The maritime war risk premium in the Middle East may see an increase as tensions between Israel and Iran escalate, particularly following recent Israeli attacks. Market analysts believe the duration and intensity of the conflict will significantly influence this premium. A chartering executive from Tokyo noted that a similar surge in conflict occurred over a year ago, but it was short-lived and did not have lasting effects. Currently, the additional war risk premium stands at about 0.05% to 0.07% of a ship’s hull and machinery value for vessels spending seven days in the Persian Gulf.
This figure has remained steady over the past 18 months. In North Asia, naphtha importers are already facing high costs, paying up to $50,000 per voyage due to the region’s designation as a high-risk area for maritime insurers, an assessment made following a series of attacks on oil tankers. While incidents have become less frequent, the associated risks continue to contribute to a significant revenue stream for maritime insurers. To mitigate costs, insurance companies often provide substantial discounts to owners with large fleets by allowing longer transit periods or combining voyages of multiple vessels.
Despite these savings, freight costs and insurance charges are set to rise if tensions escalate. Tanker freight rates have already declined in June, and market players expect further drops following Israel’s recent military actions. Due to disappointing profits for dirty tankers, some operators are now opting to transport cleaner cargo. The recent escalation in conflict complicates efforts to enhance shipping activities through the Suez Canal.
Although the Red Sea offers quicker routes for cargo shipments to Europe, many owners are hesitant due to perceived risks. As geopolitical tensions persist, shipping costs, insurance fees, and overall freight rates may be affected, placing additional financial burdens on charterers while also increasing risks for shipowners and their crews.