Hormuz Reopening Won't Quickly Cut Shipping Costs as War-Risk Insurance Premiums Stay Elevated

The agreement between Washington and Tehran to reopen the Strait of Hormuz is a major step toward restoring the world's most critical oil corridor, but the marine insurance market is signalling that normal shipping conditions remain a long way off. Even as commercial traffic resumes, global shipping costs are unlikely to fall quickly because war-risk insurance premiums remain sharply elevated and insurers are demanding months of demonstrated stability before restoring standard cover.

Industry estimates illustrate the scale of repricing. Before the conflict erupted in late February 2026, war-risk premiums for vessels transiting the Gulf averaged about 0.25% of a ship's hull value. During the conflict, those rates surged to between 3% and 8% of vessel value, translating into insurance bills of roughly $3 million to $8 million for a single large tanker transit. At the height of the disruption, insurers had been offering only seven-day renewable cover at around 1% of hull value, while charter rates for oil supertankers quadrupled to nearly $800,000 a day.

Several structural factors will keep cover expensive and traffic constrained even after a formal reopening. US defence officials have estimated that clearing naval mines across the waterway could take up to six months, and maritime security specialists at BIMCO have warned that residual mine risk alone could delay a full restoration of commercial traffic. Because the navigable shipping lanes are only about three kilometres wide in each direction, even minor hazards can sharply reduce throughput. Svein Ringbakken, managing director of the Norwegian Shipowners' Mutual War Risks Insurance Association, noted that thousands of ships remained trapped in and around the waterway as the deal was announced.

The episode has been a defining test of the marine insurance system. Marine and war-risk coverage works by converting uncertainty into transferable, priced risk, but that model strains when losses become concentrated, correlated, and difficult to model. In response to the surge in premiums and cancelled policies earlier in the conflict, the US directed the International Development Finance Corporation to build a reinsurance facility providing up to $40 billion of revolving cover for hull, cargo, and liability risks, partnering with insurers including Chubb, AIG, Starr, and Berkshire Hathaway. With at least seven to fifteen tankers reported damaged during the conflict, brokers including Howden Re have described the period as a permanent structural repricing of marine war risk, layered on top of the earlier Red Sea disruptions, that will set a higher baseline for years to come.