Dry Bulk Freight Rates Surge 36% to Three-Year High Amid US-Iran Conflict and Rising Oil Prices: Bank of Baroda Report

Dry bulk freight rates experienced a significant upward surge between February and July 2026, reaching their highest levels in three years. According to a recent report by Bank of Baroda Research, the Baltic Dry Index rose by about 36 percent during this period, driven primarily by higher international oil prices, geopolitical tensions surrounding the US-Iran conflict, and robust demand for commodities.

The report highlights that the sharpest increase was recorded in the Supramax index, which climbed around 44 percent. Supramax carriers are primarily utilized for transporting bulk commodities such as grains, coal, fertilizers, cement, clinker, steel products, and alumina. Meanwhile, the Capesize index, tracking freight rates for the largest dry bulk ships, increased by approximately 38 percent. Capesize vessels are typically deployed for transporting coal and iron ore. The Panamax index, which handles coal and grains, also saw a rise of about 22 percent.

Bank of Baroda Research attributed the upward pressure on freight rates to two key drivers: rising operating costs caused by elevated oil prices and geopolitical tensions, and robust demand for agricultural goods, infrastructure materials, and electricity. The increase in transportation costs has subsequently fed into global commodity prices, which are rising due to a combination of higher freight expenses and elevated input costs.

The report also detailed significant changes in tanker freight rates following the outbreak of the US-Iran conflict. Tensions around vital shipping routes, including the Strait of Hormuz and Bab-al-Mandeb, have compelled some vessels to reroute via the Cape of Good Hope, thereby adding further pressure on global freight rates.

Domestically, freight rates have similarly trended upward since February. Truck freight rates from Delhi to Chennai and Delhi to Dehradun recorded increases of 5.3 percent and 15 percent, respectively, between February and July, placing rates in several major cities at five-year highs. Additionally, air cargo volumes faced disruptions due to the conflict and elevated aviation fuel prices. International air freight volumes fell by 53 percent between February and June, compared to a 13 percent decline in domestic freight volumes, as international airline routes were curtailed.

Looking ahead, the Bank of Baroda Research report expects freight and commodity prices to remain elevated in the near term as oil price volatility persists.

"The sharp rise in dry bulk and domestic freight rates highlights the vulnerability of global supply chains to geopolitical conflicts and oil price volatility. For businesses, particularly in manufacturing, agriculture, and logistics, higher transportation and input costs will directly impact operating margins and consumer pricing. Companies must focus on supply chain resilience and efficient cost management to navigate these inflationary pressures effectively in the near term." — Dr. Shishir Gupta, Founder & CEO, StartupLanes