Hormuz Shock: War-Risk Insurance Spike Threatens Gulf Flows of Oil Products

Enerdealers Editorial

War-risk insurance for vessels trading in the Persian Gulf and Strait of Hormuz has jumped by up to 50% within days of the latest US–Israel strikes on Iran and Tehran’s retaliatory attacks, thrusting one of the world’s most critical energy corridors into a new phase of operational and financial risk. As war-risk underwriters pull capacity and reprice exposure almost voyage by voyage, traders, suppliers and buyers of petroleum derivatives now face a sharp rise in freight and financing costs, plus mounting uncertainty over physical availabilities and laycan reliability across the Gulf, Red Sea and Indian Ocean supply chains.

Marine brokers estimate that near‑term Gulf marine hull premiums could rise by 25–50%

Insurance Costs Soar and Capacity Is Pulled

War-risk premiums for ships calling the Middle East Gulf and transiting Hormuz have moved from around 0.25% of hull value to approximately 0.375% in the space of a weekend, implying a roughly 50% increase in marginal voyage costs for high-risk calls. For a products tanker with a replacement value near 100 million dollars, that implies an additional 125,000 dollars per high-risk voyage purely in war-risk loadings, before any further increases in basic hull and machinery or P&I costs are factored in.

Marine brokers estimate that near‑term Gulf marine hull premiums could rise by 25–50%, with some annual hull‑war extensions already cancelled under standard seven‑day clauses and reinstatement only available at materially higher rates and tighter terms. Underwriters are simultaneously withdrawing or revising quoted additional premiums for transits through listed high‑risk areas, insisting on stricter voyage approval and reserving capacity for select clients with strong risk-management credentials.

Reinsurers’ risk appetite for Hormuz exposure is shrinking rapidly, signaling that remaining capacity is likely to become more selective, more expensive and more conditional on routing and security practices.

Skuld, NorthStandard and Others Move First

Oslo‑based Skuld has issued a general notice cancelling war‑risk cover for the Middle East Gulf and Gulf of Oman, effective at 00:00 GMT on 5 March, explicitly linking the move to the deteriorating security environment following US and Israeli strikes and Iran’s response. The cancellation applies to war‑risk extensions only, leaving core P&I and hull and machinery cover technically in place but stripping out the specific protection most relevant to current missile, drone and mine threats in and around Hormuz.argusmedia+1

NorthStandard has followed with its own circular cancelling multiple war‑risk clauses, including additional covers, offshore P&I war risks and charterers’ P&I war extensions in the Middle East Gulf and Gulf of Oman. Both announcements serve as formal notice that reinsurers’ risk appetite for Hormuz exposure is shrinking rapidly, signaling that remaining capacity is likely to become more selective, more expensive and more conditional on routing and security practices.

Hapag‑Lloyd has suspended all vessel transits through Hormuz until further notice, citing the official closure and prioritising crew and cargo safety.

Strait of Hormuz: Operational Standstill and Rerouting

On the operational side, major container carriers have moved swiftly to halt or divert traffic away from the Strait of Hormuz following reports that Iranian Revolutionary Guard units have closed the waterway and ordered ships to seek shelter. CMA CGM has instructed all ships in or bound for the Middle East Gulf to proceed immediately to safe waters and has suspended Suez Canal transits, while Hapag‑Lloyd has suspended all vessel transits through Hormuz until further notice, citing the official closure and prioritising crew and cargo safety.

With key services now routing around the Cape of Good Hope instead of the Red Sea/Hormuz axis, voyage times for east–west flows are lengthening, and port calls in the Arabian Gulf face delays, blank sailings and schedule disruption. For oil products and petrochemical cargoes that depend on containerised flows for additives, components and specialty chemicals, these interruptions compound the risks already facing clean and CPP tanker tonnage in the area.

Direct Hits on Energy and Product Infrastructure

The security risk is not just theoretical: at least one small chemical and oil products tanker has been reported hit near the Strait of Hormuz amid the latest escalation, underscoring the vulnerability of refined products trade to targeted attacks. At the same time, drone strikes have reached Oman's Duqm port, a growing hub for refining, storage and transshipment that plays an increasingly important role in regional products and bunkers logistics.

Market sources indicate that war‑risk cancellations were triggered almost immediately after these incidents, with underwriters moving to protect balance sheets against a cluster of large, correlated losses in a confined geographic area. This shift comes on top of an already fragile war‑risk market that has been reshaped by earlier Red Sea disruptions, sanctions exposure and the rising cost of retrocession for specialty lines.

Suppliers and buyers with exposure to Iranian, Iraqi, Saudi and Emirati barrels face greater uncertainty around laycan performance.

Implications for Petroleum Derivatives Traders and Decision Makers

For gasoline, diesel, jet fuel and other petroleum derivatives, the immediate consequence is a step‑change in delivered cost into and out of Gulf‑linked supply chains, particularly on short‑haul trades where war‑risk and deviation premiums represent a large share of total freight. Traders will need to reassess netbacks and arbitrage economics on lanes such as AG–East Africa, AG–South Asia and AG–Europe via current or alternative routes, especially where deviation around the Cape erodes time‑sensitive spreads.

Suppliers and buyers with exposure to Iranian, Iraqi, Saudi and Emirati barrels face greater uncertainty around laycan performance, nomination flexibility and force majeure triggers as shipowners re‑negotiate charter terms and may decline voyages that lack clear war‑risk protection. Decision makers in refining, trading and logistics will also need to revisit inventory strategies, diversifying optionality between Gulf, Mediterranean, US Gulf Coast and Asian origins where possible to mitigate the risk of prolonged disruption at Hormuz.

Strategic Response: What Market Participants Should Watch

In the near term, close monitoring of daily insurer circulars and listed high‑risk areas will be essential, as war‑risk pricing and eligibility may change with little notice. Charterers should scrutinise war‑risk and deviation clauses, clarify who bears incremental premiums, and seek pre‑approved routing and port lists to avoid last‑minute coverage gaps that could derail loadings.

Over the medium term, persistent conflict risk could accelerate structural changes already under way, including the repositioning of storage and blending hubs out of the highest‑risk zones and greater reliance on overland routes and pipelines where capacity allows. For Gulf producers and regional policymakers, the episode reinforces the strategic vulnerability of Hormuz and may sharpen incentives to invest in alternative export outlets and port diversification to retain market share in petroleum derivatives.

Conclusion

The sudden spike in war‑risk premiums, combined with the effective paralysis of the Strait of Hormuz, marks a critical inflection point for companies exposed to Gulf‑centric petroleum products trade. Insurance markets are signalling that risk in the region is being repriced structurally higher, while operational constraints from vessel cancellations, rerouting and targeted attacks threaten to reshape flows, margins and credit terms for months to come.

For traders, suppliers, buyers and decision makers across the oil products value chain, the priority now is to integrate this new risk regime into commercial strategy: reassessing route economics, diversifying sourcing, tightening contractual language and stress‑testing logistics under prolonged Hormuz disruption scenarios. Those who move fastest to adapt their books, contracts and supply chains to this environment will be best positioned to preserve optionality and protect margins amid a rapidly evolving Gulf risk landscape.

Sources

• Argus Media – Skuld, NorthStandard cancel some Mideast cover. [argusmedia]​

• Skuld – General notice of cancellation in respect of certain war risks. [skuld]​

• Argus Media – Skuld P&I cancels war risk cover in Mideast Gulf. [argusmedia]​

• Lloyd’s List – Iran attacks prompt Red Sea rethink as box shipping exits Strait of Hormuz. [lloydslist]​

• Reinsurance News – Marine hull insurance rates in the Gulf could rise 50% due to Iran conflict. [reinsurancene]​

• Safety4Sea / Reuters – Middle East war risk insurance costs surge due to conflict. [safety4sea]​

• Middle East Insurance Review – War triggers war-risk policy cancellations and premium rate hikes. meinsurancereview+1

• Container News – Iran closes Strait of Hormuz: carriers abandon the region. [container-news]​

• Haberler – The Hormuz crisis is escalating: global trade is on the danger line. [en.haberler]​