Marine War-Risk Insurance Surges as Strait of Hormuz Conflict Disrupts Global Oil Shipping

The ongoing conflict between Iran and the US-Israel coalition continues to send shockwaves through the global marine insurance and energy markets, with the Strait of Hormuz at the centre of the disruption. The narrow waterway, which under normal conditions carries roughly 20% of the world's seaborne oil and a significant share of global liquefied natural gas, has seen shipping traffic fall dramatically since the conflict escalated in late February 2026.

War-risk insurance — a specialised coverage that protects ships and cargo against losses from acts of war — has repriced dramatically. According to industry analysis, premiums rose from approximately 0.125% of a vessel's insured value per transit before the conflict to between 0.2% and 0.4% in the early days, and ultimately to multiples of 3.5% or more at the peak of the crisis. For a very large crude carrier, this translates into hundreds of thousands of dollars in additional cost per voyage. Major marine war-risk providers, including Norway's Gard and Skuld, Britain's NorthStandard, the London P&I Club, and the New York-based American Club, temporarily scrapped or recalibrated war-risk cover for vessels operating in the region, relying on the standard 72-hour cancellation clauses built into such policies.

In an extraordinary intervention, the US government directed the US International Development Finance Corporation (DFC) to provide political risk insurance for maritime trade through the Strait, establishing a reinsurance facility — in partnership with leading US insurers — providing coverage on a revolving basis spanning hull, cargo, and liability risks. As of late June, reports indicate tanker traffic through Hormuz has been picking up after slower flows, with US naval forces helping ships transit, even as the security situation remains, in the words of one major insurer's CEO, an 'hour to hour' assessment. Iran cited 'major progress' after all-night talks with the US, raising hopes of de-escalation.

Analysts caution that even after a ceasefire, insurance rates and shipping volumes may not return to normal quickly. A commercial marine insurer noted that premiums are unlikely to fall significantly while active hostilities continue, and that a credible, sustained pattern of safe transits would be needed before insurers revise their risk ratings downward. The episode has become a defining stress test for the limits of private insurability in an era of heightened geopolitical risk, and a case study in how governments are increasingly willing to act as insurers of last resort to preserve economic continuity.