Premiums soar 10 times! The Middle East conflict has cut off shipping routes, and the cost of tanker transit insurance has skyrocketed to $7.5 million

Israel and the United States have launched airstrikes against Iran, rapidly transmitting the conflict to the global commodity supply chain. The Strait of Hormuz is paralyzed, energy trade costs have surged, shipping war insurance premiums have skyrocketed by over 10 times, with the transit insurance cost for a single tanker exceeding $7.5 million.

According to Reuters, Iran announced on Monday that it would fire on any vessels attempting to transit, with at least 9 ships reported damaged in the area since the outbreak of the conflict. The Strait of Hormuz, as the world's most important energy transport chokepoint, sees over 20 million barrels of crude oil, condensate, and refined oil transit daily, accounting for about one-fifth of global oil consumption, and is effectively under blockade.

The rapid rise in premiums is significantly increasing the operating costs for shipowners, traders, and energy companies. Analysts warn that if the situation does not improve, inflationary pressures will spread. U.S. President Trump has intervened, stating that multiple response measures are being explored, but the market remains skeptical about the implementation of substantial solutions.

Premiums soar over 10 times, single ship cost exceeds $7.5 million

The increase in premiums is shocking. According to calculations by brokerage firm Jefferies cited by Reuters, the hull war risk rate was about 0.25% before the outbreak of the conflict. For a tanker valued at $200 million to $300 million, the corresponding premium was about $625,000; the new rate has risen to 3%, meaning the hull war risk premium for the same vessel is now approximately $7.5 million, an increase of over 10 times.

Stephen Rudman, head of Aon’s Asia maritime business, told Reuters that "the response in the hull war risk market is the most rapid," due to the potential for significant concentrated losses if multiple vessels are damaged in the same area.

He added that if the situation escalates further, there is still room for rates to increase, noting that additional premiums for high-risk waters "are rising sharply and may continue to fluctuate in the short term."

Angus Blayney, director of the maritime division at major brokerage Gallagher, confirmed to Reuters that premiums have risen and vary daily based on the type of vessel and individual circumstances, but did not disclose specific figures. He also stated that related insurance is still available for purchase.

Nearly a thousand vessels stranded, potential industry losses could reach $1.75 billion

Currently, the situation near the strait remains tense, with large-scale vessel stranding occurring. According to Reuters, as of last week, at least 200 vessels have been anchored offshore near major Gulf oil-producing countries waiting.

Sheila Cameron, CEO of the Lloyd's Market Association, stated in a statement that there are currently about 1,000 vessels in the Persian Gulf and surrounding waters, with about half being oil and gas tankers, collectively valued at over $25 billion, "the vast majority insured in the London market, and the insurance remains valid." Jefferies analysts estimate that as of March 5, when their report was released, at least 7 ships have been damaged, with potential industry losses reaching up to $1.75 billion. Credit rating agency Morningstar DBRS warned in a report that reinsurers may raise loss payment trigger thresholds or reduce underwriting capacity, "leaving more risk for primary insurers to bear, which could put pressure on their solvency."

Supply chains forced to reroute, inflation concerns emerge

The actual blockade of the Strait of Hormuz is forcing global supply chains to seek alternative routes. Morningstar DBRS pointed out that goods will be forced to detour around the Cape of Good Hope or take land routes, significantly increasing both transportation time and costs, "the supply chain will face severe pressure."

Data analysis shows that since the outbreak of the conflict, the daily transit volume of tankers and liquefied natural gas (LNG) vessels has nearly come to a halt. According to data analysis firm Vortexa, last year the daily passage of oil and related products through the Strait of Hormuz exceeded 20 million barrels; if this route is blocked for an extended period, the impact on global energy supply will be hard to underestimate.

Dr. Michel Léonard, chief economist and data scientist at the Insurance Information Institute, succinctly summarized the current market predicament with a metaphor: "It's like insuring a building that is on fire."

Trump's intervention, uncertainty remains over implementation

In response to the shipping crisis, the Trump administration has begun seeking solutions. Trump stated on Tuesday that the U.S. Navy may provide escort for tankers transiting the Strait of Hormuz and has ordered the U.S. International Development Finance Corporation (DFC) to provide political risk insurance and financial guarantees for maritime trade in the Gulf region.

It is reported that Trump has also held talks with global insurance broker Marsh on this issue. Lloyd's has also stated that it is actively communicating with the DFC and relevant stakeholders to seek a resolution.

However, the market remains skeptical about whether these measures can be effectively implemented. They pointed out that it is still unclear how the U.S. government's intervention plan will specifically operate and whether it will apply to vessels and cargo of all nationalities. In the absence of alternative solutions, it is expected that most shipowners will renew existing insurance at higher rates and absorb the rising costs themselves