The combination of El Niño-induced drought and geopolitical tensions in the Strait of Hormuz has led to a significant increase in Panama Canal transit fees, along with risks of reduced shipping quotas. Water levels in key reservoirs, particularly Gatún and Alhajuela, have decreased, prompting the Panama Canal Authority to implement water-saving measures. Meanwhile, the closure of the Strait of Hormuz due to conflict between Iran, the United States, and Israel has diverted additional maritime traffic to the Panama Canal, resulting in increased congestion and record transit auction prices. Market pricing indicates a significant decrease in confidence regarding a return to normal Strait of Hormuz traffic levels by September 30.
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