Introduction
Marine insurers are cancelling war risk coverage for ships operating in the Middle East Gulf as the widening U.S.-Israel-Iran conflict disrupts shipping and raises the threat level in and around the Strait of Hormuz. Tankers have been damaged, vessels are clustered in open waters rather than transiting the chokepoint, and fatalities have been reported. The insurance pullback is set to lift shipping costs sharply, adding another inflationary layer to already rising oil and gas prices.
What Is Happening in the Strait of Hormuz
Shipping through the Strait has slowed to a near standstill as vessels avoid transit following attacks and warnings from Iranian-linked forces. Reports describe multiple tankers damaged, at least two deaths, and roughly 150 ships stranded in the vicinity. The operational effect is not only physical disruption but also a risk shock: even without a formal blockade, elevated threat perception can freeze traffic as shipowners, charterers, and insurers reassess exposure.
Attacks on Vessels and Rising Operational Risk
Several incidents were reported involving tankers across the Gulf and near Oman and the UAE, including aerial impacts and projectiles hitting vessels. Ship managers said at least one worker and one crew member were killed in separate events. These incidents have reinforced the view among insurers that the risk profile has changed quickly and materially, making standard cover inadequate for the current conditions.
Insurers Cancel War Risk Coverage From March 5
Major marine insurers said they are cancelling war risk cover for vessels in the region, with cancellations taking effect on March 5 based on notices dated March 1. The practical implication is immediate for ship operators: vessels typically cannot sail without adequate insurance because port authorities, banks, charterers, and regulators require proof of cover. Without it, ships may be unable to load, transit, or dock, which can deepen supply disruptions even if physical routes remain technically open.
Premiums Spike From 0.2% to as High as 1%
War risk premiums have surged in a matter of days. Industry estimates cited in the report put premiums as high as 1% of a ship’s value for a single voyage, up from around 0.2% the prior week. For a tanker valued at $100 million, that implies a jump from roughly $200,000 per voyage to around $1 million. Brokers also warned that some underwriters are raising rates aggressively or declining to offer terms for transits through Hormuz at all.
Why War Risk Insurance Matters for Global Trade
War risk insurance covers losses tied to war and terrorism that are explicitly excluded from standard marine policies. In practice, it acts as a gatekeeper for maritime commerce. When coverage is pulled or repriced sharply, the delivered cost of oil and liquefied natural gas rises because freight, risk premiums, and financing constraints get baked into cargo economics. Container shipping is also affected, with warnings that port backlogs in Europe and Asia could grow if rerouting and delays persist.
Energy Price Impact Intensifies With LNG Disruptions
The insurance shock is landing at the same time as broader energy disruption, including reported halts affecting LNG production by QatarEnergy after facilities in Qatar were hit. With Hormuz-linked risks rising, delivered energy costs are likely to increase further, pushing up fuel, electricity, and heating costs. Benchmark European gas prices and Asian LNG benchmarks were reported to have surged sharply following the LNG interruption, reinforcing the conflict’s rapid spillover from security risk into energy inflation.
Conclusion
The cancellation of war risk insurance and the spike in premiums are turning Hormuz disruption into a self-reinforcing economic shock: higher risk leads to less shipping, less shipping tightens supply, and tighter supply lifts prices. Even if the Strait is not formally blocked, the combination of attacks, perceived threat, and restricted insurance availability can function like an effective closure. The near-term outlook hinges on whether security conditions stabilize, whether escort and protection measures restore confidence, and whether insurers re-enter the market at workable pricing levels.
