KONNECT - JULY 2026

Executive Summary

June delivered the sharpest ocean freight rate increases of 2026, a Hormuz agreement that collapsed within days of signing, and the expiry of Australia's fuel excise relief — all landing simultaneously as Q3 began. The Hormuz MOU signed at Versailles on 17 June briefly moved markets: oil prices fell, 55 merchant ships crossed on 18 June, and CENTCOM confirmed traffic was moving. Three days later, Iran's military declared the strait closed again. The MOU remains formally in place; its practical authority over passage is openly contested. Entering July, no major disruption thread from the past four months has resolved. Several have compounded.

The ocean freight market has entered Q3 at a materially higher cost floor than Q2. Carrier GRIs and peak season surcharges took simultaneous effect in the first week of June, with the Freightos Baltic Index recording Asia to US West Coast up 51% in a single week, Asia to North Europe up 37% the following week, and most major lanes finishing June 70–120% above mid-May levels — above their respective 2025 peak season highs. Rates plateaued high rather than retreating, with vessels fully booked through June end and containers rolling on some services. The July BAF reset — calculated against Q2 fuel costs, when Singapore bunker prices ran well above pre-war baseline levels for extended periods — is estimated to increase contracted shippers' BAF charges by approximately 80%. That cost is locked in regardless of any diplomatic progress on Hormuz; the MOU easing feeds into October's BAF calculation, not July's. CMA CGM has announced a Peak Season Surcharge from 10 July and Hapag-Lloyd for Australia-bound cargo from 15 July. The Q3 rate floor was set before Q2 had closed.

The US tariff transition is now days away from its most consequential point. Section 122 tariffs expire on 24 July. The Court of International Trade ruled in May that they were applied without meeting statutory conditions, though the government's Federal Circuit appeal keeps them in effect until that ruling. Section 301 investigations targeting approximately 80 economies are tracking toward findings before the expiry date — but the rate, scope, and implementation timing are unconfirmed. Three scenarios remain live: country-specific Section 301 rates above 10% landing before 24 July; a brief window with no surcharge layer if Section 122 lapses before Section 301 tariffs are in force; or a Federal Circuit ruling that broadens the refund class. For Oceania businesses with US-linked programmes, sourcing from Southeast Asia, or selling DDP into the US market, contract pricing and tariff risk allocation decisions can no longer be deferred.

Domestically, July opens under a more concentrated cost pressure than any month this year. The RBA held the cash rate at 4.35% at its 16 June meeting — the first unanimous decision of the tightening cycle — but core inflation has not turned, and the fuel excise reduction expired at midnight on 30 June, lifting domestic road freight costs from 1 July. In New Zealand, Q1 GDP grew 0.8% quarter-on-quarter and April trade delivered a record NZD 1.92 billion surplus, but the RBNZ's three-to-three split in May — resolved by Governor Breman's casting vote — and explicit forward guidance pointing to three hikes before year end mean a rising rate environment is approaching. Port of Auckland VBS access fees rose 28% from 1 July, DAFF biosecurity and imported food regulatory fees increased 3.8% on the same date, and the broader surcharge environment on ocean freight remains elevated. For supply chain and procurement teams across both markets, July landed-cost models built on June assumptions are already out of date.

Business Tip

Two cost increases arrived on 1 July. Update your landed-cost model before the invoices do.

The July BAF reset adds an estimated 80% to contracted fuel surcharges, calculated against Q2 fuel prices and locked in regardless of the MOU outcome. At the same time, Australia's fuel excise reduction expired on 30 June, increasing fuel costs for road freight operators across Australia. Neither cost is avoidable for July cargo. Update your landed-cost models now, and confirm whether your cost reporting separates BAF from base freight. If not, the increase will be difficult to track against budget. 

Spotlight

 Cargo Insurance in a Contested Strait: Is Your Coverage Keeping Up?

Entering July, most cargo insurance policies in the Oceania market are still calibrated to a pre-conflict risk map. The MOU of 17 June was the first signal of normalisation, and it lasted 72 hours. War-risk premiums do not fall at the same speed as diplomatic progress; underwriters assess durable settlement, not signed documents. The Persian Gulf Strait Authority, established by Iran in May, remains operative regardless of MOU terms.

KLN Oceania provides cargo insurance brokerage and consultancy. If your policy has not been reviewed since late February, or if your supply chain has exposure to Gulf origins, Cape of Good Hope routing, or transhipment hub variability, now is the time to check coverage scope, exclusions, and declared values against the current risk environment. Contact your KLN Oceania account manager to arrange a review.

Market Trend

The Hormuz MOU: Signed in June, Contested by July

On 17 June, the US and Iran signed an MOU at the Palace of Versailles committing Iran to best efforts for safe passage through the Strait for 60 days. The early signals were positive: oil prices fell, 55 merchant ships crossed on 18 June, and CENTCOM confirmed traffic was moving. Three days later, Iran's military declared the Strait closed again, immediately contradicted by Iran's own foreign ministry and US CENTCOM. By late June, the situation had escalated further: Iran advised all vessels to transit exclusively via the northern passage along the Iranian coast and coordinate with Iranian authorities. The IMO, which had been organising a parallel evacuation route via the southern Omani passage, paused that effort after an Iranian strike on a container vessel transiting outside the Iranian-designated lane. The MOU remains formally in place; its practical authority over passage is openly contested.

The critical planning implication is timing. Even if the Strait stabilises, contracted shippers will not see it in Q3 invoices. The July BAF reset was already calculated against Q2 fuel costs, with bunker fuel running well above pre-war baseline levels at Singapore throughout Q2. The Hormuz easing feeds into October's BAF calculation, not July's. That cost is locked in.

What this means entering July

• The July BAF reset is locked in regardless of diplomatic progress.
• War-risk premiums and insurance conditions will not normalise until there is durable, verified settlement. Review cargo insurance cover before relying on improved conditions.
• Routing uncertainty is not resolved. Confirm with your carrier which route your cargo will travel before making ETA commitments to customers.

Peak Season: June Was the Peak Month, Rates Plateaued High, and Q3 Pricing Is Locked In

The NRF confirmed June as the peak global import month, with volumes running 5% above May, driven by frontloading ahead of the July BAF increase, elevated Asian energy input costs, and tariff-related hedging before Section 122 expires 24 July. On the week of 2 June, carrier GRIs and PSS announcements took simultaneous effect: Asia-USWC surged 51% in a week; Asia-USEC rose approximately 25%; Asia-North Europe rose 37% by 9 June, surpassing its 2025 peak. Rates held at elevated levels rather than retreating, reflecting a market at full utilisation. Vessels were fully booked through June end, with containers being rolled on some services.

CMA CGM announced a Peak Season Surcharge from 10 July. Multiple Asia-Europe carriers announced further increases for July. The Q3 rate floor was set materially above Q2 before June had closed.

What this means entering July

• Q3 carrier allocation is the immediate priority. The booking window for August arrivals is narrowing, and containers are already being rolled to subsequent sailings on some lanes.
• Review all-in freight costs, not just base rates. Surcharges, including BAF, peak season levies and terminal fees, are material and variable. Obtain itemised quotes and lock validity windows before committing to customer pricing.
• Contact your KLN Oceania account manager to confirm available carrier and service combinations before space tightens further.

Developments in Oceania

Australia’s Economic Outlook

The RBA held the cash rate at 4.35% on 16 June in its first unanimous decision since the tightening cycle began, a shift from the 5-4 split votes of February and March. The Board maintained its tightening bias but acknowledged that the April unemployment rate of 4.5% had weakened faster than forecast.

April CPI came in at 4.2% annually (down from 4.6%), but the trimmed mean rose to 3.4%, confirming core inflation has not turned. ANZ, CBA, and NAB forecast rates on hold through 2026; Westpac still expects one further hike. The RBA flagged scenarios where inflation tracks worse than the May baseline if the Middle East situation does not resolve.

The most pressing domestic cost development was not the cash rate. The temporary fuel excise reduction expired at midnight on 30 June, increasing fuel costs for both light and heavy vehicles from 1 July. July delivery costs on Australian domestic road freight will be measurably higher than June's. Operators on fixed-price domestic transport arrangements may face renegotiation requests from carriers.

New Zealand’s Economic Outlook

New Zealand's Q1 2026 GDP came in at +0.8% quarter-on-quarter, slightly below the 0.9% consensus but solid in annual terms at +1.5%. Growth was broad-based across manufacturing (+1.9%), wholesale trade (+2.4%) and transport and warehousing (+1.0%). Most major NZ economists, including ANZ, BNZ and Infometrics, expect the RBNZ to lift the OCR from 2.25% at the July meeting, which takes place in the coming weeks.

The RBNZ's 27 May meeting produced a 3-3 split, with Governor Breman using her casting vote to hold while signalling explicitly: “If we don’t hike we’re likely to get more persistent, more enduring inflation.” The updated OCR projection targets the neutral estimate of 3.0–3.25% through H2 2026 and into 2027. The interest rate environment is moving from stimulatory to neutral.

Diesel prices fell 11.4% through May and into June, a welcome offset for domestic road operators particularly in the primary sector and regional distribution. The NZ–India Free Trade Agreement, concluded during the period, has limited immediate volume impact but represents a strategic positioning move in an increasingly fragmented global trade architecture.

Trade & Industry Highlights

The shared challenge for both economies is the gap between rising freight costs and a domestic demand environment under pressure from elevated interest rates and accumulated cost-of-living impacts. Consumer confidence in New Zealand fell to its lowest level in three years in June, and the RBA's June statement described Australian household spending as slowing, with housing prices falling in some capital cities. For trans-Tasman supply chains, the key tension is between confirmed import programmes, where the cost of delaying is high given tight vessel space, and demand signals that argue against carrying excess inventory through H2 2026.

As July opens, the businesses best positioned are those that locked in Q3 freight at contracted rates and updated their landed-cost models before July invoices arrive. Section 301's potential scope over AU/NZ also introduces sourcing-cost uncertainty beyond direct bilateral trade. If key suppliers in other markets face 10–12.5% tariffs, landed-cost structures for goods transiting through those markets will need reassessment.

Ocean Freight Updates

June Rate Surge, July BAF Reset: What the Numbers Mean Entering Q3

 The ocean freight market delivered the most significant single-week rate increases of 2026 in early June, as carrier GRIs and peak season surcharges took simultaneous effect across all major lanes. Rates plateaued in mid-June rather than softening, and July GRIs were already in market before June had closed. The direction entering H2 2026 is higher, not lower. 

June brought the sharpest weekly increases since the 2025 tariff surge

On the week of 2 June, multiple carrier GRIs and PSS announcements took simultaneous effect. The Freightos Baltic Index recorded: Asia to US West Coast (FBX01) up 51% in a single week. Asia to US East Coast (FBX03) up approximately 25%. In the following week, Asia to North Europe (FBX11) rose 37%, surpassing its own prior peak season high from 2025. Asia to Mediterranean (FBX13) rose 24%.

Rates did not plateau: they continued climbing through June. By 30 June, the Freightos Baltic Index recorded Asia to US West Coast (FBX01) up 120% since mid-May and above the 2025 peak season high. Asia to US East Coast (FBX03) closed June up 85% in six weeks, above last year's frontloading-driven summer high. Asia to North Europe (FBX11) up 70% since mid-May and Asia to Mediterranean (FBX13) up 85% in the same period. Port congestion at major hubs across South Asia, the Far East, and Europe reduced effective capacity and reinforced upward price pressure. Vessels remained fully booked through June end, with containers rolling on some services. China to Australia East Coast rates also closed June materially higher, with schedule volatility on North Asia-to-AU/NZ services notably above pre-conflict conditions.

BAF reset: contracted shippers face an 80% fuel surcharge increase

The quarterly Bunker Adjustment Factor resets in July against average bunker prices over Q2 2026, a quarter in which fuel ran well above pre-war levels at Singapore for extended periods. The estimated increase for contracted shippers is 80% on their current BAF charges. This is locked in regardless of oil price movements. The MOU-related easing feeds into the October BAF calculation, not July's.

If your freight cost reporting separates BAF from base freight, update your July budget model now. If it conflates them, the BAF increase will appear as a base rate change and distort budget-to-actual analysis.

GRIs already announced: CMA CGM leading the Peak Season Surcharge

CMA CGM announced a Peak Season Surcharge on all transpacific containers effective 10 July. Hapag-Lloyd announced a Peak Season Surcharge for Australia-bound cargo from the Far East, Middle East, Indian Subcontinent, and Red Sea destinations on sailings commencing 15 July. Multiple Asia-Europe carriers announced additional increases from 1 July. The Q3 rate floor is being set materially above Q2. One in three containers moved globally in May was empty, absorbing approximately 30% of TEU-miles and creating equipment availability risk at some origin ports.

What this means entering July

• Confirm Q3 carrier allocation before the booking window for August arrivals closes. Containers are already being rolled to subsequent sailings on some lanes.
• Update landed-cost models before July invoices arrive. Separate BAF from base freight in cost reporting to accurately track the 80% BAF increase.
• For Australian domestic legs, factor in the fuel excise increase effective 1 July when modelling port-to-warehouse and last-mile transport costs.
•  Speak with your KLN Oceania account manager to review available carrier and service options before space tightens further.