Leading maritime insurers have withdrawn war risk coverage for vessels operating in the Gulf as the escalating US-Israel conflict with Iran disrupts shipping through the Strait of Hormuz.
According to The Guardian, over 150 vessels, including crude oil and liquefied natural gas tankers, have anchored in the strait and nearby waters, while at least three tankers were damaged and one seafarer was killed over the weekend.
The strait, a vital passage for roughly 20% of the world’s oil and gas shipments, is effectively closed after intensified airstrikes on Iran began Saturday. Several major mutual marine insurers, including Norway’s Gard and Skuld, the UK’s NorthStandard and London P&I Club, and the American Club in New York, issued notices that they would cancel war risk coverage for vessels in Iranian and adjacent waters, effective March 5.
The cancellation of war risk cover has broad implications for international shipping and energy markets. Ships without insurance may avoid the Gulf altogether, forcing longer, costlier routes and reducing cargo capacity. Freight costs are rising sharply, and supply chains for oil, liquefied natural gas, and other goods are under pressure. Higher insurance premiums and operational risks may translate into higher global fuel prices, affecting countries reliant on imported energy.
Peter Hulyer, head of UK protection and indemnity at Marsh, noted that insurers are seeking to reassess coverage amid heightened risk, saying: “In most cases the clubs will be offering to reinstate war coverage at terms to be agreed. Mutual P&I cover offered by the clubs is unaffected by the above.”
Marcus Baker, Marsh’s global head of marine, added: “Several other insurance markets, including Lloyd’s of London, have issued notices of cancellation, to give insurers time to look at the heightened risks in the Middle East and assess their rates.” as noted by The Guardian
Shipping costs have already surged. The Containerized Freight Index rose 6.5%, while Freightos terminal container rates for a 40ft container from Shanghai to Dubai’s Jebel Ali port jumped from $1,800 to $3,700 over the weekend. Dubai-based DP World temporarily suspended operations at Jebel Ali after a fire caused by an aerial interception, though operations have since resumed.
John Wyn-Evans, head of market analysis at Rathbones, explained the impact on shipping: “Any rate increases would be linked to a combination of rerouting and higher oil prices; rerouting involves being at sea for longer which reduces capacity and if the cargoes have to get there by a certain time, they have to sail faster, which uses up more fuel, and it’s exponential, like driving faster in a car and watching MPG go down.”
For oil-importing countries like Ghana, the disruption could raise the landed cost of petroleum products, strain fuel supply chains, and pressure domestic energy prices. Delays in shipments and rising insurance premiums are likely to translate into higher costs for businesses and consumers, further impacting the country’s economy amid an already volatile global oil market.
Although only 2% to 3% of global container volumes pass through the Strait of Hormuz, its effective closure is causing wider disruptions across regional shipping lanes, including the Red Sea. Freight delays and higher costs may affect trade in the Middle East, Africa, and beyond.
