War Risk Premiums Drive Hormuz Shipping Expenses Higher

Global Insurance Desk: Transit costs for oil tankers moving through the Strait of Hormuz have climbed sharply in recent months, with some operators facing bills of 10 to 20 million dollars for a single voyage. The jump stems largely from sky-high cargo insurance and war-risk premiums that underwriters have piled on since fighting involving Iran intensified earlier this year.

According to Paul Bradshaw, a director at Emirates National Oil Company, those elevated costs have become routine. Cargo cover alone can run 5 or 6% of a shipment’s value while war-risk rates have hit as high as 10% of a vessel’s insured hull value.

Brokers and market trackers note that the typical war-risk charge now sits around 1.5% or more of hull value for a Hormuz transit. That compares with a pre-crisis baseline of roughly 0.1%.

On a very large crude carrier valued near 150 million dollars, the extra premium can easily exceed 2 million dollars for one crossing, and the full transit package, including cargo, has pushed total outlays into the 10-to-20-million range for some tankers.

Rates have not stayed fixed. They swung lower after reports of a ceasefire deal in June, dropping in some cases from 5% of hull value toward 2%, only to firm again when tensions flared.

Market participants say underwriters still price in the risk of renewed disruption, and many shipowners have simply steered clear of the waterway when possible. Saudi authorities recently moved to create a national marine insurance pool in response to the pressure on coverage.

The higher insurance burden feeds directly into the cost of moving crude. Industry voices have estimated that war-risk charges alone now add several dollars to each barrel of oil shipped out of the Gulf.

While exact figures vary by vessel, flag and cargo, the pattern is clear: what used to be a manageable add-on has become a major line item that continues to reflect the unsettled security picture in the region.