Maritime insurers are canceling war risk coverage for vessels in the Gulf as the escalating U.S.-Israel-Iran conflict disrupts shipping, leaving tankers damaged or stranded and at least two people dead. The conflict entered its fourth day on Tuesday with U.S. and Israeli attacks continuing on Iran, which has retaliated by attacking U.S. assets and other infrastructure in Gulf countries.
Key Takeaways
Maritime insurers are canceling war risk coverage for vessels in the Gulf as the escalating U.S.-Israel-Iran conflict disrupts shipping, leaving tankers damaged or stranded and at least two people dead. The Strait of Hormuz has seen near-halted shipping after Iranian retaliation against U.S. and Israeli strikes.
- Maritime insurers cancel war risk coverage for vessels in the Gulf
- At least five tankers damaged, two personnel killed, about 150 ships stranded around the Strait of Hormuz
- Oil and European natural gas prices jump as Brent crude futures rise up to 13%
- About 10% of the world’s container ships ensnared in broader backups
- War risk premiums have risen as high as 1% of a ship's value
Shipping through the Strait of Hormuz between Iran and Oman has ground to a near halt after vessels in the area were hit as Iran retaliated against U.S. and Israeli strikes. A commander in Iran’s Revolutionary Guard Corps (IRGC) said on Monday that the strait was “closed” and that any vessel attempting to pass through the waterway would be set “ablaze.”
At least five tankers have been damaged, two personnel killed, and about 150 ships stranded around the strait. The disruption and fears of prolonged closure have caused oil and European natural gas prices to jump, with Brent crude futures up as much as 13 percent as the conflict triggers multiple oil and gas shutdowns in the Middle East.
About 10 percent of the world’s container ships are ensnared in the broader backups, and cargo could soon start piling up at ports and transshipment hubs in Europe and Asia. The tankers are clustered in open waters off the coasts of major Gulf oil producers, including Iraq and Saudi Arabia, as well as LNG giant Qatar.
As a result of these incidents, marine insurers are canceling war risk coverage for vessels, and the overall cost of shipping oil from the region is set to surge further. Insurance companies including Gard, Skuld, NorthStandard, the London P&I Club, and the American Club said cancellation of war risk cover would take effect from March 5.
War risk premiums have risen as high as 1 percent of the value of a ship in the past 48 hours, from about 0.2 percent last week. For example, for a tanker worth $100 million, the war-risk premium for a single voyage would jump from roughly $200,000 to about $1 million.
The Strait of Hormuz carries about one-fifth of oil consumed globally as well as large quantities of gas from Gulf producers like Saudi Arabia, Iraq, the UAE, Kuwait, and Qatar. Any disruption affects gas markets in Asia and Europe.
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