The ongoing conflict between Israel and Iran has resulted in a significant increase in shipping insurance costs for vessels navigating the Red Sea and the Persian Gulf. According to Marsh McLennan, the world’s largest insurance broker, marine insurers have raised their charges to 0.2% of a ship’s value for journeys into the Gulf.
This marks a rise from 0.125% prior to Israel’s unexpected military actions against Iran last week. There has also been a noticeable increase in war risk insurance rates for the Red Sea, with coverage for ports in Israel now costing more than three times as much, reaching 0.7%.
Additionally, the duration for which insurance quotes are valid has been shortened from 48 hours to just 24, indicating a rapidly changing risk assessment in the region. This surge in costs and the quickened decision-making reflect the deteriorating security situation, as Israel and Iran engage in continued air attacks.
Concerns about the potential for a broader conflict are heightened, particularly regarding the possibility of U.S. intervention in the region. Despite these challenges, there is still a focus on allowing cargo to flow through these critical waterways, as explained by Marcus Baker, the global head of marine, cargo, and logistics at Marsh.
However, some shipowners have chosen to avoid the strategically vital Strait of Hormuz, revealing an unease within the shipping industry. Jakob Larsen, head of security at Bimco, the organization representing global shipowners, noted that the intensifying conflict has raised concerns among shipowners, leading to a slight decline in the number of vessels transiting the affected areas.
Located between Iran and Oman, the Strait of Hormuz is an essential conduit for oil, and any disruption in this passage could significantly impact global energy prices and cause substantial supply delays.