Black Sea Conflict Disrupts Grain and Oil Flows Amid Escalating Attacks

A surge in attacks on ships and ports in the Black Sea has disrupted global supplies of grain and oil, adding to pressure on commodity markets already strained by disruptions to major shipping routes.

The Black Sea is a crucial route for shipments of grain, crude oil, and refined products, shared by Russia, Ukraine, Bulgaria, Georgia, Romania, and Turkey. Recent weeks have seen an escalation in attacks on each other's agricultural export facilities and commercial vessels in the region. Kyiv has targeted tankers involved in Russia's oil trade.

Russia is the world's largest wheat exporter, and Ukraine is a major agricultural exporter. The conflict is creating another pressure point for commodity markets already coping with disruptions to shipping routes in the Middle East, where oil flows through the Strait of Hormuz have been disrupted by the U.S.-Iran conflict, and a maritime embargo declared by Yemen's Iran-aligned Houthis on Saudi Arabian ports and ships has raised risks for Red Sea shipping.

The escalation is affecting trade flows. Ukraine recorded 35 attacks on vessels in port and 22 at sea in July, along with 67 strikes on port facilities. Reuters estimates Ukraine has targeted dozens of tankers involved in Russia's oil trade. FESCO, a Russian shipping group, said it had suspended new shipment orders via the Black Sea after one of its vessels was hit in a Ukrainian drone attack.

The conflict is also driving up shipping costs. Average daily Black Sea oil tanker costs have jumped to over $300,000 a day from just over $200,000 a day a week ago, according to market estimates. War insurance costs for port calls to Black Sea terminals have risen to as much as 2% of the value of the ship.