As tensions rise in Middle East and vessel safety in the Strait of Hormuz comes under renewed focus, the flag a ship flies has emerged as a key factor in maritime security, regulation and state protection.Flagging a vessel means it is registered with a country and must comply with that nation’s maritime laws and regulations. It also gives the flag state powers to investigate and penalise violations of domestic and international laws. Since regulations differ across countries, shipowners often choose jurisdictions that best suit operational and commercial needs, according to an ET report.An Indian-flagged vessel is a commercial ship registered with the Directorate General of Shipping and authorised to fly the national flag. Such vessels are governed by the Merchant Shipping Act and operate under Indian jurisdiction as a sovereign extension on the high seas.These ships are taxed by Indian authorities and must comply with Indian maritime safety, labour and environmental rules. To qualify for Indian flagging, vessels must come to domestic waters for registration and the owning company must be incorporated in India.Indian-flagged ships also receive strategic backing. India protects their interests through naval and diplomatic intervention when required. Experts say this creates a higher compliance burden than “Flag of Convenience” jurisdictions such as Panama and St Kitts.According to Rajeev Kumar Yadav, as quoted ET, director at Vertex Marine Services, Flag of Convenience systems allow vessels to be flagged from anywhere in the world within “3-4 days”.Indian-flagged ships calling at domestic ports can also benefit from lower port levies and tax liabilities, along with priority in government cargo movement and public sector charter contracts.During the Iran crisis, more than two dozen Indian ships were stranded west of the Strait of Hormuz after strict high-risk area classifications were imposed. The Indian Navy escorted several tankers to safety, though some vessels remain in the Persian Gulf.No direct attacks have been reported on Indian-flagged vessels so far, largely due to India’s balanced diplomatic approach in the crisis.However, being Indian-flagged does not give the government powers to decide freight rates or commercial destinations. The state’s role is limited to enforcing civil, criminal and regulatory laws onboard, along with international safety, environmental and labour compliance norms.India’s flagged fleet has been expanding. The Indian-flagged vessel fleet reached 14.2 million Gross Tonnage (GT) in March, with 92 vessels of 1.5 million GT joining during FY26.The long-term Maritime Amrit Kaal Vision 2047 aims to sharply raise India’s share of the global flagged fleet and increase utilisation of Indian-flagged ships from about 7 per cent currently to 30-40 per cent by 2047.

Oil prices tumbled on Friday after Iranian officials said they would allow commercial traffic to resume in the Strait of Hormuz. This lifted equity markets in Europe and New York, where major indices hit new records.

Citing the ceasefire between Israel and Lebanon, Iran’s Foreign Minister Abbas Araghchi said Tehran would lift its blockade on shipping through the key Gulf energy trade route.

“In line with the ceasefire in Lebanon, the passage for all commercial vessels through Strait of Hormuz is declared completely open for the remaining period of ceasefire,” Araghchi said.

Traffic in the strategic waterway, through which one-fifth of the world’s crude oil normally flows, has been disrupted by Iran since the US-Israeli offensive began on Feb. 28. At one point, this sent oil prices to a peak of nearly $120 a barrel and roiled the global economy.

Both Brent, the benchmark international contract, and its US equivalent WTI fell below $90 per barrel following Tehran’s announcement. Brent later cut its losses and finished at $90.38 a barrel, down 9.1%.

‘Immediate impact’

“This news is having an immediate impact on markets,” said Kathleen Brooks, research director at XTB.

The move also sent a jolt through equity markets, extending a rally in New York. There, equities have pushed ever higher since late March in anticipation of a breakthrough in the Middle East crisis.

“We had seen a big move the last two weeks, and now it’s just really pricing completely out the worst-case scenario, said Angelo Kourkafas, from Edward Jones.

Kourkafas also pointed to underlying strength in the US economy that should get more attention in the coming period as geopolitical concerns ebb.

“Geopolitical developments are moving in the right direction, and at the same time, the earning strength is hard to ignore,” Kourkafas said.

The broad-based S&P 500 finished at 7,126.06, up 1.2% for the day and 4.5% for the week.

‘Good news’

Earlier, European stocks closed higher, with both Frankfurt and Paris gaining 2%.

US President Donald Trump cheered the reopening of the Strait of Hormuz in an interview with AFP.

“We’re very close to having a deal,” Trump said in a brief telephone call with AFP from Las Vegas. He added there were “no sticking points at all” left with Tehran.

But Iran quickly pushed back on one key point.

Iran’s foreign ministry said Friday that its stockpile of enriched uranium would not be transferred “anywhere.” It rejected an earlier claim by Trump that the Islamic Republic had agreed to hand it over.

Shipping industry figures, meanwhile, gave a cautious welcome to Iran’s announcement.

A spokesman for German transportation giant Hapag-Lloyd, which has ships stuck in the Gulf, told AFP by phone that the reopening was “in general… good news.”

But he cautioned that shippers still needed details of what route vessels could take and in what order, citing fears of mines.

“One thousand ships cannot just go now to the entrance of the strait, that will be chaos. They (the Iranians) need to give clear orders,” said the spokesman, Nils Haupt.

“We would be ready to go very soon if some of these open questions can be solved within the weekend.”