The cost of insuring vessels navigating the Strait of Hormuz has soared, as underwriters scramble to reprice risk in response to the deteriorating security environment around one of the world’s most critical maritime corridors.
Marine insurers have raised rates for hull and machinery cover by more than 60% in recent days, according to figures cited by Marsh McLennan, the global broking giant. The increase takes typical premiums from 0.125% to approximately 0.2% of vessel value - meaning insurance on a $100 million ship now costs around $200,000 for a single passage through the Gulf region.
The reassessment follows the escalation in hostilities between Israel and Iran, a confrontation whose consequences are reverberating far beyond the battlefield. While direct missile strikes on commercial vessels have not yet materialised in the Arabian Gulf, market participants are clearly factoring in a broader spectrum of risk - from misdirected munitions and cyber disruption to opportunistic attacks by proxy forces.
“The rating shift reflects more than just physical peril,” Marcus Baker, global head of marine and cargo at Marsh told the Financial Times. “It’s about the uncertainty premium - the price of not knowing when, or how, the next escalation may unfold.”
The Strait of Hormuz, which lies between Iran and Oman, funnels nearly a fifth of the world’s petroleum supply each day. Recent developments have magnified the region’s fragility. On Monday, two tankers - the Adalynn and Front Eagle - collided just east of Khor Fakkan, resulting in fires aboard both vessels. Although all crew were rescued and early reports suggest no hostile involvement, the event underscores the vulnerabilities faced by commercial shipping in tense geopolitical theatres.
Authorities are probing whether navigational interference contributed to the incident. One of the ships reportedly transmitted anomalous positioning data prior to the collision - a scenario reminiscent of previous jamming campaigns believed to be orchestrated by state-linked actors.
According to Vanguard Tech, a UK-based maritime intelligence agency, there is no immediate evidence of foul play. However, the timing of the incident, coinciding with a spike in regional military activity, has unsettled reinsurers and added fresh momentum to rate hardening.
For insurers, the dilemma is a familiar one: retreat from high-risk zones, or lean into volatility in the hopes of reaping profitable margins. War risk policies are, by nature, polarised instruments - often yielding windfalls when conflict is contained, but exposing underwriters to catastrophic losses when control is lost.
“There are always carriers who will exit and others who step into the breach,” Baker said. “Some view it as a tactical window to underwrite with discipline, others as a signal to reduce aggregate exposures.”
In parallel with hull cover increases, market participants expect cargo rates - particularly for oil shipments - to follow suit, albeit more slowly. Much depends on the nature and frequency of future incidents.
“We’re investigating the impact that recent escalations between Israel and Iran will have on both the availability and cost of war risk insurance within the Middle East,” Dylan Saunders-Mortimer, marine hull UK war leader at Marsh told Insurance Business. “While there is not yet a general consensus, we note several key themes emerging, including: Consideration for increasing rating generally across Middle Eastern ‘High-Risk-Areas’”
With global reinsurers already facing climate losses and tighter capital conditions, capacity deployment into Gulf war risks may become increasingly selective. London and Lloyd’s syndicates, long the backbone of marine war risk, are said to be monitoring developments closely, particularly as reinsurance renewals loom.
The uptick in regional volatility comes as the United States repositions naval assets - including the USS Nimitz carrier group - in the Arabian Sea. This military presence is intended to deter Iranian aggression and reassure allies, but may also signal growing concern about the vulnerability of strategic energy flows.
At the policy level, defence think tanks have issued fresh warnings about the threat of a formal closure of the Strait of Hormuz, a move which could trigger a far-reaching energy crisis. The Foundation for Defense of Democracies, in a recent analysis, stated: “Iran’s strategic posture continues to include the implicit threat of shutting Hormuz - a move with seismic consequences for global oil and insurance markets.”
For now, shipping continues - cautiously - through the strait. But the accumulation of military pressure points, navigation anomalies, and tactical uncertainty is testing the market’s capacity for resilience.
