Global Shipping Industry Faces Decarbonization Deadlock Amid Middle East Crisis

The global shipping industry is grappling with an unprecedented crisis as two of the Middle East’s most critical waterways—the Strait of Hormuz and the Red Sea—remain effectively closed for weeks. Since early March, Iran and Houthi rebels have threatened ships passing through these routes, blocking the movement of oil in retaliation to U.S.-Israel airstrikes. The disruption has triggered a sharp rise in crude oil prices, pushing maritime fuel costs so high that some biofuels have become cheaper alternatives.

More than 150 ships have been stranded, unable to safely navigate the Strait of Hormuz, which handles 20% of the world’s oil supply. Many vessels have been forced to take lengthy detours around Africa’s southern tip, further inflating shipping expenses and adding weeks to travel times. Iran briefly reopened the Strait before seizing it again over the weekend, intensifying the blockade.

Against this backdrop, the International Maritime Organization (IMO), the UN agency regulating global shipping, is convening this week to address the industry’s climate impact. Shipping currently accounts for 3% of global greenhouse gas emissions, and for the past three years, the IMO’s 176 member nations have been negotiating a net-zero framework. This policy would require shippers to pay fees for emissions exceeding a set threshold, with proceeds funding cleaner fuels and supporting lower-income countries.

However, the framework’s adoption hit a major obstacle last summer when the U.S. government, under then-Secretary of State Marco Rubio, issued a warning. The statement threatened punitive measures—including visa restrictions, tariffs, and port fees—against countries voting in favor of the agreement. The threat prompted several nations to backtrack, and at an October meeting where adoption was expected, members instead delayed the decision by at least a year.

Since then, technical discussions have continued, but political support for the framework has largely evaporated. “The Iran war has certainly complicated things,” said Evelyne Williams, a research associate at Columbia University’s Center on Global Energy Policy. “It’s tricky because if the U.S. does want to kill this thing, it has considerable leverage in its LNG market to threaten countries.”

The upcoming IMO meeting will reveal where nations stand amid the current crisis. Several countries have proposed alternatives in recent months, including a Japanese proposal that suggests removing the fee structure entirely. Under this plan, shippers emitting excess greenhouse gases could instead trade away their excess emissions.