Hormuz Strait Crisis: Insurance Withdrawals Paralyze Global Shipping as Tankers Stranded, Attacked
By Jonathan Saul, Emily Chow and Jeslyn Lerh
LONDON/SINGAPORE, March 2 (Reuters) – A critical artery of global trade is seizing up. The widening conflict involving Iran has forced major marine insurers to cancel war risk coverage for vessels transiting the Middle East Gulf, leaving a growing fleet of tankers stranded or damaged, disrupting energy supplies, and claiming at least two lives.
Shipping through the Strait of Hormuz, the narrow channel between Iran and Oman that carries about one-fifth of the world’s seaborne oil, has nearly halted. The standoff follows a series of retaliatory strikes by Iran against U.S. and Israeli targets, which have spilled over into the maritime domain. Iranian authorities have declared the waterway closed to navigation, with its Revolutionary Guards vowing to fire on any ship attempting passage.
The immediate impact is stark: one tanker was ablaze on Monday, at least four others sustained damage, and approximately 150 vessels—including oil and liquefied natural gas (LNG) carriers—are anchored in the Strait and surrounding waters, according to shipping data. The broader ripple effects are now being felt across global supply chains.
"We're looking at a potential logjam that could stretch from Singapore to Rotterdam," said Jeremy Nixon, CEO of container shipping giant Ocean Network Express (ONE). He warned that about 10% of the world's container ship capacity is caught in the broader backups, which could soon lead to cargo pile-ups at key Asian and European ports.
The disruption has sent shockwaves through energy markets. Brent crude futures surged as much as 13%, while European natural gas prices also jumped sharply. The crisis has triggered multiple oil and gas production shutdowns in the region, exacerbating fears of a prolonged closure.
Insurance Market in Turmoil
In a decisive move that underscores the severity of the threat, leading marine insurers—including Gard, Skuld, NorthStandard, the London P&I Club, and the American Club—issued notices cancelling war risk coverage for the region, effective March 5.
"The market is facing what is essentially a de facto closure of the Strait of Hormuz, driven primarily by the perception of threat rather than a tangible blockade," said Munro Anderson, a partner at marine war risk specialist Vessel Protect.
The cost of securing coverage has skyrocketed. War risk premiums have jumped from about 0.2% of a ship's value last week to as high as 1% in the past 48 hours—adding hundreds of thousands of dollars to the cost of a single voyage. For many shipowners, the math no longer works.
"Each underwriter is invariably increasing rates or, for vessels passing through the Strait, even declining to offer terms right now," confirmed David Smith, head of marine at brokerage McGill and Partners.
Mounting Human and Commercial Toll
The human cost of the crisis emerged in separate incidents. A shipyard worker was killed when the U.S.-flagged Stena Imperative was damaged by "aerial impacts" while berthed. A crew member died after a projectile hit the Marshall Islands-flagged tanker MKD VYOM off the coast of Oman on Sunday.
Other vessels, including the Gibraltar-flagged bunkering tanker Hercules Star and the Honduran-flagged Athe Nova, have also been attacked or damaged. The clustering of tankers off the coasts of major producers like Iraq, Saudi Arabia, and Qatar presents a concentrated target.
With insurance evaporating and risks mounting, the cost of shipping oil from the Middle East to Asia—already at a six-year high—is poised to climb further. The crisis threatens to inject sustained volatility into global energy prices and supply chains at a time of fragile economic recovery.
Reaction & Analysis
Reuters spoke to industry observers for their take on the escalating crisis:
• Sarah Chen, Maritime Analyst, Singapore: "This is a systemic shock. The insurance withdrawal isn't just a premium issue; it's a signal that the professional risk market sees the corridor as uninsurable. Alternative routes around Africa add weeks and millions in cost, which will be passed directly to consumers."
• Marcus Thorne, Former Tanker Captain, London: "The brazen attacks on commercial shipping are a grave escalation. Seafarers are not combatants. The international community's response has been woefully inadequate. We're witnessing the weaponization of a global chokepoint in real time."
• Dr. Anya Petrova, Energy Security Fellow, Brussels: "While the price spike is immediate, the strategic implications are deeper. This crisis will accelerate the diversification of energy routes and sourcing, but that's a decade-long project. In the near term, global economies are held hostage by the stability of this 21-mile-wide strait."
• Jake Ridley, Shipping Consultant, Long Beach (California): "This is an unmitigated disaster orchestrated by Tehran. The regime is holding the global economy hostage, and the insurance industry's pullout is the only rational response. Where is the naval coalition to secure the lane? The dithering is costing lives and livelihoods."
(Reporting by Emily Chow and Jeslyn Lerh in Singapore, Jonathan Saul in London, and Lisa Baertlein in Long Beach; Additional reporting by Trixie Yap, Ruth Chai, Nidhi Verma, and Enes Tunagur; Writing and analysis by Reuters Global Energy & Trade desk; Editing by Aidan Lewis, Nick Zieminski and Lisa Shumaker)