to the Atlantic Basin, sourcing crude from the US Gulf, Brazil, Guyana, West Africa, and Canada. This pivot introduces two challenges for the market. First, sourcing crude from across the Atlantic lengthens transit distances, multiplying ton mile demand and locking up a large portion of the global VLCC and Suezmax fleets.

Second, an operational mismatch occurs at the refinery level because many Asian refining systems, particularly in Japan, are optimized for heavier, sour Middle Eastern grades. Substituting these with light, sweet Atlantic shale or basin crudes creates inefficiencies.

While Middle Eastern exporters are expanding bypass infrastructure, including Saudi Arabia’s Yanbu pipelines on the Red Sea and the UAE’s West East pipeline to Fujairah, these projects face scaling constraints. The UAE expansion targets a 2027 completion to double export capacity, meaning incremental barrels of crude will still travel the long route around Africa in the near term, supporting a higher baseline for long haul tanker rates.

Spot Market Momentum & Rate Dynamics

The supply shock dislocated freight pricing during the first quarter of 2026. This shift affected both unrefined and refined asset classes, lifting the Dirty Tanker Index (BIDY) to 2,307 and the Clean Tanker Index (BITY) to 1,686. Both benchmarks reached multiyear highs, reflecting the premium placed on immediate vessel availability as the fleet adjusted to longer voyages.

Bloomberg Dirty Tanker Index (BIDY)

Bloomberg Clean Tanker Index (BITY)

In the spot market, daily earnings for modern two stroke tankers surged to nearly $280,000 per day between weeks 9 and 11. For context, rates during the same period in 2025 averaged below $25,000 per day, while the five year opening quarter average sits near $50,000 per day. We believe this spread highlights the operating leverage inherent in the sector when fleet capacity tightens.

Spot Market Momentum Expected to Extend Through 2026

While charter rates have normalized from recent peaks, the spot market has established a higher baseline. Daily earnings have stabilized in a corridor between $80,000 and $90,000. Forward assessments from shipbrokers and Spark curve data indicate this strength has longevity. Rather than reverting to historical averages, the forward curve points to a steady rate plateau for the rest of 2026, which in our view should support free cash flow generation through year end.

Inventory Tailwinds & Support Floor

Underlying inventory data indicates that this elevated rate environment has a highly durable fundamental floor, driven by acute supply deficits. Compliant floating commercial stocks remain severely depleted, tracking well below the standard five year range. At the same time, the US Strategic Petroleum Reserve stands at ~363M barrels, down from over 600M barrels prior to 2022.

US Strategic Reserve Ending Stocks

This 205M barrel inventory deficit represents a massive backlog of replacement demand. Restoring the reserve to its historical baseline of over 600M barrels requires purchasing large volumes of seaborne crude over an extended timeline. We believe this multiyear restocking cycle effectively establishes a reliable floor for vessel utilization and charter rates.

Equity Performance & Valuation Variations

Public equity markets reflect the shipping sector polarization. Tanker heavy operators and specialized bulkers occupy the top positions in the marine transportation complex, while container liners show flat or negative returns.

Top performing equities in the index include Tsakos up 98%, China Merchants Energy up 97%, Cosco Shipping Energy up 93%, and Ardmore Shipping up 85%.

Conversely, companies tied to standard container liner networks or chemical logistics have missed the upcycle entirely. Hapag Lloyd remains flat at 0%, HMM is down 3%, and Odfjell is down 10%. With underlying asset values rising and cash generation hitting multiyear highs, we believe the market valuation of top tier tanker and dry bulk equities still looks too conservative.

6.1 Crude Tanker Market

A common assumption is that the closure of the Strait of Hormuz would severely damage the crude tanker market by cutting off major cargo volumes. However, global demand dictates that this oil must still be sourced and transported.

Instead of destroying tanker demand, the disruption reshapes it. By forcing buyers to replace Persian Gulf barrels with alternative supplies from the Atlantic Basin, the market requires significantly longer voyages. In our view, this multiplication of ton mile demand means the industry actually requires more vessels to move the same volume of energy, keeping fleet utilization high.

On crude oil tankers, we want to remind readers that we flagged this trade back in November 2025, before the conflict began and before rates moved.

We called it the smoothest trade in shipping at the time, and the market proved us right. Rates surged to levels not seen in years, and we think the momentum continues into 2026. The data we are seeing today only reinforces that view.

Fleet Reallocation & Atlantic Ballasting

The realignment of global trade routes has shifted tonnage heavily toward the Atlantic Basin. Throughout the second half of 2025, the number of crude tankers ballasting to the Atlantic stayed stable between 150 and 180 vessels.

More Vessels Ballasting to the Atlantic Basin

Following market disruptions in early 2026, this number accelerated to a peak of roughly 340 vessels in April before easing to around 265 vessels in May. In our view, this shift leaves fewer ships available in other regions, which should keep spot capacity tight across the rest of the world.

Onshore Inventory Draws & Demand Drivers

Global oil demand remains stable through 2027. Global consumption growth stays above 1.0M barrels per day, while China’s strategic stockpiling contributes an additional 0.6M to 0.9M barrels per day. While these factors provide a steady baseline for the market, we see the primary driver for tanker rates right now as the liquidation happening in land-based storage.

Global Oil Demand Forecast Remains Stable

During the first quarter of 2026, onshore inventories climbed to a peak of 3,425M barrels in April, moving above the 2020–2025 average. This build happened as the market adjusted to the initial Hormuz disruption. Since then, the situation has reversed. Refineries are drawing down these land-based stocks at a pace of 4.6M barrels per day through May and June.

In our view, refineries are using local safety cushions to sustain operations, drawing stocks toward low levels by July. Once these buffers are depleted, refiners must rely on seaborne imports from the Atlantic Basin to maintain daily throughput. This depletion creates a lag effect that should keep tanker utilization high and support long haul rates through the second half of the year.

Mid Size Supply Side Realities

The supply metrics for mid size tankers point to a tight multiyear outlook because orderbooks face pressure from an aging global fleet. In the Suezmax segment, the orderbook stands at 178 vessels. This forward capacity is offset by an aging compliant fleet of 125 vessels that are 17 years or older, alongside 105 older vessels tied up in sanctioned trades.

The imbalance is even clearer in the Aframax and LR2 sector, where the orderbook of 221 vessels is matched by an aging compliant fleet of 221 vessels, while the aging sanctioned fleet stands at 285 vessels. We think that as a large portion of the fleet hits retirement age, retirement pressure and compliance rules will limit net fleet growth and keep the supply of commercial ships tight.

6.2 Dry Bulk Market

The dry bulk market is our favorite shipping segment for 2026.

The setup reminds us a lot of what we saw with crude oil tankers in 2025. Valuations have come down to levels that do not reflect what we think the fundamentals actually support. Ton-mile demand is growing, the fleet is aging, El Niño adds potential upside in the second half, and the stocks are trading at a discount to their earnings power.

Demand Dynamics & Ton-Mile Expansion

Total dry bulk cargo volume is expected to grow 1.3% in 2026. That sounds modest, but the more interesting number is ton-mile demand, which is growing at 2.5%. Ton-miles measure not just how much cargo moves, but how far it travels. When that number grows faster than volume, it means trade routes are getting longer and ships are staying busy for more days per voyage. Q1 confirmed this, with volumes up 3.5% YoY, lifted by an 8.1% recovery in Chinese imports.

Dry Bulk Ton-Miles Growth

Grains are the main driver of this mileage expansion, with volumes projected to grow 3.7% and ton-miles 6.8%, supported by strong exports from major Atlantic suppliers sailing longer distances to reach Asian buyers.

Minor bulks, including bauxite out of Guinea, are also adding demand for larger Capesize vessels. Iron ore from Brazil and West Africa continues to provide support, even as China’s domestic steel output softened in Q1. Coal is the weak spot, expected to decline 1.6% in volume and 0.5% in ton-miles.

El Niño: A Variable Worth Watching

Weather could play a bigger role in the second half of 2026 than most people are factoring in. Forecasters put the probability of an El Niño event at 61% between May and July, rising to around 94% through year end.

For dry bulk, we think the implications are meaningful. Drought conditions lower water levels at the Panama Canal, cutting daily transits from 36 vessels down to 24 and forcing ships to reroute around the Cape of Good Hope, adding weeks to voyages. Warmer and drier conditions in Southeast Asia reduce hydropower generation, pushing up thermal coal imports to meet energy demand.

And shifting rainfall patterns across South America and Australia affect crop yields, changing where grain needs to come from and how far it needs to travel.

At 94% probability through year end, El Niño is more likely than not. If it materializes, we believe the second half of 2026 could look considerably stronger for dry bulk than current forecasts suggest.

Supply Side Growth & Fleet Constraints

Fleet growth is accelerating. New orders have been coming in at a pace not seen in several years, and the orderbook now represents 13.2% of the existing fleet.

What is worth noting is that contracting activity in just the first four months of 2026 has already matched the pace of full years past. Shipowners are clearly betting on sustained demand, and yards are filling up as a result.

Those numbers look significant, but a third of the global dry bulk fleet, around 362M DWT, is made up of ships over 15 years old. As vessels age, they spend more time out of service for mandatory inspections and maintenance.

New deliveries do not simply add to available capacity on a one for one basis, because older ships absorb a portion of that growth through downtime. The gap between ships on order and ships actually available to carry cargo is larger than the orderbook alone suggests.

Estimates point to those delays reducing effective fleet capacity by more than 0.5% per year in 2026 and 2027. To put that in context, when a third of your fleet is aging and regularly taken out of service for weeks at a time, the number of ships actually available to carry cargo on any given day is meaningfully lower than the total fleet size suggests. New ships coming in do not simply add to capacity on a one for one basis. A portion of that incoming supply is offset by older ships sitting idle for maintenance. The net result is a market that stays tighter than the headline orderbook numbers imply, which is supportive for rates.

6.3 Product Tanker Market

Product tanker rates have reached historic levels, recently peaking near $80,000 per day following the closure of the Strait of Hormuz. This current spike vastly exceeds the 20-year historical average of ~$18,000 per day, eclipsing previous earnings peaks driven by the war in Ukraine and Red Sea diversions.

We believe the market remains highly reactive to these compounding disruptions because the baseline supply-demand balance is exceptionally tight.

Demand Drivers: Refineries & Longer Voyages

Global demand for refined products continues to expand, but the main driver of higher rates is the relocation of oil refining capacity.

• Longer Voyage Distances: New refining capacity is coming online far from key consuming regions, particularly in the Middle East and Asia.

• Ton-Mile Growth: Longer routes increase voyage duration, tying up vessels for more time per trip. This inefficiency boosts global ton-mile demand and effectively reduces available fleet capacity.

Supply-Side Constraints: Aging Fleet vs. Orderbook

While the 2026 year-to-date orderbook appears substantial at 18.5% of the active fleet, it faces an immediate wall of vessel retirements. The global fleet is aging rapidly, creating a severe long-term replacement deficit:

• 2026e: 21.3% of the active fleet is over 20 years old.

• 2027e: 25.8% of the fleet will exceed 20 years old.

• 2028e: 30.6% of the fleet will cross the 20-year threshold.

Because the volume of aging tonnage outpaces incoming newbuilds, fleet growth faces downward pressure. Depending on the pace of older vessel retirements, net fleet growth could drop to 0.5% in 2027 and contract by 2.6% by 2028.

Inefficiencies Amplified by the Sanctioned Fleet

A significant portion of global capacity is entirely sequestered from compliant commercial trade routes, worsening the supply squeeze.

The shadow market has absorbed a large share of the global fleet:

• Aframax/LR2: 25.5% of the active fleet operates in sanctioned trades.

• Suezmax/LR3: 17.2% of the active fleet is tied up in sanctioned trades.

• MR/Handy: 9.2% of the fleet is exposed to these restricted routes.

With an average age of over 21 years across all major segments, this shadow fleet avoids the scrap yard by operating exclusively in non-compliant trades. This locks vessels out of the standard commercial pool, forcing compliant operators to compete for a shrinking supply of modern, efficient tonnage.

Consequently, we believe the product tanker market is primed for a prolonged upcycle. Stretched voyage distances ensure incremental demand or geopolitical friction translates directly into elevated baseline earnings for top-tier operators.

6.4 Container Market

The container market is not our preferred shipping segment at the moment. Fundamentals are stable, and the Strait of Hormuz disruption has supported a near-term improvement in freight rates. Supply conditions are also gradually improving as fleet growth slows. However, we continue to see more attractive opportunities in other shipping segments for 2026.

Stable but Slower Demand Growth

Container trade has grown almost without interruption since 2000, tracking global GDP closely along the way. That long term relationship remains intact. Global container demand grew 4% YoY in Q1 2026, a solid start to the year.

For the full year, demand growth is forecast at 2 to 3%, a step down from recent years and subject to two meaningful risks: the ongoing Middle East situation and US tariffs, which could weaken trade volumes if they persist or escalate.

Supply: The Main Concern

This is where the container market gets more complicated. Deliveries surged dramatically from 2023 through 2024, with quarterly deliveries reaching nearly 900k TEU at the peak. Scrapping over that same period was almost nonexistent. The result is a fleet that has grown significantly faster than demand.

In 2026, fleet capacity growth is expected to moderate to 4%, down from 10% in 2024 and 7% in 2025. Demand is growing at around 3%. Supply is still outpacing demand, just by less than before. That is an improvement, but it is not the kind of tight market that drives exceptional returns.

Fleet Age Profile Supports the Narrative

The aging fleet picture adds some nuance. Across most size categories, a meaningful portion of the existing fleet is over 20 years old. In some segments, the orderbook as a percentage of that aging fleet is relatively modest, which means scrapping activity could pick up and provide a natural offset to new deliveries over the next few years.

Rates: Hormuz Is a Near-Term Tailwind

Spot freight rates have surged following the Strait of Hormuz closure, reflecting higher bunker costs and longer routing distances. That is a genuine near term tailwind, but it is worth being clear about what is driving it. Higher rates from route disruption are not the same as higher rates from strong underlying demand. When the Strait reopens, we expect that boost to fade quickly.

Our View: The container market is in a reasonable place. Demand is growing, rates have held up better than many expected, and the supply wave is starting to moderate. But with fleet capacity still growing faster than trade volumes and the Hormuz tailwind likely temporary, we do not see the container market as the most compelling opportunity in shipping right now. It is a sector worth having exposure to, but we would size it accordingly.

7. 2026 Outlook for Shipping Rates

Rates are where the money is made or lost in shipping, and 2026 has already been one of the most volatile years on record across every segment.

The Strait of Hormuz closure reset the picture entirely, creating extraordinary earnings in some markets while leaving others largely unaffected. Below we break down where rates stand today and what we think drives them from here across crude tankers, product tankers, dry bulk, and containers.

7.1 Crude Tanker Rates

Crude tanker rates experienced one of the most dramatic moves in a decade during Q1 2026. Three forces converged at the same time: the Strait of Hormuz disruption, a Sinokor concentration play, and the draining of floating inventories. The result was a rate spike that caught most of the market off guard.

VLCC rates on the Middle East Gulf to East route surged to ~$600,000 per day at the peak in early March, a level not seen since the brief COVID-era spike in 2020.

Suezmax rates on the Middle East Gulf to Mediterranean route reached over $400,000 per day. Both have since moderated, but rates remain well above where they were before the conflict began, with VLCCs still earning nearly $300,000 to $400,000 per day and Suezmaxes holding in a similar range.

The Hormuz Shock

Around 14.9M barrels per day of crude exports and 35% of global crude ton-miles transit the Strait of Hormuz. That makes this the largest single chokepoint disruption ever recorded. The immediate effect was a near total halt in tanker traffic through the Strait, with Kpler data showing transits collapsing by around 92% compared to pre-conflict levels.

What partially offset the shock was Saudi Arabia redirecting crude exports from Ras Tanura, its main Gulf terminal, to Yanbu on the Red Sea coast. At peak, Saudi exports through Yanbu reached 8,950 kbd. That figure has since come down to around 3,719 kbd, reflecting the limits of that alternative route.

The vessel supply picture tells the rest of the story. At any given point during April, nearly 63 laden VLCCs were trapped inside the Arabian Gulf, with another 60 waiting outside the Middle East Gulf and ~36 more waiting at Yanbu.

That is over 155 VLCCs effectively removed from spot supply at once, a number that has kept the market tight even as the initial rate spike has moderated.

What Is Keeping the Market Supported

The rate spike was the first chapter. What keeps us interested is what comes after it. Going into 2026, crude tanker fundamentals were already in good shape.

The supply and demand balance had been supportive of freight rates since mid 2025, before the conflict added any geopolitical premium. During Q1, a private aggregator moved aggressively to consolidate vessels, pulling compliant tonnage off the spot market and tightening supply further. On top of that, the conflict introduced meaningful rate differences between trade routes, with some corridors commanding premiums that would have seemed impossible a year ago.

Add to that the fact that around 10% of the global VLCC fleet is currently sitting idle, either trapped with cargo in the Arabian Gulf or waiting to load in western Saudi Arabia, and you have a market where the effective supply of working ships is considerably smaller than the headline numbers suggest.

What Could Drive Further Upside

Three things stand out as potential catalysts for the crude tanker market beyond the immediate disruption.

The first is sanctions relief. If Venezuelan or Iranian crude volumes move from the shadow fleet into the compliant market, legitimate shipowners capture that business. At the same time, the shadow fleet loses its main source of employment and much of it gets scrapped. That is a double benefit for compliant operators.

The second is inventory rebuilding. Once the Strait reopens, governments and refiners that have been running down reserves will need to restock. That process generates tanker demand well above what day to day consumption requires, and it could last for an extended period.

The third is fleet retirement. As compliant trade grows and the shadow fleet shrinks, older and less efficient vessels will exit the market. That removes supply from the global pool and keeps the balance tighter than it would otherwise be.

We think the crude tanker market is better positioned than most people currently give it credit for. The extraordinary earnings of Q1 will not repeat at those exact levels, but the medium-term setup still points to a market that remains firmer for longer once the immediate crisis fades. We are already seeing strong Q2 2026 rates being locked in by companies currently reporting Q1 2026 earnings.

7.2 Dry Bulk Rates

Dry bulk rates have had a strong start to 2026. The Baltic 5TC Index is the industry's primary benchmark for dry bulk shipping rates, tracking average earnings across the five main routes.

As shown in the chart below, it opened 2026 around $25,000 per day and climbed to nearly $45,000 by late April, well ahead of where rates stood at the same point in both 2024 and 2025, and above the 2021 to 2025 average.

Four factors are driving this. Cargo volumes are up, ships are slowing down to save fuel which reduces fleet availability, port congestion is increasing waiting times, and Middle East disruptions are adding distance and complexity to voyages. Each of these independently tightens the effective supply of ships. Together, they are creating a rate environment that is meaningfully better than what most market participants expected entering the year.

Rates are running in the upper half of the 2015 to 2025 historical range, well above the 2021 to 2025 average but nowhere near the extraordinary levels seen during the COVID era peak in late 2021. For shipowners with modern, efficient fleets, the current rate environment is generating solid cash flow.

The key question from here is sustainability. We believe the demand drivers we outlined, growing ton-miles, El Niño upside in the second half, and an aging fleet absorbing new supply, provide a reasonable foundation for rates to stay supported through 2026. A reopening of the Strait of Hormuz would remove one tailwind, but the underlying demand picture would remain intact.

7.3 Product Tanker Rates

The product tanker market has been one of the biggest beneficiaries of the Strait of Hormuz closure, and the numbers speak for themselves. Medium Range tankers earned an average spot rate of $33,700 per day in Q1 2026, accelerating to $52,100 per day in Q2 to date, according to Ardmore Shipping. International Seaways reported a blended average spot rate above $100,000 per day fleetwide in Q1. These are exceptional levels by any historical standard.

The Strait of Hormuz closure has disrupted ~15% of global oil product flows. Nearly 130 product tankers are now trapped inside the Persian Gulf, significantly tightening vessel supply. To replace lost Middle Eastern volumes, buyers in Asia and Europe are sourcing refined products from the US, West Africa, and Europe instead, on voyages about twice as long as normal. Longer distances increase ton-miles, meaning vessels stay tied up for more time per voyage. Refining margins in the Atlantic Basin have also risen to their highest levels since the pandemic recovery, supporting stronger cargo flows on these longer-haul routes.

The key question is what happens when the Strait reopens.

A portion of these elevated rates will fade as Middle Eastern volumes come back online and the rerouting premium disappears. How much rates soften will depend on how quickly trapped tonnage re-enters the market and how fast Middle Eastern product flows normalize. We think the product tanker market will soften from current levels once the Strait reopens, but the underlying demand picture, growing Atlantic trade flows and an aging fleet, should prevent rates from falling back to pre-conflict levels quickly.

7.4 Container Rates

Container rates tell an interesting story when you look at the price and volume data together. Volume has been remarkably stable over the past five years, moving in a relatively narrow range throughout the peaks and troughs. The price swings, on the other hand, have been dramatic. That tells you this market is being driven by supply dynamics more than demand.

Rates peaked in 2021 at levels that were extraordinary by any historical standard, then collapsed sharply through 2022 and 2023 as the post-COVID shipping boom unwound and the fleet absorbed a wave of new deliveries.

Container Prices vs Volume Since 2021

By mid 2023, the price index had fallen deeply negative on a YoY basis. A brief but a recovery followed in mid 2024 as Red Sea disruptions rerouted vessels and tightened effective supply, before rates fell again through late 2024 and into 2025.

Looking at a specific trade lane gives you a clearer picture of where things stand today. On the Ho Chi Minh to Los Angeles route, one of the busiest Asia to US West Coast corridors, 20ft container rates currently sit ~$2,463 per FEU and 40ft containers ~$3,062 per FEU. Both are recovering gradually from their late 2025 lows, but remain well below the $6,500 to $8,500 range seen at the 2024 peak.

Asia to US West Coast Container Rates

The Strait of Hormuz closure has provided some support to rates through higher bunker costs and longer routing distances, but as we noted in the market section, that tailwind is tied to the disruption rather than underlying demand strength.

When the Strait reopens, that support should fade. We think container rates stay in a modest recovery mode through 2026, supported by stable volumes and gradually moderating fleet growth, but we do not see a return to 2024 peak levels anytime soon. The supply overhang is still working its way through the market.

8. Our Favorite Shipping Stocks

We currently have one shipping company in the Aurelion Index.

We had more exposure earlier this year, but trimmed it down when the concentration risk felt too high relative to the potential reward.

Today we are adding back a name we think is well positioned for what is happening in the market right now. Below we break down each name, what makes it interesting, our valuation, and our price targets.

You can access our Plutus Shipping Basket here.

8.1 Top Idea #1: Okeanis Tankers

Okeanis Tankers (ECO) is already in the Aurelion Index.

We published a full in depth report on ECO on December 11, 2025. If you have not read it yet, we recommend starting there as it covers the company in considerably more detail than the overview below.

Company Overview

Okeanis Eco Tankers is a pure play crude tanker company with a young, fuel efficient fleet and a clear cash return profile. OET owns 16 large crude carriers, split between Suezmax vessels (medium sized crude tankers) and VLCCs (very large crude carriers), all built to eco standards and equipped with exhaust cleaning systems that allow them to burn cheaper fuel oil.

We see OET as a high quality crude tanker platform with a proven cash distribution track record and an attractive risk reward profile, supported by aligned family ownership and dual listings in Oslo and New York.

Investment Thesis

1. Premium Fleet Advantage

OET owns a young fleet of fuel-efficient Suezmax and VLCC tankers.

These ships burn less fuel than older vessels and use exhaust systems to run on cheaper fuel. In practice, this has translated into higher day rates than peers in recent years. We expect this gap to continue as long as the industry rewards newer, cleaner, and more efficient ships.

2. Proven Capital Returns

OET has already shown what it does with free cash. Since its IPO, the company has distributed over $550M in dividends, equal to ~2.5x its initial market cap.

This track record translates to a remarkable 13% average annualized dividend yield over the past sixteen quarters. Since its fleet became fully delivered, Okeanis has returned 91% of its reported net income to shareholders, proving its commitment to direct cash returns while tanker conditions remain healthy.

3. Aligned Insider Ownership

The controlling family, board members and key institutions all hold meaningful stakes and there are no options or other dilutive instruments.

This supports disciplined decisions on leverage, fleet risk and dividends. At the same time, a tight free float and the related party technical manager help explain why the stock can trade at a discount to our view of fair value.

We believe a company like OET, with its modern fleet, strong cash generation, and high payout policy, deserves a valuation at least in line with leading crude tanker peers as the current cycle continues through 2026.

Okeanis At a Glance

Okeanis Eco Tankers is a crude oil tanker company founded in 2018. It operates a fleet of 16 modern vessels, all equipped with scrubbers that allow the ships to burn cheaper fuel. That keeps operating costs low and gives OET a cost advantage over older, less efficient competitors.

Fleet Breakdown

The fleet is split into two asset classes:

• 8 VLCCs: Very Large Crude Carriers moving ~2M barrels per voyage.

• 8 Suezmax vessels: Tankers that typically carry 1M barrels of oil.

How the Fleet Creates Value

The company focuses entirely on two ship sizes: VLCCs for global trade and Suezmax vessels for regional flexibility. While competitors often manage mixed fleets of varying quality, OET owns a uniform collection of top tier ships delivered between 2016 and 2022. This discipline creates a pure operating platform with zero exposure to older, inefficient tonnage.

The business is built on two operational pillars:

• Spot Market Strategy: Okeanis sells its shipping capacity at current daily market rates rather than locking in long term fixed prices. This ensures the company captures the full profit potential when global energy demand pushes freight rates higher.

• The Scrubber Edge: Global regulations force most ships to burn expensive Low Sulfur Fuel Oil. Okeanis utilizes a cost saving alternative. Every vessel is equipped with a scrubber, an exhaust cleaning system that removes pollutants from the smoke. This allows the fleet to burn Heavy Fuel Oil. Since this unrefined fuel trades at a significant discount to the regulated low sulfur option, it secures a durable cost advantage on every voyage.

Tanker Fleet Profile

The fleet consists entirely of Eco vessels built by Hyundai Heavy Industries in Korea and Japan Marine in Japan. Because these builders are recognized as global leaders in ship quality, these vessels hold their value better and command higher prices in the secondhand market than ships from lower tier yards.

Exhibit: Okeanis Current Fleet

The business operates with high operating leverage. Daily costs covering crew, insurance, and interest remain fixed, while revenue fluctuates with the global oil market. Once daily rates cross the break even threshold, nearly every incremental dollar flows directly to profit. With the fleet fully delivered and zero capital for new construction, it directs FCF toward dividends and debt reduction.

Competitive Advantage: The Scrubber Premium

OET runs a modern, fuel-efficient fleet equipped entirely with scrubbers. This setup allows it to burn Heavy Fuel Oil at a much lower cost than low-sulfur fuel, driving a structural earnings premium through every market cycle. Since 4Q 2019, this edge has generated ~$256M in cumulative outperformance relative to peers.

The exhibit below shows exactly how OET stands apart. It operates one of the youngest fleets in the sector with 100% scrubber penetration, while peers rely on older vessels and much lower adoption rates. This combination allows OET to capture stronger charter rates while keeping daily operating costs low.

Exhibit: Scrubber Penetration vs Fleet Age

VLCC Segment Economics

OET’s 8 VLCCs focus entirely on high-volume trade routes from the Middle East to Asia. Because of their modern engine design, these tankers can run at higher speeds without triggering the severe fuel penalties that older ships face.

This capability allows OET to consistently outpace the market. Since late 2019, the VLCC fleet has locked in a steady $11,000 per day premium over peer averages, delivering $144M in cumulative outperformance.

Exhibit: VLCC Spot TCE Against Peers

Suezmax Segment Economics

OET’s Suezmax fleet adds regional flexibility while matching the strong premiums of the VLCC segment. Low fuel consumption helps these vessels secure a steady $11,178 per day premium over peers, outperforming peers by $112M since late 2019. This cost advantage protects cash flow and keeps the fleet profitable even when rates dip and older vessels struggle to break even.

Exhibit: Suezmax Spot TCE Against Peers

Rate Setup & Bookings

OET Q1 just ended last week, and the company already enters 2Q26 with strong rate visibility. That is the beauty of shipping. A large share of available days is already fixed at firm levels, providing a clear line of sight on near-term earnings and reinforcing confidence in the upcoming quarters.

For 2Q26, the company already booked:

• 56% of VLCC days at $223,900/day

• 60% of Suezmax days at $187,300/day.

These realized and forward bookings establish the rate foundation of our model and highlight the fleet’s leverage to firm tanker conditions.

ECO Valuation & Estimates

The stock currently trades at 1.46x NAV. This is a slightly higher valuation compared to the end of 2025, but given the earnings growth and significant dividend yield, we believe it remains attractive.

On earnings, we are forecasting TCE revenues of $610M in 2026, more than double the $265M generated in 2025. That flows through to net profit of $449M and adjusted EPS of $11.49. At a 90% payout ratio, total dividends per share are estimated at $10.34 for the year, a dividend yield of 18.3% at current prices.

For 2027, we expect some normalization as the rate environment moderates, with EPS at $7.93 and dividends at $7.14 per share, still implying a 12.7% yield.

The stock trades at 4.9x our 2026 earnings estimate. Applying a 7.0x target multiple gives a price target of $80.4 per share, implying 43% upside. On 2027 at 9.0x, we arrive at $71.4, still 27% above current levels.

ECO was built to be among the lowest cost operators in the crude tanker market. Modern vessels, scrubbers, and fuel efficiency give it a margin advantage over older fleets that widens when rates are high. At a 90% payout ratio, shareholders capture most of that directly. Sell side estimates have moved sharply higher since Q1. We think there is still more to go.

8.2 Top Idea #2: TORM Shipping

We are adding back TORM Shipping (TRMD) to the Aurelion Index.

We published a full in depth report on TORM on January 20, 2026. If you have not read it yet, we recommend starting there as it covers the company in considerably more detail than the overview below.

TORM at a Glance

TORM is one of the world's largest pure-play product tanker companies, founded in 1889 and dual listed in the US and Denmark under the ticker TRMD. The fleet currently stands at 95 vessels, growing to 103 by 2028. Market cap sits at ~$3.35B.

The product tanker market continues to benefit from limited fleet growth and longer trade routes shaped by the Strait of Hormuz disruption.

TORM’s fleet mix gives it flexibility as cargo flows shift. Larger LR2 and LR1 vessels can focus on longer haul demand and switch into crude related trades when the economics work, while some MR vessels are chemical capable, expanding cargo options and keeping utilization stable.

Q1 2026 results were strong across the board.

Fleet-wide TCE rates averaged $34,937 per day, up significantly from $26,807 per day a year earlier. LR2 vessels were the standout at $41,062 per day, with LR1 at $34,903 per day and MR at $32,946 per day. Return on invested capital came in at 18% for the quarter, a level that reflects both the strength of the market and the quality of TORM's commercial execution

Key Drivers in 2026

The Strait of Hormuz closure changed everything for product tankers in 2026. Around 15% of global oil product flows were disrupted overnight, forcing a complete rerouting of refined product trade away from the Middle East and toward longer haul alternatives from the Atlantic Basin.

Atlantic Basin suppliers, primarily the US, Europe, and West Africa, are stepping in to replace Middle Eastern volumes, on voyages roughly double the normal length. That adds significant ton-miles per cargo and keeps ships busy for longer.

Russia related constraints continue to reshape trade flows. The EU ban on Russian crude-derived products has pushed Indian refined product exports into more complex routing, with some volumes ending up in floating storage rather than moving directly to buyers. That friction benefits compliant operators who can step in on longer haul replacement routes.

On supply, ~142 MR vessels are scheduled for delivery in 2026. The net impact on the clean tanker market is considerably smaller than that number suggests.

As MR vessels age past 20 years, their participation in clean trades drops sharply, from ~70% to ~40%. Once you account for that, the effective addition to the clean pool is closer to 86 vessels, around 40% less than the headline figure implies.

Demand for refined products has remained steady, with MR clean trade reaching a record 10.1M barrels per day in early 2026. That level of demand, combined with tight utilization and constrained effective supply, means the market does not need exceptional conditions to generate strong rates.

The question worth asking is how much of the current strength is tied to the disruption and how much reflects the underlying market. We think the aging fleet and the shift in refinery geography provide a solid foundation even without the Hormuz premium. We would not expect Q1 and Q2 rate levels to last forever, and anyone building a thesis on those numbers alone should factor that in.

TRMD Valuation & Estimates

Our financial model points to a compelling setup for TORM at current prices.

We are forecasting TCE earnings of $1,440M in 2026, up significantly from $910M in 2025, driven by the elevated rate environment. That translates into net profit of $655M and adjusted EPS of $6.48 for the year. At an 85% payout ratio, we estimate a total dividend per share of $5.51 in 2026, implying a dividend yield of 16.8% at current prices. For 2027, we expect some normalization as the Hormuz premium fades, with TCE earnings coming in at $1,350M and net profit at $578M, still generating $4.84 per share in dividends at a 14.7% yield.

On valuation, the stock currently trades at 5.1x our 2026 earnings estimate and 5.8x our 2027E. Applying a target multiple of 8.0x to our 2026 EPS gives a Price Target of $51.8 per share, or DKK 334.89.On our 2027E at 9.0x, we arrive at $51.2 per share, or DKK 330.82. Both imply ~50% upside from current levels.

From a NAV perspective, the fleet is valued at $3,619M across 95 vessels, with a gross asset value of $3,931M after accounting for undelivered vessels, net working capital, and committed capex. After netting out debt, NAV per share comes to $29.75, or DKK 191.26. TRMD currently trades at 1.11x NAV, a modest premium that we think is more than justified given the earnings power at current rates.

It is worth noting that sell side estimates across the board have been revised sharply higher following the Strait of Hormuz closure and the Q1 2026 results.

Consensus has moved significantly in the direction of our numbers, and we think there is still room for further upward revisions as the full impact of the rate environment works its way through earnings.

9. Additional Stocks Worth Following

The two names we cover in depth in this report are our highest conviction ideas right now, but they are far from the only interesting opportunities in shipping.

We believe that each shipping segment has names worth following closely, and we will continue to flag them as the situation evolves through 2026.

9.1 Himalaya Shipping (Dry Bulk)

While we cannot include every company in the Aurelion Index, Himalaya Shipping (HSHP) is one we follow closely and think is worth highlighting.

The company owns 12 modern dual fuel dry bulk vessels, all delivered between 2023 and 2024, making it one of the youngest and most fuel efficient fleets in the Capesize market. That focus on modern tonnage is core to how it thinks about generating returns for shareholders, alongside a consistent monthly dividend.

Earnings Premium & Cash Breakeven

This modern fleet gives Himalaya a real earnings advantage.

Data from Fearnleys shows that Himalaya consistently outperforms both its peers and the standard market benchmarks. On average, the company secures a 48% premium over the Baltic 5TC index and a 25% premium over its direct competitors. Because these ships are so efficient, the company has a low daily cash breakeven of around $17,300 on a Capesize index equivalent basis.

For context, the Baltic Capesize Index averaged $22,000 over the last five years. With a breakeven of $17,300, Himalaya generates positive cash flow even when rates are running below the historical average, which gives the company resilience through weaker parts of the cycle.

That cash flow has allowed them to pay 28 consecutive monthly cash distributions, including an 18 cent payout for the first quarter of 2026.

Operating Leverage & Dividend Capacity

We believe the real appeal of HSHP lies in its operating leverage when Capesize rates strengthen. Because their cash breakeven is set at $17,296, any increase in market rates drops straight to the bottom line as free cash flow to equity.

The company's rate sensitivity table shows exactly how this payout potential scales. If Capesize index rates rise to $30,000, free cash flow goes to $1.60 per share. At $45,000, it reaches $3.50, and if rates hit $60,000, the fleet can generate $5.30 per share annually. This direct link between market rates and cash generation makes the stock an effective way to capture dry bulk upside.

Balance Sheet & Alignment

On the balance sheet, Himalaya Shipping has a market cap of nearly $703M against $694M in gross debt. That breaks down to ~$58M per vessel, giving them an estimated loan to value ratio of 62%.

The financing carries a 7% fixed interest rate over a 7 year term, well within the 26 to 30 year useful life of these ships. Management and the board are also well aligned with shareholders, owning about one third of the equity.

9.2 Star Bulk Carriers (Dry Bulk)

Dry bulk remains our favorite segment within shipping for 2026. Star Bulk (SBLK) is a major global operator in this space, managing a large and diversified fleet of 145 owned vessels. Their fleet ranges from Supramax ships to large Newcastlemax carriers, giving them a total capacity of more than 14.0M DWT.

The average age of their ships is ~11.9 years. SBLK moves ~80M metric tons of cargo annually, carrying major commodities like iron ore, minerals, and grain, as well as minor bulks like bauxite, fertilizers, and steel products. They also operate a dedicated division in Singapore to connect cargo origins directly with end users.

Operating Leverage & Cash Flow Potential

Star Bulk has high operating leverage, meaning that when daily charter rates move higher, the impact on cash flow is amplified quickly. At current market expectations of around $20,500 per day, the company is positioned to generate $3.40 of free cash flow per share, a 13.0% cash yield.

That number scales meaningfully with rates. At $19,000 per day, free cash flow holds at $2.80 per share, still a 10.5% yield. Push rates to $23,500 and free cash flow climbs to $4.70 per share at a 17.8% yield. At $26,500, the fleet generates $6.00 per share annually, a 22.6% cash yield. The upside sensitivity here is one of the most compelling aspects of the story.

Forward Free Cash Flow Yield at Various TCE Levels

Balance Sheet & Debt Reduction

SBLK has aggressively cleaned up its balance sheet over the last few years. Since Q1 2021, it has reduced its net debt by 63%, dropping it from $1.454B down to $542M by Q1 2026. For context, their Q1 2026 gross debt sits at $951M, which is completely covered by the $975M scrap value of their fleet. Having a scrap value that is higher than their gross debt gives it a strong financial safety net.

Valuation & Outlook

We see clear upside to Star Bulk’s fundamental value. The company has a strong track record of solid execution, and as their cash flows grow, their dividend payouts are rising too. The stock still trades at a discount to its net asset value, and they operate in dry bulk, which is our favorite shipping segment for 2026. Given these factors, the current market valuation looks too conservative.

10. Our Final Take on the Shipping Market

Shipping is one of the most misunderstood industries in global markets, and that misunderstanding creates opportunity for those willing to do the work.

The Hormuz closure has accelerated trends that were already building, longer trade routes, tighter effective supply, and a growing divide between compliant operators and the shadow fleet. Those trends do not reverse overnight.

Our highest conviction call remains dry bulk, where valuations are attractive and the setup reminds us of crude oil tankers in 2025. Product tankers are generating strong earnings right now, and while some of that fades when the Strait reopens, the underlying market is in better shape than the orderbook alone would suggest.

Crude tankers have had their moment, and we think there is more to come as inventory rebuilding and sanction relief add volume back to the compliant market.

The market will keep moving, and so will we. We will continue to update our views as the geopolitical situation evolves and the data changes. In shipping, the picture can shift quickly, and staying close to it is what makes the difference.

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Disclosures & Methodology

All forecasts and estimates are based on publicly available information, management commentary, and our own modeling assumptions. This report reflects independent analysis by Aurelion Research. All opinions and estimates expressed herein reflect the author’s judgment as of the date of publication and are subject to change without notice.

This publication is for informational and educational purposes only and does not constitute investment advice, a solicitation, or a recommendation to buy or sell any security. Aurelion Research and its analysts may or may not hold positions in securities discussed. Use only where legally permitted.

We think the complete opposite. We believe oil prices will not sustain these levels and that the market is heading lower. We have held that view since the conflict began in early March, and our approach has been proven right, consistent with our track record of predicting where oil prices are actually going.

The reason is simple: while the consensus chases headlines and extreme forecasts, we stay focused on the actual flow of oil and what the data is saying.

The bull case assumes lost production will trigger a massive shortage, pushing prices toward $150 or even $200. That kind of thinking fails the moment prices stop cooperating with the forecast. You cannot fight where prices want to go. The faster you accept that, the better your chances of being right.

Since the start of the Iran-US conflict, oil prices have moved above $100 WTI on three occasions: $105 on March 30, $113 on April 6, and $109 on April 29.

Each time, prices quickly fell back below $100. Fear moves markets fast, but it cannot hold prices at levels the real economy does not support. Demand, supply, and what the consumer can actually afford are what move oil over time.

We are now back over $100, with prices around $102 on May 12, and we do not expect this level to hold. From the start, we knew that a weakened Iran could not sustain a permanent supply shock. The Strait of Hormuz risk premium pushed the price floor higher, but a higher floor does not mean prices can stay wherever the market wants to push them.

We made this point clearly on March 12, in our LatAm Oil & Gas report:

"We do not see oil staying higher for longer. Iran is now too weakened to sustain this move. While the market is reacting to headlines, the reality of a diminished Iran will eventually bring prices back down. The fundamentals simply do not support a permanent shift to triple-digit oil, and we expect this premium to fade."

Table of Contents:

0. Introduction: Don’t Fall for the Oil Bulls

1. How We Analyze the Oil Market

2. The Importance of Simplification

3. Why We Have a Contrarian View on Oil

   3.1 Trump & the Midterm Pressure

4. Expertise and the Oil Market

5. The Market Is Missing the Bigger Picture

6. How We See Oil Price Scenarios Playing Out

7. How China Is Rebalancing the Global Oil Market

8. Geological Constraints & the Cut Profile

9. Asia Is Moving Away From Middle Eastern Oil

10. Our Final Take on Oil

1. How We Analyze the Oil Market

Oil is the world’s most important commodity, and it is always the first market people turn to when a major global event unfolds. Our approach is simple: we follow the data and the macro picture, even when that leads us to a contrarian position. That is exactly where we stand today.

We believe oil prices above $100 per barrel are unsustainable. At those levels, energy costs begin to weigh on global growth, and consumers and businesses are forced to cut back on fuel consumption. That drop in demand is what brings prices back down. It has happened before, and we believe it is happening now.

The Evolution of Oil Prices Since 2020

While many focus on supply disruptions, we look at how the global economy reacts to higher price levels. History shows that $100 oil triggers a slowdown that eventually pulls prices back down. This cycle of demand destruction acts as a natural ceiling, preventing prices from staying elevated indefinitely.

Focusing on these economic reactions helps us anticipate shifts that the broader market often misses. When prices rise to a point where consumers and businesses start pulling back, spending data and real demand figures will show it before any forecast does. We watch for those signals carefully.

We believe an analyst should look past the fear and focus on what supply, demand, and inventory levels are actually saying. That is what keeps our positioning grounded when sentiment runs ahead of reality.

2. The Importance of Simplification

Since 2020, our approach to forecasting oil has been to keep things simple. It is easy to become overly bullish on oil. It can lead investors to ignore warning signals or dismiss them entirely, even when they are meaningful. We stay focused on the data and on real-world market conditions.

Our approach proved correct. We remained bearish from the peak in June 2022 all the way to the bottom in December 2025, and we have maintained that same view since the conflict in Iran began in late February 2026. Headlines move fast, but economic reality is what ultimately moves the market.

We believe successful analysis requires paying attention to changes in consumer behavior. High prices eventually reach a point where people can no longer maintain normal consumption. Tracking these real-world signals alongside the data helps identify the limits of oil prices before the broader market reacts.

In our view, keeping that focus on the consumer is what keeps analysis grounded in reality rather than in models that assume demand never breaks.

Key macro takeaway: Successful commodity analysis often requires looking beyond the desk and observing real-world conditions. What happens on the ground usually reflects the true picture more closely than models alone.

3. Why We Have a Contrarian View on Oil

Since the start of the conflict in Iran, we have maintained a bearish outlook on oil. The common bull argument suggests that lost production will lead to a massive shortage, forcing prices toward $150 or $200 as supply fails to meet global demand. We understand the logic, but we disagree with the conclusion.

The problem with many of these forecasts is that they stop adapting the moment prices do not cooperate. You cannot fight where prices want to go. It is like water.

Oil prices have not reached the extreme levels many predicted, and we do not see that changing. A shortage exists, but the data shows it is not severe enough to justify $150 or $200 oil. Markets tend to overestimate how bad a disruption will be and underestimate how fast buyers and sellers find alternatives. We have seen that happen repeatedly, and this time is no different.

3.1 Trump & the Midterm Pressure

Another major reason we are not bullish on oil prices is Donald Trump.

In the United States, midterm elections take place halfway through a presidential term. Every seat in the House of Representatives and a third of Senate seats are up for vote. They are essentially a public verdict on how the president is performing. For Trump, that vote happens in early November 2026, and oil prices are becoming a serious problem.

High energy prices hit American consumers directly, at the gas pump and in their electricity bills. When people feel that pressure in their daily lives, they blame the person in charge. Trump knows this. His approval ratings are already slipping, and the longer oil stays above $100, the more damage it does to his political standing going into November.

This gives Trump a real incentive to find a deal that reopens the Strait of Hormuz and brings prices back down before voters go to the polls. The Iranian regime understands this too. They follow American politics closely, and Trump’s midterm timeline is one of the few pieces of leverage they have left.

The clock is running. If Trump does not find a way to reopen the Strait before the summer, the damage at the polls will already be done. We do not think the market is fully pricing that pressure in yet.

4. Expertise and the Oil Market

A common question is what makes our view different from traditional experts. Oil is a commodity where excessive specialization can create blind spots.

We have seen this repeatedly across the industry, with Pierre Andurand being the most notable example. Andurand is widely considered a genius, holding 4 Masters degrees in fields like Mathematical Physics from Oxford and Astrophysics from London. Yet that depth of expertise can push an analyst toward complex models that end up missing the bigger picture.

The results speak for themselves. His flagship fund was down 15% in 2019, 55% in 2023, and 40% in 2025. The fund gained 31% in March, only to give it all back and more, slumping 52% in just the first half of April as prices retreated.

Volatile performance like that is a sign that the model is fighting the market instead of following it. Being an expert in a single field creates a narrow perspective that prevents seeing how different global forces interact.

Our approach avoids this by maintaining a flexible framework. We look at the entire macroeconomic picture instead of getting lost in the technical details of a single asset, and we believe that is what keeps our positioning accurate over time.

5. The Market Is Missing the Bigger Picture

Most people are only looking at a part of the picture. The data that supports a bullish view is easy to find right now, but the data that challenges it is just as important. We believe that when you look at both together, the case for extreme oil prices becomes much harder to make.

1. World Oil Supply vs Demand

Yes, a supply gap exists. Since 2021, global oil demand has consistently run above supply, meaning the world has been consuming more oil than it produces. That deficit has not disappeared with the conflict. What has changed is the direction. The gap has been narrowing steadily through 2025 and into 2026.

Supply from non-Middle Eastern producers has been growing, gradually closing the distance between what the world produces and what it consumes. The gap is narrowing, and that matters when assessing whether $150 or $200 oil is a realistic outcome. We do not believe those levels are realistic under current conditions.

2. Alternative Export Routes

This is the part of the story we think most people are missing. When the Strait of Hormuz closed, the assumption was that the oil stopped flowing.

But producers had other plans. Within weeks, exports were being redirected through two alternative routes: Yanbu Industrial Port on Saudi Arabia's Red Sea coast and Fujairah on the UAE's eastern coast.

The results are significant. Combined exports through these two routes have grown from around 2 mb/d in January to nearly 7 mb/d by April, adding roughly 4 mb/d of new export capacity in just a few months. That is a substantial and rapid adjustment that the market has been slow to price in.

The world adapted faster than most expected. Inventories remain comfortable, the supply gap is narrowing, and producers found alternative routes within weeks. The disruption was real, but the market absorbed it. That is why we do not see a fundamental case for oil staying above $100.

6. How We See Oil Price Scenarios Playing Out

We see oil prices staying in the $85 to $100 range for as long as the conflict in Iran remains unresolved. Even when the Strait of Hormuz reopens, we believe the damage to infrastructure and supply chains will take time to repair, and prices will not fall back to $70 quickly. We do not see oil breaking above $120 to $130 under current conditions. In our view, that kind of move would require the conflict to escalate into a much broader regional war involving multiple countries. We are not there, and we do not think we are heading there.

To support our view, we are going to walk through the data, because we think it challenges most of what you are hearing right now.

Start with US crude oil inventories. Levels in 2026 have been running above both the 5-year average and 2025 for most of the year, only beginning to ease slightly around April. They are one of the most reliable indicators in the oil market.

US Crude Oil Inventories

The logic is simple: when supply is genuinely tight and demand is outpacing it, stocks fall. Buyers draw down what is sitting in storage because there is not enough coming in to meet their needs. That has not happened here.

Despite the Strait of Hormuz closure, the US has maintained comfortable inventory levels throughout. In our view, that is a strong sign that the actual supply disruption is nowhere near as severe as the market has been pricing in.

The global picture confirms what the US data is already showing. Since 2022, world crude oil supply has consistently kept pace with demand, and that balance has held into 2026 despite the conflict. The demand line has been flat to slightly declining, while supply from multiple regions, including the US, China, and other non-OECD producers, has remained robust. A market where supply is meeting demand is not a market that justifies triple-digit panic pricing.

World Crude Oil Supply vs Demand

Taken together, these two charts make our case clearly. The fear driving oil prices right now is not supported by what is actually happening in the physical market. In our experience, that kind of gap between sentiment and reality always closes, and when it does, prices follow the fundamentals back down.

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7. How China Is Rebalancing the Global Oil Market

China’s crude oil imports are falling, and this is the first time we have seen a decline of this magnitude since 2024. The easy explanation is to blame the Strait of Hormuz closure, and while that plays a role, the Chinese economy was already slowing before the conflict began.

The Chinese economy is weak. Domestic demand for fuel is soft, and that was true before the conflict began. What China actually needs right now is LPG, ethane, and naphtha, the building blocks for its petrochemical industry. Crude oil and refined fuel products are a different story. We believe demand for both will remain limited, and the import numbers already reflect that.

We believe the difference between what China needs and what it is actually buying is important for anyone trying to read the oil market through the lens of Chinese demand. China is selectively importing what its petrochemical industry needs and pulling back on crude and fuel products.

The Strait of Hormuz disruption adds pressure, but the weakness in Chinese oil demand was already there before the conflict began. We think that ignoring this leads investors to overestimate where oil prices are heading.

8. Geological Constraints & the Cut Profile

Iran cannot cut production evenly across its oil fields. The nature of its reservoirs makes that impossible. Iran relies heavily on mature carbonate reservoirs, mainly the Asmari and Bangestan formations, which naturally decline at between 4% and 12% per year without constant pressure support.

Because oil flows through complex fracture networks in these rocks, any interruption in pressure maintenance can cause rapid and permanent damage. Once that damage occurs, that production capacity cannot be recovered.

Prioritizing Field Survival

Iran’s national oil company (NIOC) is focused on protecting three categories of fields above everything else:

• Shared Reservoirs: Fields like Azadegan and Yadavaran stay active because shutting them down risks losing oil to neighboring countries who share the same reservoir.

• Pressure Sensitive Fields: Bangestan group fields need constant pressure to keep oil moving through their networks. Any pause risks permanent loss.

• Gas Injection Fields: Iran reinjects billions of cubic feet of gas daily to keep fields productive. Stopping that process accelerates decline and reduces how much oil can ever be recovered.

Protecting these priority fields forces cuts onto a smaller group of assets, mainly older onshore southern fields like Ahvaz-Asmari and Gachsaran. These fields offer more operational flexibility, but decades of production have left them requiring more maintenance and less able to absorb sudden changes.

Impact on Export Blends

The geology determines what Iran can actually sell. Bangestan reservoirs produce the heavier Iran Heavy blend, while the shallower Asmari formations produce Iran Light, which normally makes up around 55% of exports. Because cuts are concentrated in specific areas, the mix of oil reaching Asian refineries will shift, with lighter grades likely seeing the biggest reduction.

Outlook: Higher Costs & Uncertain Recovery

With storage full and reservoirs at their limits, production cuts will begin immediately and deepen fast. President Trump has said the blockade stays until a deal is signed. Iran refuses to negotiate while the blockade is in place. That standoff is pushing Iran’s national oil company into costly workarounds.

Keeping reservoirs healthy during a shutdown requires constant well work and pressure management. Rather than shutting assets down completely, the company has to cycle production on and off, which drives operating costs higher.

As oil revenue shrinks, less money is available for the maintenance needed to protect long term capacity. The short term decisions being made today will result in permanently higher costs and lower production capacity for years to come.

9. Asia Is Moving Away From Middle Eastern Oil

India keeps buying Russian oil, and the volumes are growing. The thinking among Indian refiners is simple: keeping fuel affordable and supply reliable at home is more important than worrying about Western sanctions.

You can see it directly in the numbers. In March 2026, Russian crude imports into India surged by over 900kbd, pushing total Russian volumes to a record 2.25 Mbd. That is nearly half of everything India buys. These numbers have been building for months and show no sign of reversing.

Pricing & Sanctions Risk

Indian buyers are well aware of the sanctions risk and have been factoring it into their pricing for weeks. Premiums for May arrival Urals are currently averaging around $6/bbl above ICE Brent. Even after the record volumes seen in March, April arrivals held strong at 1.5 Mbd. India is paying a premium to keep the oil flowing, and that tells you how seriously it takes supply security.

Southeast Asia Joins In

When the Strait of Hormuz closed, Southeast Asia felt it immediately. With Middle Eastern barrels suddenly harder to access, countries across the region turned to Russia to fill the gap. Malaysia, Indonesia, and the Philippines are all actively securing Russian crude. Philippine refiner Petron bought over 2 Mbbls as an emergency measure. We think these countries will continue buying Russian oil even as the situation evolves.

Making It Permanent

India is now putting the infrastructure in place to keep these flows going. Its shipping authority recently added a Russian insurer to its approved list, allowing Indian tankers to move Russian crude without relying on Western financial systems. Supply security and cost come before anything else for India, and that decision reflects it directly. We believe the shift toward Russian energy in Asia is becoming a permanent feature of how the region sources its oil.

10. Our Final Take on Oil

Our view on oil has not changed. We remain bearish. The shortage is real, but manageable, and nothing in the data supports a permanent shift to triple-digit oil. China’s demand is weaker than most assume, Trump has a political deadline to resolve the conflict, and consumers are already feeling the weight of elevated prices. All of this points in the same direction. We see prices heading lower from here, and we will keep following the data as the situation develops.

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Questions? Reach us directly on Substack or at contact@aurelionresearch.com.

The Aurelion Team

Disclosures & Methodology

All forecasts and estimates are based on publicly available information, management commentary, and our own modeling assumptions. This report reflects independent analysis by Aurelion Research. All opinions and estimates expressed herein reflect the author’s judgment as of the date of publication and are subject to change without notice.

This publication is for informational and educational purposes only and does not constitute investment advice, a solicitation, or a recommendation to buy or sell any security. Aurelion Research and its analysts may or may not hold positions in securities discussed. Use only where legally permitted.

Why nickel today? It is a critical mineral that the market has punished heavily since 2023, largely due to oversupply. Indonesia is the biggest producer, and they rely heavily on this industry. It generates massive revenue for them, so you cannot blame them for overproducing. However, the more they produce, the more it distorts the supply and demand balance.

As you can see in the chart below, this is directly reflected in the price. When production floods the market and exceeds demand, prices naturally fall.

This dynamic is exactly why we stayed on the sidelines. It was simply too risky, the trend was fading, and the outlook was ugly. So why look at it now?

The story has changed, and we like the new setup a lot. We believe the risk/reward profile has clearly improved. With Indonesia significantly cutting production in 2026, the overall outlook is suddenly much brighter.

The reason we are writing this primer is simple. Aside from a great piece by Macquarie Commodity Research, we have not seen any other real deep dives into the nickel market. We think that is a mistake because this commodity deserves far more attention than it currently receives. It has the potential to be the next big mineral. While the demand might not reach the sheer scale of copper, nickel absolutely should be discussed just as much as lithium.

Table of Contents

1. Nickel Market Overview

2. What Is Nickel?

3. The Process of Producing Nickel

4. Why the World Will Need More Nickel in the Coming Decade

5. Breaking Down the Nickel Producers

   5.1 PT Vale Indonesia

   5.2 Norilsk Nickel

6. Our Favorite Nickel Miners

7. Indonesia Dominates Global Nickel Supply

8. Don’t Forget the Philippines

9. Key Risks to Watch

10. Our Final Take on the Nickel Market

1. Nickel Market Overview

We always begin our primers with a market overview, as understanding the broader dynamics of the nickel market provides essential context before diving into the specific details and the investment thesis.

Here is exactly what is driving the market today:

The Demand for Nickel. The global shift toward green energy is creating massive demand for nickel. The metal is absolutely essential for manufacturing the batteries that power electric vehicles and store renewable energy. Because production is concentrated in just a few regions, securing a steady supply of nickel has become a major concern for global supply chains.

Macquarie expects total nickel demand to grow 5.4% this year, reaching 3.7M tonnes. Higher stainless steel production in China will drive the majority of this growth. European stainless steel production should also recover as new trade rules restrict outside imports. Energy storage systems will create additional demand, growing by 16,000 tonnes to reach a total of 47,000 tonnes in 2026. However, if nickel prices climb too high, battery makers could switch to cheaper alternatives like LFP or sodium ion chemistries.

The largest nickel-consuming countries driving this demand are China, Indonesia, EU member states, Japan, the USA, and South Korea.

The Hidden Value in Nickel Mining. Extracting nickel brings additional financial value through important byproducts. The mining process also yields copper and platinum group metals. Copper is crucial for a wide range of industrial uses and the broader electric grid. Platinum group metals, including platinum and palladium, are necessary for building automotive catalytic converters and advancing fuel cell technologies.

Indonesia Changes the Rules. National trade policies directly control the global nickel market. In 2020, Indonesia banned the export of unprocessed nickel ore. The government made this move to force companies to build smelting and refining facilities inside the country. The goal was to create a strong domestic industry, attract foreign investment, and secure a dominant position in the global electric vehicle battery supply chain.

The Global Market Impact. The Indonesian export ban caused immediate disruptions in global supply and pushed nickel prices higher. It also completely shifted international trade flows. China responded by pouring investment directly into Indonesian nickel processing facilities.

While these policies made Indonesia the central player in the market, they also introduced lasting uncertainties for global pricing and supply chains.

Indonesian Policy Uncertainty. Today, Indonesia dictates the global nickel market. They supply China, maintain a near monopoly on production, and control recent supply growth. This makes global prices highly sensitive to their internal regulations. The Indonesian government set the 2026 mining quota between 260M and 270M tonnes, but local smelters will actually require between 320M and 330M tonnes.

This significant shortfall forces processing plants to rely on imports from the Philippines, a dynamic that supports higher nickel prices. However, miners can request additional volume in July, meaning strict quota enforcement remains uncertain. Furthermore, the government delayed a planned nickel export tax, adding another layer of confusion to the policy outlook.

The Government Strategy. Indonesian authorities worry about how miners use the remaining nickel reserves. They believe too much nickel goes to stainless steel mills rather than the electric vehicle industry. To fix this and stop the oversupply, the government put new rules in place.

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We want to cut through the noise and look at how the global supply of oil has violently shifted compared to world demand over the past few months. We also want to highlight a hidden risk that could drive prices much higher due to unpredictable attacks on key infrastructure.

To be clear upfront, we do not believe oil prices will stay high forever. However, we see massive risk for prices to spike in the short term because current market prices completely fail to reflect the severe, real world shortage of oil happening right now.

This is a Pro-tier Macro update from Aurelion Research. On rare occasions, we share a preview of Pro content with all subscribers when the topic warrants broader visibility.

The Historic Supply Shock: Only the Beginning?

Just a few months ago, experts expected a massive oversupply of oil. Fast forward to the end of March, and the extreme fragility of the global energy trade is fully exposed. The closure of the Strait of Hormuz brought around 20% of daily global oil movement to a grinding halt. This instantly plunged the market into the largest supply shock in history.

Quantifying the Massive Shortfall. As detailed in the exhibit below, the initial closure removed a staggering 18.4M barrels daily from the global market. Emergency actions and alternative pipelines have managed to replace a portion of this loss. However, the world still faces a massive net shortage of 11.1M barrels daily. This physical roadblock makes the vast majority of the global backup oil supply completely inaccessible.

A Market Underestimating the Risk. We are now one month into this crisis. The immediate economic impacts are already severe, characterized by surging global prices and physical fuel shortages across Asia. Yet, conversations with industry insiders reveal a clear consensus. The broader market still does not grasp the true severity of the situation.

The Crisis Spreads West. Experts are now drawing direct parallels to the historic oil shocks of the 1970s. They warn that a prolonged closure will trigger an even larger economic fallout.

The localized fuel shortages currently squeezing Asian markets will rapidly spread westward. Europe remains highly vulnerable and will likely face surging prices as nations desperately bid to secure any available energy cargoes. As the global supply chain fractures, European markets are at severe risk of experiencing outright physical diesel shortages in the coming weeks.

The True Consumption Gap & Exhausting Lifelines

While previous sections outlined the massive physical supply shortfalls, the actual consumption math remains grim. Even factoring in reduced demand from Asia, the global market still faces a net 9M barrel daily deficit compared to pre-war levels. To put the sheer scale of that shortage into perspective, this missing volume exceeds the total daily oil consumption of the UK, France, Germany, Spain, and Italy combined.

Running Out of Temporary Fixes. The market is quickly burning through its temporary safety nets. Exceptional measures, such as issuing U.S. waivers on Russian & Iranian oil sanctions, have bought the global economy some crucial time. However, these are strictly finite lifelines. Once these emergency options are completely exhausted, global leaders will have virtually no tools left to artificially suppress prices without physically reopening the waterway.

The Unique Threat to Natural Gas

While crude oil has at least a few alternative pipeline routes, the situation for liquefied natural gas is entirely rigid. The final ships carrying Middle Eastern gas are arriving at their international destinations right now. Once they are empty, there are virtually no alternative physical routes to get that stranded gas to global buyers. Making matters worse, there are almost no strategic global stockpiles available to cushion a natural gas shortfall.

The North American Fortress. Retail gasoline and diesel prices have certainly jumped domestically, but the U.S. is structurally positioned to weather this crisis better than any other region. Geographically removed from the conflict and far less reliant on Middle Eastern transit, the American energy market is heavily protected. Furthermore, as the absolute largest exporter of liquefied natural gas in the world, the massive domestic gas market remains deeply insulated from the unfolding global chaos.

Ignoring the Noise & Assessing the True Risk

Political Talk Versus Reality on the Ground. The White House continues using public statements to try and force prices lower, with President Trump recently pushing oil below $90 per barrel on social media by claiming the conflict is effectively over. However, we see a massive disconnect between this political rhetoric and the reality on the ground. A legitimate peace deal remains highly unlikely right now. Both sides are deeply entrenched in their demands, and the potential deployment of American forces into the region points toward severe escalation instead of a peaceful resolution.

The Escalating Threat to Backup Shipping Routes. Given their focus on unconventional warfare, Iran and its allies are highly likely to target backup global supply routes to apply maximum economic pressure. With the Houthis entering the conflict this past weekend, the risk to passing cargo ships and vital infrastructure continues to climb.

We view the following backup transit points as highly vulnerable targets:

• The Saudi East to West Pipeline & Yanbu Port: This critical infrastructure allows up to 7M barrels of Saudi oil per day to bypass the Strait of Hormuz and load directly onto ships in the Red Sea.

• The Bab el Mandeb Strait: Located at the southern end of the Red Sea, this narrow passage historically handles 4 to 5M barrels daily. The number of potential targets here is currently very high because ships diverted from Saudi Arabia are crowding the area as they head south toward the Indian Ocean.

• The UAE Bypass Pipeline: Carrying nearly 1.8M barrels of oil per day, this pipeline represents another highly attractive target for disrupting regional exports.

Middle East Crude Chokepoints:

Our Call: A New Permanent Floor for Crude

Read more

Defensive names and those with heavy exposure to housing and construction have been left behind. The market is paying up for visible growth and has little patience for stories that need a broad economic recovery to work.

The chart above shows that the defensives premium over cyclicals has fallen back below its 10-year average and is now near the lower end of its pre-2020 range. Cyclicals may look cheap, but the key question is whether the earnings recovery is strong enough to support that re-rating.

Table of Contents

1. Chemical Markets Overview

2. Middle East Capacity Exposure

3. Global Chemicals as an Industrial Leading Indicator

4. Breaking Down the Chemical Stocks One by One: DOW, LYB, HUN & BAK

5. Polyethylene: A Major Catalyst for US Producers

6. Ethylene & Propylene: Tighter Supply & Rising Costs

Industry Developments

Several industry players also made strategic moves or received regulatory updates recently. In the energy sector, a major producer is increasing its capacity to meet rising demand for nuclear fuel components and is working closely with the government on future expansions. Regarding environmental milestones, an eco-friendly polymer recently received approval for use in agriculture, which should pave the way for its commercial launch.

In corporate news, one firm resolved a significant pricing dispute through a legal settlement, while an investment group substantially increased its ownership stake in a major coatings manufacturer. Finally, projections for the auto industry have been adjusted, with expectations rising for North American production while cooling slightly for the market in China.

1. Chemical Markets: The Potential Fallout

With conflict escalating in Iran and across the broader Middle East, several key chemical markets are facing meaningful supply risk. If disruption in the Persian Gulf persists and oil prices remain elevated, a select group of U.S. chemical producers could emerge as major beneficiaries.

That group includes Dow, LyondellBasell, Olin, Westlake, and Celanese. Higher oil prices raise production costs for competitors in Europe and Asia, which widens the cost advantage for U.S. producers.

The Methanol Factor

Iran plays a significant role in global chemicals, particularly in methanol. The country is the world’s second largest producer, accounting for roughly 11% of global capacity. Domestic consumption remains limited, which means more than 90% of output is exported, mainly to China and India.

China is especially exposed. The country imports roughly one quarter of its methanol needs, and more than half of those imports originate from Iran. That methanol feeds Methanol to Olefins facilities, which convert it into plastics such as polyethylene and polypropylene.

Those Chinese plants are already operating under pressure, with margins still weak. Any disruption to Iranian supply would likely force further production cuts. We believe the result would be tighter global plastics availability and upward pressure on prices across the chain.

2. Middle East Capacity Exposure

The Middle East accounts for a meaningful share of global petrochemical capacity. Around 15% of global polyethylene and ethylene capacity is located in the region, and roughly 9% sits inside the Strait of Hormuz. That leaves a large volume of supply exposed to any disruption in the area.

The concentration is important. The Gulf Cooperation Council represents ~9% of global polyethylene capacity and 6% of polypropylene capacity, while Iran adds another 3% of polyethylene supply and ~4% of ethylene capacity.

On their own, those shares may not look that large, but with so much capacity concentrated in one region, the risk to global markets rises. Feedstocks also add to the exposure. More than 37% of global seaborne naphtha passes through the Strait of Hormuz, mostly toward Asia. Since naphtha is a key input for steam crackers, any disruption would quickly raise costs and reduce flexibility for Asian producers.

If those flows are interrupted, the pressure would extend beyond direct production losses. Even assuming imported naphtha is redirected toward ethylene production, around 6% of global ethylene capacity could still face constraints. That does not include added pressure from crude imports used to make naphtha or LPG supplies for mixed feed crackers.

Altogether, the region holds an important position in both petrochemical production and feedstock trade. A prolonged disruption in the Strait of Hormuz would likely tighten supply, raise costs, and make the global chemical chain more difficult to balance.

3. Global Chemicals as an Industrial Leading Indicator

We close with Europe. Industrial chemicals are predominantly a European story, and right now, that story is not getting the attention it deserves.

Think about how the industrial chain actually works. Before a car gets assembled, before a house gets built, before a package gets shipped, someone has to order the chemical inputs first. That sequencing is exactly what makes this sector one of the best early reads on economic activity you can find. When chemical demand picks up, manufacturing follows. When orders soften, the weakness shows up here before it appears almost anywhere else, well before GDP prints or PMI surveys catch it.

The end market exposure makes that signal even more powerful. Chemical volumes touch housing, packaging, autos, appliances, and a huge share of everyday manufactured goods. A move in volumes tells you whether factories are rebuilding inventories, whether construction is gaining momentum, or whether downstream customers are still sitting on their hands. There is a lot of information packed into that number.

The cost side adds another layer that most people overlook. Chemical plants run on high fixed costs, so when utilization swings, it hits profitability hard and fast. Volumes rise, assets run harder, margins expand quickly. Volumes fall, earnings weaken just as fast. That operating leverage is why the sector tends to move sharply at cycle turns in both directions.

Miss the inflection and you miss most of the move.

Chemicals Sector Cost Structure Breakdown

Petrochemicals: Why Europe Runs This Market

The diagram below shows exactly how deep chemical inputs run into the economy. Natural Gas and Crude Oil feed into a Steam Cracker, which produces the core intermediates: Ethylene, Propylene, Butadiene, Aromatics, Ammonia, and Methanol. From there, the chain fans out into hundreds of end products touching nearly every corner of the economy.

Europe dominates this space because the industry was built there over decades, with dense clusters of integrated plants, deep engineering expertise, and long-standing trade relationships with both feedstock suppliers and downstream manufacturers. That history is not easy to replicate, and it is why European producers still set the tone for global chemical markets today.

Petrochemical Supply Chain Diagram

We have highlighted Insulation and Polyurethane Foam in red for a reason. Both are heavily tied to construction and housing activity, which is precisely the end market showing the earliest signs of a potential recovery in Europe.

When building activity picks up, these are among the first chemical derivatives to see volume growth, and volume flows directly into utilization rates at the plant level. Raw material costs, product mix, and geographic footprint determine how quickly a company benefits from a recovery.

A producer with low input costs and exposure to healthier end markets looks completely different from one facing weak domestic demand and a poor cost base. Getting that distinction right is where the real work lives. Chemical volume trends and utilization rates move before the shift shows up in broader data. We are watching this sector closely, and you should be too.

Stock Ideas: Air Liquide and WestLake

We will cover two names that stand out at this stage of the cycle.

Air Liquide is the higher quality name of the two. The French industrial gas giant operates with long term contracts, largely take or pay, which means volumes hold up even when the broader chemical environment weakens.

Air Liquide gives you exposure to a European industrial recovery with significantly less downside risk than most names in the sector. The company has compounded earnings reliably for years, carries a strong balance sheet, and trades at a premium that is historically justified. If European industrial activity accelerates, it will participate. If the recovery takes longer than expected, you still own a business that generates cash while you wait.

WestLake is a different kind of bet. The Houston based producer has significant exposure to PVC and chlor-alkali chemistry, both of which are closely tied to housing and construction demand. WestLake has been quietly building out its European presence, and the company benefits from a relatively advantaged feedstock position compared to many European peers still dealing with elevated energy costs.

When construction volumes in Europe start moving, WestLake is one of the names that feels it early and fast. The stock has underperformed the broader market over the past year, which is precisely why it is interesting now.

You are buying it before the recovery is priced in, and that timing is the whole idea. Both names sit at different points on the risk spectrum. Air Liquide is the patient, high conviction hold. WestLake is the higher beta way to play a faster recovery. Together they offer a sensible way to build exposure to a sector that the market is still underestimating.

4. Breaking Down the Chemical Stocks One by One

Now let’s get into what you are here for. What does all of this mean for DOW, LYB, HUN, and BAK? We go through each one.

The 2026 outlook for these names is shaped by a clear theme:

DOW and LYB recently received Buy upgrades as Middle East supply disruptions widen the cost advantage for North American ethane producers over naphtha-based peers globally. BAK sits in a different category, with its valuation tied to the final execution of the IG4 Novonor deal and the resolution of its Brazilian legal overhang.

First two : DOW & LYB

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Our Core Thesis on Oil

To be clear, we know this is a big call, but we do not see oil staying higher for longer. We believe Iran is now too weakened to sustain this move. While the market is reacting to headlines, the reality of a diminished Iran will soon bring prices back down. The fundamentals simply do not support a permanent shift to triple-digit oil, and we expect this premium to fade.

Geopolitical Tensions Pressure LatAm Equities

Escalating conflict in the Middle East drove a broad risk-off move last week, with Latin American equities selling off sharply and underperforming the broader emerging market index. All key markets posted weekly losses, though with some dispersion. The geopolitical shock pushed oil prices toward $120 per barrel, providing relative support to more oil-sensitive markets.

Bloomberg Country Index: Total Returns

Despite the recent setback, Latin America remains one of the best performing regions so far this year. Looking forward, the path will depend on the duration of the conflict and whether higher oil prices trigger inflation pressures that could slow down or reverse interest rate cuts. Even with those risks, we believe the region is well positioned to do just fine.

Does Oil at $80-100 Signals Weaker Returns Ahead?

Historical returns across oil regimes suggest prices above $100 per barrel would be a headwind for Latin American equities. Since 2000, the $40-$60 range has delivered the strongest average returns and hit ratios above 80% across key markets. Above $100, which Bloomberg Economics projects in a scenario of intensifying conflict, forward average returns have been the most negative for the regional index, though results diverge.

12M Fwd Returns by Oil Price Regime (Local FX)

Chile and Colombia underperformed, while Peru has posted positive returns on average with a hit ratio of 72%. With oil now in the $80 to $100 range, history suggests weaker performance ahead. A ceasefire that brings prices back toward $65 per barrel would offer a more supportive backdrop.

OUR TAKE ON OIL PRICES AND LATAM OIL & GAS

On our end, we don’t see oil staying higher for longer. We recently spoke with a top U.S. resources analyst who has a massive track record, including being short oil from $140 all the way down to $60. We always value his views plus find ourselves closely aligned with his take on aluminum, fertilizers, plus copper. Just like us, he believes Iran is now too weakened to sustain this move. We agree that oil prices won’t stay high for long.

Based on that, we think a long run range of $60 to $80 is a much more realistic baseline for the Latin American market. Because of this, we aren’t particularly worried about the $80 to $100 range that Bloomberg often points to as a danger zone for regional producers. Most major players in the region are far more resilient than they used to be. For example, Petrobras has managed to get its portfolio breakeven down to around $25 per barrel, while Ecopetrol is already planning its entire 2026 budget around a $60 Brent price.

This means they can still generate significant cash flow even if prices move toward the lower end of our range. The noise about higher prices being a “bad” thing for LatAm oil producers usually misses the fact that these companies have already lean-down their operations to thrive in a much lower price environment. Following the U.S.–Iran strikes, most of the market’s focus has gone to crude. For Brazil, the more immediate pressure sits in refined products. The country still relies on imported diesel and gasoline, so higher international prices feed quickly into domestic fuel economics. Petrobras stands at the center of that picture as Brazil’s largest fuel supplier.

Brazil Fuels: Price Increases Look More Likely

Our view is simple. If current oil prices held at these levels, Petrobras would eventually be forced to hike domestic fuel prices. However, since we expect oil to cool off plus return to the $60–$80 range, that pressure should subside before it triggers a major policy shift.

Since Petrobras adopted its new pricing framework in May 2023, it has moved away from reacting too quickly to global volatility. Instead, the company favors a smoothing strategy that allows domestic prices to lag international benchmarks during brief spikes. This approach works well for managing headlines plus uncertainty, but it becomes harder to sustain if the discount stays wide for too long.

Diesel Still Trades at a 7% Discount

Gasoline Tracks Closer at a 3% Discount

As of early March 2026, the data shows that PBR is already leaning into this strategy. Diesel is currently trading at a 7% discount to international prices while Gasoline is tracking much closer with only a 3% discount. Because we view the current oil rally as a temporary reaction to the situation in Iran, we believe Petrobras can successfully bridge this gap without needing a major price hike. As global prices settle back into our target range, these discounts will naturally close, keeping the domestic market stable while protecting long-term margins.

2. Fuel Distribution: Sourcing Mix Gains Importance

The second order effect hits the fuel distributors. Brazil still relies on imported fuel to meet its domestic demand, which means the real cost of getting supply rises with global prices regardless of how slowly Petrobras reacts. In this environment, distributors with better access to the company’s volumes are in a much stronger position.

We see Vibra and Ultrapar as the clear winners in this setup. By sourcing more of their fuel from PBR, they gain a massive cost advantage over smaller competitors who have to buy on the expensive spot market. Even though we expect this oil price spike to be short lived, this temporary gap allows these market leaders to protect their margins while others struggle to keep up.

This dynamic is especially important right now. While a brief price move just creates noise, a more persistent gap changes the earnings setup across the entire distribution chain. Since we expect oil prices to move back toward the $60 to $80 range, this specific advantage might be short lived, but it still allows these leaders to solidify their market position while smaller competitors struggle with the temporary volatility.

Tail Risk: Fuel Availability & Global Aftershocks

The main downside risk to watch right now is a temporary supply squeeze, particularly in diesel. Petrobras is no longer the sole supplier in Brazil, and since imports now play a much larger role in meeting demand, any hit to import economics or logistics could trigger local shortages. Brazil’s transport system is heavily dependent on diesel, so any disruption there would move quickly through the rest of the economy.

Even if we do not see this as the base case, it is a significant tail risk. On a broader scale, we are seeing global tsunamis but much smaller local effects. While the direct impact of the U.S. and Israeli operations against Iran has been somewhat limited in Latin America, net oil importers are still feeling the pinch in their trade balances.

The Monetary Impact

The main concern for the region is how central banks respond if higher oil prices begin to feed through more quickly into domestic inflation. If that happens, policymakers across LatAm could have much less room to ease than investors currently expect. That risk is especially relevant for Brazil, Chile, and Mexico, where rate cuts are already in focus. A renewed rise in fuel and energy costs could slow that process or pause it altogether.

For markets, the issue is clear: tighter policy for longer would weigh on growth and pressure the parts of the economy that are most exposed to financing costs.

Trade with Iran & Net Fuel Exports

The regional exposure is uneven, but the broader takeaway is clear. LatAm is more sensitive to oil shocks than most developed markets, especially when pass through into local prices is faster than usual. The policy response implied by the data is meaningfully larger than what we see across most developed economies.

Trade with Iran & Fuel Net Exports

Higher oil prices also create a monetary risk for LatAm. The region is more sensitive to oil shocks than most developed markets, especially when pass through into local prices runs high. In that setup, central banks may have less room to ease than markets currently expect.

We believe the growth impact from current oil levels still looks manageable, but inflation is the bigger issue. If oil moves higher from here, the pressure on headline CPI rises more quickly, which increases the chance that policymakers in Brazil, Chile, and Mexico slow or pause their easing cycles.

As you can see in the exhibits above, that would tighten financial conditions at a time when the region was expecting more support from lower rates. Overall, the key point is that the first order effect of higher oil is not only energy. It could also delay monetary easing, and we think that would widen the impact across equities, credit, and domestic demand.

The Aurelion Team

Disclosures & Methodology

All forecasts and estimates are based on publicly available information, management commentary, and our own modeling assumptions. This report reflects independent analysis by Aurelion Research. All opinions and estimates expressed herein reflect the author’s judgment as of the date of publication and are subject to change without notice.

This publication is for informational and educational purposes only and does not constitute investment advice, a solicitation, or a recommendation to buy or sell any security. Aurelion Research and its analysts may or may not hold positions in securities discussed. Use only where legally permitted.

1) Why tanker stocks are not rising despite record spot rates.

2) Whether the current tanker market strength is temporary or structural.

3) Which stocks are best positioned to benefit from the current market.

We bring expertise and a track record in the tanker industry to the table. This is rare in North America. While shipping analysts are usually found in Norway, Denmark, or Greece, they are scarce in the US, and in Canada, they are basically non-existent.

We currently see an exceptional tanker market. As many of you recognize, spot rates have jumped even higher. A red hot environment defines tanker shipping, and momentum remains clearly positive. The gap between available vessels and cargo demand widens fast. Rates have broken through previous highs, creating a profitable environment for owners of compliant ships. Some might view the move as a short-term spike, but a closer look reveals a global balance where limited ship supply keeps earnings high.

Red Hot Spot Market

The VLCC route from the Middle East to China recently topped $78,000 per day, marking a 12% increase in a single week. Suezmax rates from West Africa to Europe trade near $62 000, while Aframax rates in the North Sea hold at $55,000. Detours around risky or blocked routes are lengthening voyages, reducing available ship supply and driving tanker rates higher.

Because the demand to move oil over long distances grows faster than the fleet, the base for daily earnings has moved to a much higher level. This setup should allow top shipping companies to capture a larger share of a tight market, as the low supply of ships for immediate hire keeps rates elevated.

Now for the interesting part. Why are tanker equities down or flat while spot rates go up like crazy? We intend to go deep into this explanation in the following sections. Trust us, you do not want to miss this.

Why Tanker Stocks Are Ignoring the Rate Boom?

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Unless you live on a remote island with no internet or belong to one of the few “Uncontacted Indigenous” groups left on Earth, you have undoubtedly heard about the current conflict between the U.S. and the Iranian regime.

President Trump’s decision to launch strikes against Iran has put a massive portion of the global oil supply at risk. While the Islamic Republic produces ~3.3M barrels a day, making up 3% of global output and ranking as the fourth largest producer in OPEC, its true power comes from its geography.

The nation sits right on the Strait of Hormuz which serves as the primary shipping lane for about 20% of the world’s crude from suppliers such as Saudi Arabia and Iraq. This waterway is the primary chokepoint for global energy markets and the current conflict between the United States and Iran has significantly elevated the risk of physical supply disruptions. As you can see below, this is arguably the most critical oil transit point on the planet.

Global Oil Trade Chokepoint

Iran’s potential to retaliate by obstructing this narrow passage threatens ~30% of all seaborne oil trade. Regional exposure for major importers is substantial given that Persian Gulf exports represented nearly 50% of total Chinese oil imports in December 2025. This volume translates to ~38% of China’s daily consumption and highlights why Asian markets are particularly vulnerable to a surge in energy costs as this geopolitical crisis unfolds. Since the attacks on Saturday, tankers have already started avoiding the area.

Reports from Iranian media indicate that the Strait of Hormuz is effectively closed, and shipping data confirms this as vessels are now clustering on both sides of the passage. Since markets are shut for the weekend, the full price impact hasn’t hit yet. While there is no confirmed evidence that major oil production or export infrastructure has been directly targeted, the situation remains incredibly tense.

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Oil Refineries & Terminals in the Middle East

The following map shows how quickly this conflict has spread across the Gulf. Explosions were reported on Kharg Island, which is home to the main oil export terminal for Iran. Missile activity has also been recorded near U.S. military bases in Kuwait, Qatar, Bahrain, Saudi Arabia, and the UAE. There were interceptions over Riyadh, blasts heard near Dubai, and smoke seen near the Al Udeid base in Qatar.

The Persian Gulf Is Now a Frontline in the US-Iran War

Even if energy facilities aren’t the primary targets right now, the high concentration of military incidents around the Persian Gulf creates a massive risk for accidental hits on shipping lanes, terminals, or storage hubs. Since ~20% of the world’s oil flows through the Strait of Hormuz, even a short blockage would severely tighten global supply and send prices skyrocketing.

Iran’s Oil & Gas Assets: What to Watch

Since 2020, Iran has managed to push its oil production up from under 2M barrels a day despite facing heavy international sanctions. They have gotten quite good at navigating these rules by sending ~90% of their exports directly to China. Most of this oil comes from the Khuzestan province, specifically from massive deposits like Ahvaz, Marun, and the West Karun cluster.

Iran’s Oil & Gas Assets Overview

The refining side is equally important. The historic Abadan refinery, in operation since 1912, has a capacity of more than 500,000 barrels per day. Iran also depends on the Bandar Abbas and Persian Gulf Star complexes to process crude and condensate, an ultra light oil produced in large volumes domestically. Even the capital, Tehran, operates its own refinery to help secure internal fuel supply.

Kharg Island sits at the center of Iran’s export system. It is the primary logistical hub in the northern Persian Gulf, equipped with multiple loading berths and storage facilities capable of holding tens of millions of barrels. On Saturday, the Mehr news agency reported an explosion on the island. Details remain limited, and the oil terminal was not specifically identified, but the situation is being closely watched.

To keep revenue flowing, Iran relies heavily on private Chinese refiners that purchase its crude at significant discounts, as they are among the few buyers willing to overlook U.S. sanctions. These shipments are typically transported by a shadow fleet of older tankers that switch off their tracking transponders to avoid detection by U.S. authorities.

China Leads Oil Flows Through Hormuz

As the data below shows, China is the largest destination for oil traveling through the Strait of Hormuz. In fact, 38% of all the oil passing through that waterway is destined for China, which makes it the most exposed major economy to any disruption in the flow of crude from the Gulf.

Iran’s Position in the OPEC Supply Balance

Despite years of sanctions and volatility, Iran remains a powerful force within OPEC. The country accounts for ~12% of the group’s total production, which solidifies its position as the organization’s fourth largest producer.

To see where the rest of the supply comes from, Saudi Arabia leads the group at 34%, followed by Iraq at 15% and the UAE at 12%. Kuwait contributes 9%, while the remaining 18% comes from all other member states combined.

Iran Is OPEC’s Fourth-Largest Producer

While Iran’s share is smaller than that of Saudi Arabia, the volume is still substantial enough to sway the entire market. Any major loss of Iranian output or exports creates a significant gap in the OPEC supply chain. We believe a disruption of this scale immediately tightens the group’s effective balance and forces other members to ramp up their own production to prevent a global shortage.

What Happens Next? Scenarios

Now that we’ve covered why Iran matters to the oil market, the next step is determining which scenario becomes the base case. Oil prices will move as the odds of these outcomes shift. The decision tree is simple and starts with whether the current leadership survives or collapses. A collapse would bring a political change such as democracy, a new ruler, or total chaos, and markets usually trade that uncertainty first if the transition looks messy. If the leadership stays in power, the next driver is how they choose to retaliate.

A symbolic response would maintain a risk premium in crude without causing a lasting supply shock, whereas a significant response involving strikes on regional bases or shipping is where the real upside risk originates.

This is where oil could gap higher, but any sustained move needs an actual hit to supply rather than just headlines. With crude expected to open around $80 on Monday, a jump from $70, a move toward $90 is plausible if tensions stay high. While a prolonged and extreme scenario involving a disruption of the Strait of Hormuz could theoretically push oil to $110, this outcome is unlikely since the waterway is the primary source of income for the Iranian leadership and closing it would effectively force their surrender.

We believe the most probable path leads to $90-100 because this range reflects the immediate war premium and higher shipping and insurance costs during a conflict. While the situation is tense, a move to $120 or higher looks unlikely because the global market is oversupplied and OPEC+ still has significant spare capacity that can stabilize prices. In addition, Iran depends on oil revenue for regime survival, so a full closure of the Strait of Hormuz would amount to economic suicide and offers no viable long term strategy. With these supply buffers in place and major buyers already holding large inventories, the market should find a ceiling before extreme levels, and anyone calling for $120 to $160 as a base case is overstating the situation.

Iran’s Risk Premium in Crude

The current market data from Bloomberg highlights that geopolitical risk has already contributed a six dollar premium to the price of oil as tensions between the U.S. and Iran escalated throughout early 2026. This premium has risen steadily alongside major events such as the movement of a massive naval armada and reports that the nations are moving closer to a major war.

Iran’s $6 Risk Premium in Oil to Rise After Attacks

While demand factors and other supply shifts have fluctuated, the geopolitical contribution represented by the pink portion of the chart is now the primary driver keeping prices elevated above their January baseline. This data confirms that the market has transitioned from theoretical concern to pricing in a significant risk of physical disruption which currently accounts for the bulk of the recent move toward eighty dollars per barrel.

The Gulf Risk Premium Returns

The analysts who expected a quick, limited strike were wrong. For months, major firms argued that the government’s concern over the cost of living would keep any military action small. With midterms approaching, they assumed the downside of a long conflict was too large, effectively betting that economic optics would shape military strategy.

That bet has failed. The conversation has moved past narrow strikes on missile sites. The conflict has widened, and early assumptions of containment have broken down. Reports of retaliation across the region, combined with fresh concerns around Kharg Island and the Strait of Hormuz, have forced investors to reprice the entire range of outcomes.

Oil Prices Show a Rising Risk Premium

The chart above captures the upward shift in the oil risk premium. As the perceived odds of U.S. action climbed, Brent moved higher alongside them.

The price response was meaningful, but one to two weeks ago it still read like an early-stage repricing. Probability moves first, then the physical market follows once disruption becomes visible. Now the picture looks different.

Following this week’s escalation, crude oil has moved sharply higher as the market shifts from treating conflict as a distant tail risk to a core pricing reality. We are now witnessing a tug of war between two powerful and opposing forces. Escalation risk supports a significantly higher risk premium while political constraints favor a compressed timeline and intense pressure to limit economic fallout. From here, we believe the market next move will be dictated by physical realities such as whether vital shipping lanes remain open and whether export and refining infrastructure continues to operate normally as global markets reopen, so nothing is played out yet.

How to Position From Here

First of all, the following information focuses on what to avoid by looking at historical patterns. The most sensitive sectors should be avoided, while the least sensitive ones should be viewed as opportunities if a drawdown becomes overdone in macro and market sentiment, that is where we specialize in identifying value and where we generate most of our alpha.

What We Would Avoid:

The regional investment narrative during this conflict centers on the stability of Gulf energy infrastructure, logistics, and human capital mobility. While the initial equity market reaction would likely be a drop lower, investors will focus on the duration of the conflict and any medium to long term disruptions to these core sectors. Historically, the most vulnerable stocks in the region are real estate developers such as ALDAR, EMAAR, and Dar Al Arkan due to risks surrounding demand and pricing. Mobility names like Air Arabia and Parkin are also at risk from traffic impacts and higher oil costs, while ADNOC L&S faces potential trade and operational disruptions.

Gulf Equities Reaction to ‘12-Day War’ in 2025

On the defensive side, Saudi Aramco remains the primary option due to its exposure to higher oil prices, though this only holds true if production and exports remain uninterrupted. Because these names are currently the most vulnerable, they should be avoided for the time being.

Where We See the Best Risk Reward:

It is likely you are most interested in identifying specific investment opportunities during this period of volatility. We believe that avoiding areas with excessive risk or overcrowding is the primary strategy for the short term. Canadian equities and the mining sector should perform well while defense stocks also offer a strong hedge. On the other hand, Latin America remains largely disconnected from this specific conflict and we continue to view Brazilian equities as undervalued with a compelling risk-reward profile.

While oil equities are an obvious choice, we believe that product tankers, crude oil tankers, and even dry bulk carriers will benefit significantly and deliver exceptional performance. According to a Tankers Opinion from Poten, there is very little risk that freight rates will decrease regardless of how the situation unfolds. The chart below illustrates this point clearly.

As we have mentioned many times before, the tanker market is already extremely tight with rates near historic highs and under these conditions the risk is entirely to the upside. We view this as a primary buying opportunity that is more attractive now than ever before.

The following two sections are bonus segments because they do not provide direct insights on the current situation but instead highlight historical events. Our goal is for these sections to help you learn how the market reached its current state by providing a clear view of the past.

How Oil Shaped the Modern World

To capture the history of oil prices since 1920, it helps to look at the moments where politics and supply collided. The founding of OPEC in 1960 was a turning point, intended to stabilize the market, yet the decades that followed were often defined by volatility tied to disruptions in the Middle East.

Oil Price Since 1920

1. The Era of Major Shocks

The 1970s really set the stage for modern energy anxiety with two massive price shocks. During the OPEC oil embargo of 1973-74, prices actually x4. Not long after, the 1979 Iranian oil crisis caused prices to double again, cementing the idea that energy security was tied directly to global stability.

2. The 21st Century Rollercoaster

Moving into the 2000s, a perfect storm of soaring global demand, conflict in the Middle East, and a weakening U.S. dollar pushed prices to a record peak of $145 per barrel in July 2008. That high was short-lived, as the Global Financial Crisis sent prices crashing below $40. However, the recovery was swift, with prices bouncing back above $100 within just two years.

The mid-2010s introduced a new variable: the U.S. shale revolution. Between June 2014 and January 2016, prices plummeted from $115 to $28. This decline was intensified by geopolitical maneuvering between Russia and the Middle East, leading many to speculate about the end of OPEC. Of course, prices eventually recovered as global growth picked up speed.

3. Recent Volatility & Current Trends

The start of this decade brought unprecedented swings. In 2020, the combination of supply shocks and the collapse of demand during the pandemic forced prices down to $20 per barrel before they began to rebound. We saw another major spike in 2022 following the Russian invasion of Ukraine, but that momentum eventually cooled.

As of January 2026, the market has settled significantly, with crude oil trading around $65 per barrel. This recent decline is largely attributed to ongoing concerns about a global recession dampening demand.

The Persistence of War

If you look at the last 600 years, it is pretty clear that war was the rule and peace was the rare exception. Since the year 1400, more than 150M people have lost their lives in various conflicts. What is even more staggering is that over 100M of those deaths happened just since the start of the 20th century.

600 Years of War

1. A Shift Toward Peace

Surprisingly, the 21st century flipped that script and made peace the new normal for a while. By the time 2011 rolled around, the number of deaths from armed conflict had dropped to its lowest point in 275 years.

Even though we have seen those numbers climb again over the last decade, the context is still important. In 2023, the death rate in armed conflicts was about 2 per 100,000 people. That is remarkably low when you compare it to the peak in 1948, when the rate was 112 per 100,000.

2. The Modern Reality

However, the return of war to Europe is a heavy reminder of the past. The current struggle involving Russia, Ukraine, and NATO actually marks the 487th military conflict in Europe over the last two thousand years. This tension is driving a massive surge in defense budgets, with NATO members committing to increase their spending by $700B before 2034.

At the same time, the ongoing tech war between the United States and China is forcing both economies to step up government intervention. They are pouring money into technology and defense for reasons of national security, which signals a major shift in how these global powers operate.

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The Aurelion Team

Disclosures & Methodology

All forecasts and estimates are based on publicly available information, management commentary, and our own modeling assumptions. This report reflects independent analysis by Aurelion Research. All opinions and estimates expressed herein reflect the author’s judgment as of the date of publication and are subject to change without notice.

This publication is for informational and educational purposes only and does not constitute investment advice, a solicitation, or a recommendation to buy or sell any security. Aurelion Research and its analysts may or may not hold positions in securities discussed. Use only where legally permitted.

Brazil holds the world’s greatest untapped rare earth potential, but its current production is a tiny fraction of its massive resource base. In 2024, Brazil produced only 20 tonnes of rare earth oxides, while China dominated the market with 270,000 tonnes by leveraging over half of the world’s reserves.

The country currently produces almost nothing despite holding a massive share of the world's rare earth reserves. This creates a striking gap where Brazil sits on 14% of global reserves, second only to China, yet its production remains near zero. In contrast, the United States maintains an 11% global share of production despite holding a much smaller reserve base.

Brazil Rare Earths: Untapped Reserves

To bridge this gap, the Brazilian government is rolling out a broader strategy to turn the country into a major player. This includes the R5bn Critical Minerals Fund, the R1bn Strategic Minerals Investment Fund, and a R$1bn fund backed by BNDES and Vale. At the same time, new rules make it easier for mining projects to access tax incentives through special bond structures, while a national council provides financial guarantees to reduce risk.

We believe the long-term objective is simple: develop processing capacity at home and move Brazil higher up the global critical minerals supply chain.

Rare Earths 101

Before turning to Brazil and what we think comes next, let’s first look at some essential basics about rare earth elements and their uses.

Why Do They Matter?

Rare earth elements (REEs) are the backbone of the global energy transition. Their unique magnetic and chemical properties make them essential for electric vehicles, wind turbines, and advanced electronics.

While they are not actually rare in nature, it is very difficult to find them in high enough concentrations to mine profitably. As the world moves toward clean energy, securing a steady supply of these minerals has become a top priority for both governments and private companies.

What Are They?

There are 17 rare earth elements in total. They are split into two main groups:

• Light Rare Earths: These are more common and are often found in large rock deposits. This group includes elements like Neodymium, which is used in powerful magnets.

• Heavy Rare Earths: These are much harder to find and usually come from specific clay deposits. Elements in this group, such as Dysprosium, are vital for high-tech applications because they can handle extreme heat.

Where Are They Found?

Even though rare earths are spread throughout the Earth’s crust, they are rarely found in large, concentrated batches. Most of the world’s light rare earths come from major mines in China, Australia, and the United States. Heavy rare earths are even more concentrated, with the majority of the global supply currently coming from southern China.

Key Applications

While REEs are used in everything from camera lenses to medical imaging, permanent magnets are the most valuable part of the market. These magnets allow EV motors to run efficiently and wind turbines to generate power. Even though they make up only a small part of the total volume of rare earths mined, they represent the vast majority of the industry’s economic value.

Magnets Are the Main Application

(Primary Uses of Each Rare Earth Element)

How Strong Is the Demand Outlook?

Global demand for rare earth elements is surging as the world shifts toward electric vehicles and renewable energy. A specific blend of elements called NdPr has become the industry’s biggest bottleneck. It is the essential ingredient for the high-efficiency magnets used in everything from EV motors and wind turbines to advanced robotics and defense systems.

1. Rising Demand Led by Permanent Magnets

Experts forecast that demand for NdPr will grow by ~7% every year through 2030. By then, the world will likely need 97,000 tonnes of it annually, which is 50% more than what was needed in 2024. Most of this growth is driven by the transition to clean energy, with electric cars and wind power alone making up 75% of new demand. Meanwhile, rising global tensions are pushing governments to secure more of these minerals for strategic military use.

Bloomberg Sees ~97Kt NdPr Demand by 2030

E-Mobility & Consumer Electronics Drive Demand

2. EVs: The Primary Catalyst for Demand

Electric vehicles are the most significant driver for rare earth magnet demand. Industry forecasts suggest that automotive requirements for neodymium and praseodymium could jump by over 80% between 2024 and 2030. Permanent magnet motors are the top choice for electric vehicle powertrains because they are highly efficient. Using just two kilograms of rare earth magnets in a motor can boost its efficiency by up to 5%.

Global EV Demand Set to Keep Rising

This is a massive advantage for car manufacturers. Better efficiency means they can reach their driving range targets with smaller and lighter battery packs. Since batteries are often the most expensive part of an electric car, reducing their size helps lower the total cost of the vehicle.

Why Isn’t Brazil a Rare Earth Powerhouse Yet?

Brazil’s rare earth sector faces structural barriers that slow its growth. The most immediate problem is financing. Unlike other major mining regions, Brazilian firms cannot use mining rights or future production as collateral. This limits domestic credit and forces developers to look for foreign funding. While public institutions like BNDES and Finep have created programs for strategic minerals, access remains difficult due to strict requirements.

Without flexible financing and with strong competition from countries that already have mature supply chains, Brazil struggles to move beyond early-stage production. Compounding these financial issues is the lack of a joined-up national strategy. The sector still lacks policies that connect mining with processing and manufacturing. This is a challenge because mining only represents 10 to 20% of the total value. Separation and refining capture about half of the value, and making magnets accounts for another 30 to 40%.

Trade data makes the situation even clearer. Brazil’s rare earth exports are almost entirely raw materials, showing that the domestic industry is still in its early stages. Because the country cannot yet refine or process these minerals at scale, it must import high-value oxides and compounds, mainly from China.

Brazil Remains a Net Rare Earth Importer

In 2025, Brazil’s rare earth exports reached a record $13.3M, a significant jump from $3.6M the year before. However, nearly all of these shipments went to China. This reflects the growth of Serra Verde, Brazil’s only major mine, but total production is still small compared to global demand.

As a result, Brazil exports raw materials while importing finished goods, including 84% of its hybrid vehicles. This dynamic prevents the country from capturing the full value of its own natural wealth.

2025 Exports Surged on Serra Verde Start-Up

The export surge is only part of the story. While raw shipments jumped after Serra Verde began operations, Brazil still imports a huge volume of processed rare earth products. The trade balance for these high-value materials remains negative, highlighting the lack of local refining and magnet manufacturing.

Processed Rare Earths Minerals Trade Balance

Essentially, Brazil currently exports raw concentrates while relying on foreign refining for finished goods, a cycle we believe prevents the country from capturing the full economic value of its own mineral wealth.

Can Brazil Attract Global Trade Partners?

The United States is showing significant interest in Brazil to build alternative rare earth supply chains. Former officials point to Brazil as a critical mineral superpower and a strategic focus for reducing dependence on China.

This interest is backed by action: the US International Development Finance Corporation recently provided a $465M loan to Serra Verde. Following this deal, Serra Verde canceled its long-term contracts with Chinese buyers, with those shipments set to end by the close of 2026. Since China is the biggest producer of rare earths, why move away from them? The goal is not just about finding a better buyer, but about building a better partnership.

While China has been a reliable customer, the relationship has mostly focused on Brazil exporting raw materials and importing expensive finished goods. By shifting toward partners who offer technology and investment, Brazil can stop being just a supplier and start processing its own wealth.

At the same time, Brazil is expanding its partnerships beyond the West. In January 2026, Brazil and Saudi Arabia agreed to work together on strategic minerals. This agreement includes a joint working group to find new investment opportunities and expand geological mapping across Brazil.

A key part of this partnership involves Saudi Arabia’s Public Investment Fund (PIF) and Manara Minerals, which is already a partner in Vale Base Metals. Both countries are focused on building processing plants in Brazil so they can add more value to the minerals before they are exported.

Market Volatility & China’s Pricing Gap

The global rare earth market is currently split by a massive price difference between China and the rest of the world. In early 2026, Chinese export controls have driven international prices for heavy rare earths like dysprosium and terbium to levels five times higher than those inside China.

China’s Influence on Rare Earth Pricing

For example, while dysprosium sells for around $200 per kilogram in China, it costs nearly $1,000 everywhere else. This price gap exists because China still refines around 90% of the world’s rare earths. By controlling the processing stage, China can keep domestic costs low for its own manufacturers while restricting the global supply. To fight this, the United States and its allies are creating price floors and new supply chains. We believe these efforts are designed to protect Western mining projects from price swings and ensure they remain competitive, even if China increases supply.

Summary of Brazil’s Main Projects

Brazil is currently positioning itself as a global leader in ionic clay rare earth projects, leveraging a favorable geological environment to develop multiple sites across the country. Early exploration has confirmed significant potential primarily in Minas Gerais, Goiás, and parts of Bahia.

Most Projects Are Concentrated in Minas Gerais and Goiás

In our view, the grades observed in these Brazilian ionic clay systems are highly competitive with global benchmarks. For instance, exploration in southern Minas Gerais has returned metallurgical recovery rates as high as 81.7% for total rare earth oxides, with magnetic rare earths accounting for over 60% of the yield. This high concentration of magnet metals is a critical advantage that we believe will accelerate Brazil’s transition from a raw material exporter to a central player in the global high-tech supply chain.

LREEO Dominates Project Share

Aclara Resources (ARA.TO): A Compelling Vertical Integration Play

Aclara Resources offers a differentiated strategy for gaining exposure to heavy rare earths. Listed on the TSX since 2021, the company maintains strong backing from major shareholders Hochschild Mining and CAP.

Aclara is advancing a "mine-to-magnet" strategy built around three core divisions that transition the business from simple resource extraction to high-value processing and end-market products.

Vertical Integration Strategy

Aclara is developing an integrated platform spanning mining, separation, and downstream metals and alloys to feed permanent magnet production. This strategy aims to control more of the value chain, enhance supply security for customers, and reduce reliance on China for critical processing steps.

1. Aclara Resources: Mining & Ionic Clay Assets

Aclara intends to produce mixed rare earth carbonates from two primary ionic clay deposits in Chile and Brazil. The Carina project in Nova Roma, Goiás, hosts probable reserves of 165.4M tonnes. These assets are significant due to their heavy rare earth weighting.

Carina Project

Production from these sites could represent ~16% of the dysprosium and terbium volumes produced by China in 2023. These elements are critical inputs for high-performance magnets that must remain reliable under extreme heat, and they are well represented in its resource base.

2. Aclara Technologies: U.S. Based Separation

Aclara Technologies focuses on converting mixed rare earth carbonates into high-purity rare earth oxides. The company is developing a separation facility in Louisiana, positioned as a key processing link in a Western supply chain.

Because separation remains a primary bottleneck outside China, we think a domestic facility would increase supply security, improve commercial flexibility, and strengthen Aclara’s competitive position as Western buyers seek dependable alternatives.

3. Aclara Metals: Alloys & Magnet Precursors

Through a joint venture with CAP, Aclara intends to produce the finished metals and alloys used by permanent magnet manufacturers, specifically targeting demand tied to electrification. A pilot facility in Chile is currently testing the metallization process using oxides from its own production.

We expect the full-scale metallization facility to be located alongside the separation plant in Louisiana, supporting a centralized U.S. manufacturing hub and optimizing logistics across the processing chain.

Financial Outlook & Operational Maturity

The company’s financial profile through 2033E reflects a shift from capital-intensive development to operational maturity. EBITDA is expected to turn positive in 2028E and grow steadily into the early 2030s as mining and processing reach full scale. Free cash flow follows is expected to follow the same path, moving from negative during the investment phase to sustained positive generation once the projects are fully operating.

The cash balance declines between 2026E and 2028E, bottoming in 2028E due to peak capital spending and development costs. From 2029E onward, cash begins to recover as EBITDA expands and free cash flow stays positive.

This follows a typical development curve for a high-quality mining asset. The near-term cash drawdown is needed to unlock operating leverage and long-term cash generation, positioning it as a leader in the heavy RE market.

EBITDA Growth & Balance Sheet Recovery (2025E-2033E)

Valuation & Upside Potential

From a valuation perspective, analysts estimate a significant upside with a net asset value per share of $4.39, or C$6.15. This reflects the high economic potential of the Carina and Penco projects as they move toward production.

RBC Valuation Framework

In our view, this valuation framework highlights the massive latent value within Aclara’s portfolio. The company is currently trading at a level that we believe fails to account for its unique position as a vertically integrated heavy rare earth producer. As the market begins to price in the 2028 production milestones, we expect this valuation gap to close.

We are not buyers of Aclara yet, but we are watching it closely. The stock’s discount to NAV is not especially compelling for an asset that is still a few years from production, so we think caution is warranted. That said, it could become a strong opportunity later as the timeline de-risks.

Our Final Take

Brazil is now moving from potential to power. While the country has always had the reserves, it lacked the focus and the right partners to scale. Today, that has changed. With new 2026 agreements and massive funding from the United States and Saudi Arabia, we believe Brazil is building the foundations for high technology processing at home.

In our view, Brazil has the best chance in the Western Hemisphere to challenge the Chinese monopoly. They are the only ones with the right geology and a government willing to trade market access for technology.

While the road to full magnet production will be difficult, the current momentum suggests they will succeed. We think Brazil is finally ready to stop being a raw material supplier and start being a strategic leader.

The Aurelion Team

Disclosures & Methodology

All forecasts and estimates are based on publicly available information, management commentary, and our own modeling assumptions. This report reflects independent analysis by Aurelion Research. All opinions and estimates expressed herein reflect the author’s judgment as of the date of publication and are subject to change without notice.

This publication is for informational and educational purposes only and does not constitute investment advice, a solicitation, or a recommendation to buy or sell any security. Aurelion Research and its analysts may or may not hold positions in securities discussed. Use only where legally permitted.

As we approach 2026, we are initiating an in-depth analysis of the oil sector and provide 2 actionable investment ideas.

This commodity remains a primary driver of the global economy and influences industrial activity in ways that can exceed market expectations.

It is essential to global infrastructure and serves as a key input for many industrial processes. While we recognize that oil is difficult to forecast for both equity performance and spot pricing, we enter 2026 with a bullish view on oil spot prices and oil equities.

World Oil Supply & Demand Into 2026

When it comes to oil, there are a lot of moving parts to consider before forming a clear view of crude. So we start with where the market stands today on demand and supply, then connect that to spot prices.

Headline forecasts lean toward a looser balance into 2026. Demand growth slows from the post pandemic rebound, while supply growth stays firm, led by non-OPEC producers in most models. The mix also shifts, with OPEC+ contribution moving year to year as policy changes, while non OPEC barrels account for a larger share of incremental supply into 2026 and 2027.

Exhibit 1: Global Oil Growth Slows & The Supply Mix Shifts

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Rising oil production, firm refinery margins, sanctions friction, and a tight global fleet keep spot earnings strong across crude segments. VLCC rates remain high, and modern fleets with strong spot exposure continue to capture this strength into early 1Q 2026. Supply growth stays limited through the back half of the decade, and aging fleets restrict expansion. The overall setup is steady and durable for crude tanker operators with the right mix.

Frontline (FRO) and Okeanis (OET) stand out in this environment.

FRO benefits from meaningful VLCC exposure and strong cash generation, reflected in its solid Q3 2025 performance. OET delivers consistent operations with attractive relative value. Together they offer clean access to the current tanker cycle and reliable capture of near-term earnings strength.

The sections that follow provide our full analysis. Investors can access the charts, the cycle drivers, the comparative positioning, and the valuation work that shape our view of this tanker market.

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The Gold Repricing: What Comes Next

Gold’s rise through 2025 marks a decisive change in how investors perceive value and policy credibility. The move above US$4,000/ounce represents a lasting reassessment of money and credit, driven by conditions that are broad, persistent, and global in scale.

Expanding fiscal deficits, high sovereign debt, and the fading reliability of real yields have reshaped the investment landscape. In this new environment, gold has reclaimed its place as the ultimate reference point for confidence, stability, and long-term purchasing power.

Our Expectations

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We believe these results confirm that the chemical sector is beginning to recover after a long downturn. Profitability is improving as companies focus on efficiency, capital discipline, and targeted growth.

For Huntsman, this is an encouraging sign. We hold the stock in the Aurelion Index and covered it in depth earlier this year, seeing it as one of the best positioned names for a cyclical recovery in chemicals.

The same forces driving rebound, including firmer margins, a more focused portfolio, and improving demand, are starting to support as well and point to a more positive outlook for 2026.

Market Environment & Demand Context

LYB reported that demand is still weak in most end markets in Europe and North America, especially in construction and automotive. Packaging and healthcare remain more stable, and polyethylene demand is starting to level off.

In the United States, polyethylene sales are beginning to recover after two years of decline, while in Europe, demand has grown about 3 percent since the start of the year.

Figure 1: Mature Markets Showing Signs of Recovery

Commentary: This chart shows the first signs of a rebound in polyethylene volumes in both North America and Europe. The trend suggests that mature markets are starting to return to normal as downstream inventories are cleared.

We believe this early recovery indicates that the destocking cycle is mostly complete. For Huntsman, volumes in polyurethanes, coatings, and performance products should now be steady, with potential for gradual improvement through 2026.

Feedstock costs remain high in North America, and imports continue to pressure margins in Europe, but the focus across the industry has shifted toward efficiency and reliability. It’s cost discipline and broad product mix should help it protect earnings as market conditions slowly improve.

Global Demand Trends & Long-Term Drivers

LyondellBasell’s presentation highlighted the continued strength of global polyolefin demand. Over time, demand for polyethylene and polypropylene has consistently returned to its long-term growth trend after each slowdown.

Mature markets remain the largest consumers per capita, while emerging economies add most of the new growth through expanding populations and rising income levels.

Figure 2: Resilient Global Demand Growth for Polyolefins

Commentary: This figure shows that global polyethylene demand keeps growing faster than GDP, driven by urbanization, higher consumer spending, and steady investment in infrastructure. These trends highlight how essential these materials are to everyday life and global development.

We believe this creates a strong foundation for long-term growth. Growing populations and better living standards in India, Africa, and Southeast Asia are lifting demand for basic materials, while mature markets are shifting toward uses in electrification, energy, healthcare, and mobility.

For Huntsman, this matters because its portfolio is increasingly focused on these higher-value areas such as coatings, insulation, and adhesives. This should help it capture growth as global demand gradually improves.

Capacity Rationalization & Industry Rebalancing

The most significant strategic signal from LyondellBasell’s quarter is the acceleration of capacity rationalization. Global ethylene closures and idling are expected to reach about 21M tonnes by 2028, representing roughly 10% of current supply.

Figure 3: Capacity Rationalization Trends Accelerating

Commentary: This figure shows the large wave of ethylene capacity cuts expected across Asia and Europe, led by China, Europe, and South Korea. China has already announced over 6M tonnes of closures, while Europe plans ~5M due to high costs and tighter regulations.

We believe this is a positive shift for the sector. Removing high-cost capacity will help tighten supply and support better pricing. For HUN, a more balanced feedstock market should improve profitability in propylene oxide and downstream materials, marking a move toward a healthier and more efficient global industry.

Strategic Direction & Peer Comparison

LyondellBasell remains focused on cost efficiency, reliability, and careful capital use. Management reported better uptime at the Channelview and Hyperzone plants and outlined a Cash Improvement Plan through 2026 to raise productivity.

HUN is also moving ahead with its MoReTec-1 recycling project in Germany, showing a clear shift toward recycling and higher-value growth. We believe this direction reflects what many producers across the sector are now doing. The focus is moving from growth to profitability, debt reduction, and better asset use.

Four themes stand out: tighter cost control, rationalization of high-cost capacity, a greater push into specialty products, and selective investment in recycling. This more disciplined approach is setting up the industry for a gradual and healthier recovery.

Sector Outlook & Our View

LyondellBasell expects market conditions to stay soft through late 2025, though signs of stabilization are emerging in North American polyethylene and intermediates. We believe the overall backdrop will be similar for the broader chemical space, with gradual demand improvement and firmer margins supported by ongoing cost discipline and tighter portfolios.

The sector is moving from contraction to normalization. Capacity reductions and more disciplined pricing should allow slow but steady progress even as demand remains uneven. Europe continues to lag, but lower supply is helping to restore balance and support margins.

For 2025, we see a transition period where volumes hold steady and efficiency gains begin to lift profitability. By 2026, the setup should be more favorable, with a gradual recovery in earnings as global markets strengthen.

Huntsman Corporation Trade

We believe the risk-reward is compelling at current levels. The industry appears to be bottoming, and Huntsman’s share price is near historical support. With supply tightening and margins set to recover, this looks like the right time to position before a potential re-rating.

Key Takeaways

• Polyethylene demand in North America and Europe is recovering, signaling the end of the destocking phase.

• Global polyolefin consumption continues to grow with population and income, supporting long-term stability.

• About 10% of global ethylene capacity could close by 2028, tightening supply and improving pricing.

• Cost control, capital discipline, and greater focus on specialty products are creating a stronger base for the next recovery cycle.

• We believe the sector is entering a more constructive phase, with 2026 likely marking the start of a multi-year improvement in returns.

Disclosures & Methodology

All forecasts and estimates are based on publicly available information, management commentary, and our own modeling assumptions. This report reflects independent analysis by Aurelion Research. All opinions and estimates expressed herein reflect the author’s judgment as of the date of publication and are subject to change without notice. This publication is for informational and educational purposes only and does not constitute investment advice, a solicitation, or a recommendation to buy or sell any security. Aurelion Research and its analysts may or may not hold positions in securities discussed. Use only where legally permitted.

The latest advance has come on the back of a series of supply disruptions. Freeport-McMoRan’s force majeure at Grasberg, the world’s second-largest copper mine, has removed a major source of output after heavy flooding earlier this year.

Production in Chile, Peru, and the Democratic Republic of Congo has also been affected by weather events and labor disputes, keeping inventories under pressure and reinforcing expectations of a tighter market through year-end.

Easier monetary conditions have added another layer of support. The FED shift toward rate cuts has weakened the dollar and revived investor interest in cyclical assets. Copper now sits at the crossroads of reflation, infrastructure investment, and structural energy demand, giving the rally a broad base of financial and industrial momentum.

Supply Still Leads the Market

Prices remain well above the ten-year average as supply constraints continue to shape the market. Demand growth has been steady but limited, with Chinese construction still subdued and export orders uneven. The Shanghai premium, a useful gauge of physical buying, hovers near US$50 per ton, just under its 2020–2025 average. Overall, trading conditions point to a market that is firm but contained.

The longer-term outlook for copper continues to be supported by electrification, renewable power, and grid investment. These structural trends remain in place but will unfold gradually over the coming years. Price strength today is driven mainly by supply constraints, with little evidence of stronger industrial demand.

China Shapes the Outlook

China remains the main driver of global copper demand, accounting for about half of total consumption. The rest comes from Europe, the United States, Japan, and several other regions. Domestic construction has weakened, manufacturing activity is uneven, and export volumes remain under pressure, which together have kept buying interest subdued in recent months.

Policy choices in Beijing will set the tone for the next stage of the market. Broader support for construction, renewable energy, or electric-vehicle infrastructure would translate into a faster pickup in consumption. For now, demand remains stable, and prices continue to respond mainly to developments on the supply side.

Aurelion Research View

We see copper’s performance this year as the result of tight supply and shifting policy conditions across key markets. Production setbacks have shown how limited output flexibility remains in major mining regions, while easier U.S. monetary policy has improved liquidity and encouraged broader participation in commodities.

In our view, prices should stay firm through the remainder of the year, supported by low inventories and ongoing supply constraints. A lasting move above US$11,000 per ton would require stronger industrial demand from Asia, led by a clearer pickup in Chinese consumption.

We continue to regard copper as a key indicator of global economic momentum and an essential material for the long-term transition toward electrification and renewable infrastructure.

Disclosures

This report is for informational purposes only and is not a recommendation to buy, sell, or hold any security. Aurelion Research is not registered with the AMF or any other regulator and does not provide personalized advice. All content is based on public sources believed reliable but may change without notice; you should verify independently and consult a licensed advisor. Use only where legally permitted.

About Aurelion Research. Aurelion Research delivers independent, institutional‑grade equity analysis on publicly traded companies, blending rigorous financial models with strategic insights. © Aurelion Research. All rights reserved

The tanker market is entering the fourth quarter of 2025 with rare momentum. VLCCs are already earning six figures on benchmark routes, and the rally has developed in a stable trading environment rather than being sparked by geopolitical shocks.

Underlying conditions explain the strength. The fleet is aging, new-building remains muted, and regulatory measures continue to reduce effective capacity. Voyages are taking longer, available ship-days are shrinking, and each additional cargo puts pressure on a fleet that has little slack left.

The timing makes this setup even more striking. September is typically the weakest month of the year, yet earnings have held at levels normally associated with winter peaks. That reversal of seasonal norms matters.

History shows that when Sept. begins strong, the fourth quarter almost always compounds the move. In our view, 2025 is aligned with that pattern, and the stage is set for one of the most compelling finishes to a year the market has seen in recent memory.

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The key question for Q4 is whether gold’s bull market will keep building momentum, slow down, or pause before the next leg higher. After one of the strongest years on record, the answer depends on how policy, deficits, and global demand interact in the months ahead.

Gold enters the quarter with a $400 rally already behind it and a pause after reaching US$3,700/oz. Rather than signaling exhaustion, the market is showing signs of consolidation at elevated levels; building a platform for what could come next.

Three forces stand out at this stage:

• Growth momentum is fading and real rates are easing.

• Heavy U.S. refinancing keeps a fiscal premium embedded in yields.

• The dollar depends on a perfect disinflation path while Treasury supply stays high; an unlikely mix in an election year.

The physical market is also resilient. Central banks continue to diversify reserves, Asian buyers are active at higher prices, ETF flows are stabilizing, and futures positioning is still light compared with past rallies.

Our view:

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1. Executive Summary

Americas Gold & Silver (USAS) is entering a pivotal stage. After years of uneven results and financial strain, the company has reshaped itself into a focused silver producer. Its future is now tied to two core assets; the Galena Complex in Idaho and Cosalá/EC120 in Mexico; while the Relief Canyon mine in Nevada remains on care & maintenance, ensuring management’s attention is fully on silver growth.

The investment case rests on two execution priorities:

• EC120 ramp-up: moving from test concentrate sales to full commercial production by the end of 2025, increasing silver output and improving copper revenues.

• Galena upgrades: mine improvements focused on lowering costs, raising output, and unlocking extra value from antimony recovery (>90% recovery confirmed in testing).

Financial flexibility has been reinforced. A $100M term loan ($50M drawn) secures growth funding, while the recent 1-for-2.5 share consolidation reset the capital structure, reducing shares outstanding to ~272M.

Yet valuation remains depressed. USAS trades at only 0.3–0.4× NAV and under 4× EV/EBITDA, compared to peers at 0.7–1.0× NAV and 6–7× EV/EBITDA. The market has not priced in EC120’s commercial start, Galena’s cost improvements, or the potential contribution from antimony.

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MP is moving from buildout into scale.

The magnet line is producing customer-qualified parts, deferred revenue from GM is converting to shipments, and Stage II yields are advancing toward 85%. These milestones are supported by a long-term NdPr price deck near $125/kg and a balance sheet carrying $1.8B in net cash.

The operating base is strengthening, execution risk is receding, and customer traction is becoming visible. This combination marks the shift toward a scaled earnings profile with meaningful strategic optionality.

What’s driving value?

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Shipping runs on time and distance. Add a few days to a voyage, cut a knot of speed for compliance, or shift where cargoes are loaded, and suddenly a chunk of the fleet is gone without scrapping a single hull. That’s the market we’re in.

Policy layers on a steady surcharge security detours and canal delays lengthen routings, and sanctioned trades absorb older ships. At the same time, the fleet is aging, scrapping has been minimal, and yards remain busy and expensive. Small physical changes keep compounding into big earnings outcomes.

This is why today’s cycle is supply-driven and more durable than equities suggest. Longer routes and slower steaming raise ton-miles per barrel; compliance and vetting push charterers toward modern steel; costly newbuilds slow renewal.

The outcome is simple: freight rates hold at a stronger floor, daily swings are bigger, and ship values are backed by steady cash. The winners will be owners who keep their finances solid, run younger fleets & use charter cover with balance, securing income when it helps but keeping enough ships open to benefit when the market improves.

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1. An Older Fleet: A Higher Floor

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Markets face pressure on multiple fronts: tariffs on key trading partners, weaker employment data, and renewed concerns over stagflation are weighing on equities. At the same time, precious metals are showing relative strength.

As of August 1, gold has moved above $3,340/oz (+1.34% on the day), while silver holds near $36.83/oz. Mining equities are following suit, with several names posting gains against a weaker market backdrop.

This report presents a concise, data-driven review of seven mining holdings; highlighting core assets, valuation metrics, upcoming catalysts, and current positioning. It offers a clear framework for investors seeking both resilience and upside as market conditions shift.

Policy & data shock hit markets simultaneously.

• Tariffs: The U.S. announced sweeping import tariffs ranging from 10% to 41%, including 35% on Canadian goods.

• Labor data: July payrolls rose by only 73,000 versus 110,000 expected, and unemployment edged up to 4.2%, deepening concerns about growth.

• Market reaction: S&P 500 futures fell about 1% as capital rotated toward defensive assets.

• Metals rally: Gold surged +1.34% to $3,341.99/oz and silver gained +0.43% to $36.83/oz, extending their recent leadership.

Takeaway: Rising uncertainty strengthens the case for miners; defensive through gold exposure, leveraged through copper and silver upside.

Our filtering lens

Each position in the portfolio satisfies five core criteria:

1. Visible near-term catalysts: concrete drivers.

2. Manageable capital intensity: low to moderate capex and limited execution risk.

3. Regulatory clarity: strong permitting visibility.

4. Economic substance: tangible project economics.

5. Portfolio discipline: measured position sizing (sub-10%).

Our Current Mining Portfolio

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