Caribbean & Central America - May 2026

Continued conflict in the Middle East, which has severely restricted shipping traffic in the Strait of Hormuz, has increased the prices shipping firms pay to transit the Panama Canal, creating a significant windfall for the public purse.

According to a 23 April statement by the Panama Canal Authority (ACP), the average auction price before the Middle East conflict began on 28 February was US$135,000-US$140,000 but following the outbreak of the conflict, that average climbed to approximately US$385,000 between March and April. Some vessels have paid even higher prices to reduce waiting times at the Canal, which reached as long as five days for those without an advanced booking, with one liquid natural gas (LNG) vessel paying US$4m at auction for a slot that allowed it to skip the queue, the ACP told French news agency Agence France Presse (AFP) in a report published on 21 April.

This is a significant boost to Panama’s public finances, which have become increasingly strained in recent years, with the Canal a significant economic driver. In addition, there were 6,288 deep draught transits in the first half of fiscal year 2026, which runs from October to September, a 3.7% increase compared to the same period last year. ACP finance director Victor Vial was cited by the media as saying that increased demand for transits is expected to continue until the conflict in the Middle East can be resolved. Scheduled maintenance will reduce the number of available slots in the coming months, potentially pushing prices even higher if the conflict persists.

The longer it does, the more important the Panama Canal becomes for global shipping, potentially creating the conditions for further escalation in the ongoing struggle for influence at the Canal between the US and China, as Washington continues its efforts to pressure Panama to reduce Beijing’s influence at the canal. This will place additional pressure on President José Raúl Mulino, who faces a challenging task in balancing relations with the two superpowers, meaning that increased demand for Canal transits is not entirely without its downsides.

El Niño

Another consideration regarding the Panama Canal is the forecast arrival of the El Niño weather phenomenon, which in Panama is associated with lower rainfall. The last El Niño caused water levels at Lake Gatún, which feeds the locks, to plunge, and a similar pattern is likely to emerge this time around as plans to build a new reservoir haven’t advanced.