Strait Talk: How Middle East Tensions and Europe's LNG Addiction Are Fueling a Shipping Gold Rush

The Strait of Hormuz isn't just a geographical feature—it's a geopolitical pressure cooker. With Iran threatening to close this critical oil and LNG transit route after U.S. airstrikes on its nuclear facilities, the world is on edge. And Europe? It's hooked on LNG, with 40% of its supply passing through the Strait. This volatility isn't just a risk—it's an opportunity.

Investors, take note: The LNG shipping sector is about to get a jolt. Companies like Flex LNG (FLNG) and Avance Gas (AGAS) are positioned to profit from this tension-driven market, offering robust cash flows, ironclad contracts, and exposure to premium freight rates. Let's break it down.

The Strait of Hormuz: A Geopolitical Worry, a Shipping Windfall

The Strait of Hormuz isn't just a shipping lane—it's the throat of global energy. Roughly 20% of the world's oil and LNG transits here. If Iran follows through on its threat to block it, chaos ensues: oil could spike above $90/barrel, LNG prices could hit 2022 highs, and Europe's energy grids might face blackouts.

But here's the twist: shipping companies don't care about the politics—they care about the contracts. FLNG and AGAS have long-term agreements that insulate them from market swings. Let's look at the numbers:

Flex LNG (FLNG): The Fortress of Fixed Rates

FLNG is a pure-play LNG carrier operator with 59 years of firm charter backlog, extendable to 88 years. Most of its 13 vessels are locked into fixed-rate contracts, shielding it from spot market volatility. Even as LNG freight rates dip to $20,000/day due to oversupply (yes, 251 new ships are hitting the water by 2027!), FLNG's exposure is minimal.

The real kicker? Its dividend yield of 12.3%—a cash machine fueled by a $410M war chest and zero debt until 2028. CEO comments highlight “dividend resilience” even in a “well-supplied fleet environment.”

But wait—there's more. Post-2027, demand for LNG carriers could tighten as new liquefaction projects outpace vessel numbers. FLNG's modern fleet (average age: 5.5 years) is ready to capitalize.

Investment Thesis for FLNG:
- Buy now for long-term exposure to LNG's structural growth.
- Hold for dividends—a 12% yield is hard to ignore.
- Risk: Short-term oversupply could pressure shares, but FLNG's contracts are a moat.

Avance Gas (AGAS): The Dividend Diva in Liquidation Mode

AGAS isn't just playing defense—it's cashing out. After selling its VLGC fleet and four MGC newbuilds to Exmar for $282M, AGAS is liquidating. But this isn't a death knell—it's a shareholder lovefest.

In Q1 2025 alone, AGAS distributed $113.7M in dividends ($0.74/share), with a final payout of $0.70/share coming in April. Since 2014, it's returned $1.5B to investors—627% dividend yield on recent payouts.

The company's $176M cash pile and zero debt mean it's primed to complete liquidation by mid-2025. Even as LNG markets cool, AGAS's focus is clear: return every last dollar to shareholders before exiting the game.

Investment Thesis for AGAS:
- Go all in on the liquidation play—get in now to capture the final dividends.
- Risks: Minimal—escrowed payments ensure final proceeds.
- But hurry: The final distribution is priced in, and shares may drop post-delisting.

Why Europe's LNG Addiction Ensures This Is No Fleeting Trend

Europe is LNG's junkie. With Russia's gas taps turned down and domestic production lagging, the EU imports 40% of its LNG—much of it passing through the Strait of Hormuz.

Even if the Strait stays open, geopolitical jitters mean premium freight rates persist. Shipping companies like FLNG and AGAS benefit from:
1. Commodity-linked upside (e.g., Golar LNG's 25% cut of FOB prices above $8/million Btu).
2. Regulatory tailwinds: Emissions rules will accelerate the scrapping of older ships, tightening supply post-2027.

The Bottom Line: Dive In—But Watch the Waves

This isn't a “buy and forget” trade. Geopolitical risks could ease (e.g., U.S.-Iran diplomacy), and LNG oversupply could linger. But for income investors and long-term bulls:

• FLNG is a buy-to-hold for its dividend fortress and post-2027 upside.
• AGAS is a trade—snag the final dividends before liquidation wraps up.

The Strait of Hormuz isn't going anywhere—and neither is Europe's LNG habit. These shipping stocks are the lifeboats in a stormy market. Don't miss the wave—jump in before the Strait's tides turn even fiercer!

Action Plan:
- Buy FLNG for 12% yield and long-term LNG growth.
- Snag AGAS now for the final dividend payout.
- Watch the Strait: Geopolitical headlines will drive volatility—use dips to accumulate.

This is a game of supply, demand, and shareholder grit. Play it smart, and you'll ride the LNG tide to profits.