Shipping costs surge as risk rises in Israel-Iran conflict

Global shipping costs are soaring as the Israel-Iran war escalates, prompting insurers to raise premiums sharply for vessels passing through critical maritime chokepoints such as the Strait of Hormuz and Israeli ports.

- Issac John

The rise in shipping risk and associated costs threatens to upend regional trade flows and strain global supply chains already reeling from ongoing Red Sea disruptions.

According to data from Marsh McLennan, the world's largest insurance broker, insurance prices for ships transiting the Strait of Hormuz have surged more than 60 per cent since the conflict erupted. Hull and machinery insurance premiums covering damage to the vessel itself have increased from 0.125 per cent to around 0.2 per cent of a ship's value. This means insurance for a vessel worth $100 million now costs $200,000, up from $125,000.

"We've not yet seen a missile fired at a ship in the Arabian Gulf, but the pricing clearly reflects heightened market concerns," said Marcus Baker, Global Head of Marine and Cargo Insurance at Marsh. "The premium hike is a direct reflection of perceived risk."

The Strait of Hormuz, which connects the Gulf to the Arabian Sea between Iran and Oman, is one of the world's most vital oil transit routes, with nearly a fifth of global crude passing through its narrow waters. Any disruption or escalation of hostilities in the area could have profound consequences on global energy security and freight logistics.