In recent days, shipping costs in the Gulf region have decreased following a ceasefire agreement between Israel and Iran. Industry sources indicated that while the current rates have softened, there is a possibility they could rise again if tensions escalate. The conflict previously sparked fears that Iran might close the Strait of Hormuz, a critical waterway through which approximately 20% of the world’s oil and gas demand passes.
Concerns about potential oil prices soaring to $100 a barrel heightened the urgency for shipping and insurance providers. The war risk insurance premiums for shipments in the Gulf have decreased to a range of 0.35% to 0.45%, down from a peak of 0.5% earlier in the week. This marks a notable drop when compared to the average rate of around 0.3% observed in recent months.
As shipping costs are heavily influenced by the value of the vessel and the associated risk, this reduction could save shipping companies tens of thousands of dollars per day in additional expenses during a seven-day voyage. David Smith, head of marine at McGill and Partners, noted that “rates have definitely softened.” He explained that the significant number of war risk insurers willing to underwrite various risks has contributed to the downward pressure on premiums, alongside the improving political climate.
However, he also cautioned that the situation remains uncertain and could shift quickly. In contrast to the ceasefire, Iranian Supreme Leader Ayatollah Ali Khamenei stated that any future U.S. military action would lead to retaliatory strikes on American bases in the Middle East, underscoring the ongoing volatility in the region.