West Asia Conflict Pushes War-Risk Premiums Higher, Raising Global Oil Shipping Costs

Geopolitical tensions in West Asia are driving a rise in maritime war-risk insurance premiums. This has significantly increased the cost of shipping oil and goods through some of the world’s most critical trade routes.

The escalation around strategic corridors such as the Strait of Hormuz and the Red Sea has forced insurers to reassess risk levels for vessels operating in the region. This pushes up insurance costs for shipowners and potentially affects global oil prices and supply chains.

Marine war-risk insurance, which is a specialised cover designed to protect vessels operating in conflict zones, has seen a steep jump in premiums as security concerns intensify.

Koustubh Sharma, Business Intelligence and Risk Analyst at National Funding (FairSquare Holdings), explained the significance of such coverage in global shipping, “Think of war risk insurance as the last line of financial defense for a vessel entering a conflict zone. It sits on top of hull coverage, cargo insurance, and P&I club liability. The critical detail most people miss it can be cancelled with as little as 72 hours’ notice. That’s not a footnote. When Gard and Skuld suspended cover in early March 2026 and India’s GIC Re pulled reinsurance capacity, over 200 tankers were effectively stranded at anchor in Gulf waters. Without that ‘piece of paper,’ a ship legally cannot sail.”

Insurance premiums for vessels navigating these regions have increased in recent weeks.

“Pre-escalation, war risk for a Gulf transit ran about 0.25% of hull value. By early March 2026, that hit 1% per voyage, renewed every 7 days. On a $100M tanker, that’s the difference between a $250,000 insurance bill and a $1,000,000 one, per trip. VLCC daily charter rates went from roughly $20,000 to over $770,000 in some spot fixtures. Hapag-Lloyd slapped a $1,500–$3,500 per container War Risk Surcharge on all Arabian Gulf bookings. These aren’t abstract numbers they flow straight into the cost of goods,” Sharma said.

Strategic Oil Corridor Under Pressure

The situation is particularly sensitive because the Strait of Hormuz is one of the world’s most important oil transit.

“The Strait of Hormuz moves about 20–21 million barrels per day, roughly one-fifth of global oil consumption. Brent was already up ~13% to $82/barrel, with credible analyst scenarios pointing toward $100+ if the disruption holds. The Middle East-to-Asia tanker benchmark (TD3C) nearly tripled from its January 2026 level,” Sharma added.

Beyond the immediate impact on shipping costs, analysts warn of broader economic ripple effects.

“What worries me from a small business credit perspective is the second-order effect. When freight costs spike, thin-margin borrowers, the truckers, the distributors, the manufacturers we lend to absorb the hit before they can pass it on. That shows up in cash flow before it shows up in any macroeconomic headline. And right now, the insurance market isn’t pricing this as a temporary spike. Post-Red Sea, war risk baselines have structurally reset upward. Underwriters are building in scenario pricing for rapid re-escalation. That means this isn’t a one-quarter disruption . it’s a persistent input cost baked into energy and freight for the foreseeable future.”

Premiums Surge As Insurers Reassess Risk

Experts say war-risk insurance premiums have risen sharply compared to pre-conflict levels.

Prof. Jaydeep Mukherjee from the Great Lakes Institute of Management in Chennai noted that insurers are factoring in heightened geopolitical risk.

“Before the recent conflict, the freight war-risk premiums travelling through the Persian Gulf or Red Sea were roughly 0.2–0.25% of the vessel’s insured value. During the current crisis, premiums have jumped beyond 1 percent even rising to as high as 3% of the vessel value, depending on the route and perceived risk.”

He added that the impact extends beyond shipping companies. “Around one-quarter of global seaborne oil trade passes through the Strait of Hormuz. The cost of transporting oil is directly influenced by maritime insurance premiums, which ultimately affects the final price at the pump. High insurance premiums also make freight commercially unattractive.”

Shipping Costs May Push Up Oil Prices

Rising insurance costs are also expected to affect crude oil prices globally, as higher logistics expenses feed into the final cost of imports.

Dr. Ashish Andhale from the School of Economics and Commerce at MIT-WPU said that the conflict is forcing insurers to raise premiums for ships passing through the Gulf.

“The ongoing conflict in West Asia has increased geopolitical risk in major maritime routes such as the Red Sea and the Strait of Hormuz. As a result, insurance companies have started raising war-risk premiums for vessels transporting oil. For instance, war-risk insurance for ships passing through the Gulf was earlier around 0.25% of the vessel’s value, but it is now expected to increase by around 50% or more due to security concerns.”

He explained the potential cost impact using a typical tanker example. “For a $100 million oil tanker, this could raise insurance costs from about $250,000 to nearly $375,000 per voyage.”

According to him, higher shipping costs could eventually push up crude prices. “In my view, such increases raise the overall cost of maritime transportation of crude oil. When shipping costs rise, oil-importing countries and firms face higher import expenses, which may exert upward pressure on global oil prices. However, the magnitude of this impact will largely depend on the duration of the conflict and the extent to which key supply routes remain affected.”

How Insurance Premiums Influence Oil Trade

Insurance premiums are essentially the price paid by businesses to transfer risk to insurers. Sarika Gaur, founder of Gaur Investments, explained, “Insurance premiums are the amount paid by policyholders to an insurance company to obtain coverage against a specific risk.”

She added that the insurance system works on the principle of risk pooling. “In simple terms, insurance works on the principle of risk pooling. Individuals or businesses exposed to similar risks contribute a fixed amount called a premium into a common pool. When a loss occurs to any insured member of that pool, the insurance company compensates the loss through a claim paid from this pooled fund.”

However, conflicts increase the perceived risk for insurers, pushing up premiums. “Yes, particularly marine insurance premiums are rising due to the ongoing geopolitical tensions in West Asia.”

She further noted that insurers classify high-risk maritime corridors as war-risk zones. “When conflicts occur near critical shipping routes, the risk associated with transporting goods increases. Insurers classify these regions as war-risk zones, which leads to higher war-risk premiums for vessels and cargo passing through them.”

These costs eventually feed into global oil prices. “The final cost of imported oil includes multiple components such as cost of crude oil, transportation and shipping charges, insurance costs and other logistical expenses.”

“During conflicts, shipping routes may become unsafe or longer due to diversions. This increases travel time, operational risk, and insurance premiums, especially war-risk insurance. These higher transportation and insurance costs are ultimately reflected in the overall cost of oil, which may influence global oil prices.”

Supply Chain Impact

Manufacturers and exporters are also closely watching the developments as logistics costs increase.

Raj Bhayani, Director (International Business) at Western Adsorbents & Catalysts, said shipping risks are forcing companies to rethink supply chain strategies. “Yes, insurance premiums for ships operating in the West Asia region are rising due to the ongoing geopolitical tensions. The escalation around critical maritime routes such as the Strait of Hormuz has significantly increased perceived risk for shipowners and insurers.” He added, “As a result, marine war-risk premiums that were earlier around 0.25–0.5% of a vessel’s value have reportedly risen to around 1% or more in certain cases.”

He said the additional costs could be substantial for large vessels. “This means that for large commercial vessels or oil tankers, the additional insurance cost can run into hundreds of thousands of dollars per voyage. The increase in premiums, along with rerouting and security measures, is ultimately raising logistics costs across global supply chains.”

He added that exporters are increasingly prioritising supply chain resilience, “For exporters and industrial manufacturers like us, these developments highlight the growing importance of resilient supply chains and diversified logistics planning when operating in geopolitically sensitive trade corridors.”

Also read: India Inspects Legal Impact Of US Investigation Under Section 301