Strait of Hormuz blockade: Freight, insurance costs to soar

EXPORTERS MUST BRACE for higher freight and insurance costs as tensions in West Asia escalate following the US and Israel’s strikes on Iran. Industry players say the disruption in the Strait of Hormuz, coupled with renewed Houthi threats in the Red Sea, could force vessels to reroute, pushing up freight rates and war-risk premiums on shipments to the US and Europe.

- NARAYANAN V & MUKESH JAGOTA

EXPORTERS MUST BRACE for higher freight and insurance costs as tensions in West Asia escalate following the US and Israel’s strikes on Iran.

Industry players say the disruption in the Strait of Hormuz, coupled with renewed Houthi threats in the Red Sea, could force vessels to reroute, pushing up freight rates and war-risk premiums on shipments to the US and Europe.

“What we are seeing right now is a very real and immediate reaction from the insurance market to the Israel-Iran tensions,’ said Akash Parwal, CEO, Square Insurance Brokers. He added that marine war-risk premiums, which usually stay in the range of 0.2-0.3% of vessel value, have quickly moved up to 0.5% or even higher, with some routes seeing increases of 40-60% ina matter of days.

For shipping companies, the increase translates into an additional $200,000-$500,000 per voyage, costs that are eventually passed down the value chain.