Strait of Hormuz Vessel Insurance Rates Jump 60% over Rising Geopolitical Risks
Taarek Refaat
Insurance premiums for vessels transiting the Strait of Hormuz have surged more than 60% in recent days, as rising geopolitical tensions between Iran and Israel cast a shadow over one of the world's most vital oil shipping lanes.
According to a report by the Financial Times, hull and machinery insurance—which covers physical damage to ships—has jumped from 0.125% to around 0.2% of a vessel's value since the start of the conflict. For a ship valued at $100 million, this equates to a rise from $125,000 to $200,000 in insurance costs per passage, based on data from Marsh McLennan, the world's largest insurance brokerage.
The Strait of Hormuz, a narrow maritime corridor between Iran and Oman, is a strategic chokepoint through which about a fifth of global oil supply flows. The increase in insurance premiums underscores mounting fears of disruption, despite no direct attacks on commercial vessels being reported so far in the Gulf.
'We haven't seen a missile fired at a ship in the Arabian Gulf yet, so this is a signal from the market of growing concern,' said Marcus Baker, global head of marine and cargo insurance at Marsh McLennan. 'Prices could rise further.'
Concerns are being driven not only by the threat of missile strikes but also by electronic interference, Houthi rebel activity, and the potential for direct U.S. or Israeli military involvement in the region. On Monday, two oil tankers collided near the Strait, and one was found to be transmitting unusual location signals, fueling suspicions of GPS spoofing or jamming.
Insurers are increasingly wary of the Houthis, a Yemeni militant group backed by Iran, possibly expanding their attacks to target U.S., U.K., and Israeli-flagged vessels more aggressively.
While some insurance providers may consider withdrawing coverage, others are prepared to assume the risk, Baker noted. 'War itself, as an insurance product, tends to be… lose everything or make a fortune. Many insurers have made significant fortunes willing to take the risk.'
Although cargo insurance—which covers goods like crude oil—has yet to rise as sharply, brokers expect those rates to climb soon as well, especially if shipping disruptions continue or the conflict escalates.
In parallel, analysts at Nomura are warning that ongoing trade tensions, especially between the U.S. and Asian economies, will keep tariffs elevated, particularly in the context of U.S.-China rivalry, further complicating the global trade landscape.
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