Gulf War Risk Insurance Crisis: What the Iran Strikes Mean for Container Shipping

Shippers with cargo moving to or from the Persian Gulf face urgent decisions this week. Vessels already in transit may be stranded at shelter ports for an indeterminate period. New bookings to Gulf destinations face uncertain timelines and rapidly escalating costs. And for some operators — particularly those with business connections to the United States or Israel — the option of Gulf transit may have been removed entirely, not by government sanction, but by the insurance market itself.

Marine war risk insurers moved with unusual speed over the weekend following the US and Israeli military strikes against Iran that began on 28 February, issuing cancellation notices for Gulf shipping policies before markets reopened on Monday. The repricing that follows will be substantial: Marsh, the world’s largest insurance broker, estimates near-term hull and machinery rate increases of 25 to 50 per cent for vessels transiting the Strait of Hormuz and wider Gulf region.

Before the strikes, war risk premiums for Hormuz transits stood at approximately 0.25 per cent of a vessel’s insured hull and machinery value. Industry brokers now indicate premiums could reach 0.5 per cent or higher. For a large container vessel valued at $150 million, that translates to a single-transit premium rising from around $375,000 to $750,000 — costs passed directly to cargo owners as war risk surcharges.

Dylan Mortimer, Marsh’s marine hull UK war leader, said the primary risks centre on vessel boarding and seizure by Iranian forces and the potential closure of the strait. While insurers are expected to renegotiate rather than withdraw coverage entirely, the repricing will be significant.

But the more consequential development may be selective uninsurability. Bimco’s chief safety and security officer Jakob Larsen warned that ships with business connections to the US or Israel may be unable to obtain coverage at any price, effectively barring them from the region. Larsen told Arabian Gulf Business Insight that insurance rates were expected to increase “manyfold” — a step change from the incremental premium adjustments seen during the Red Sea crisis. Where the Houthi disruption allowed for gradual market adaptation, this is a binary repricing event.

Cargo insurers are also preparing to act. Underwriters covering commodities moving through the Gulf — including manufactured goods, raw materials and consumer products alongside oil and gas — are reviewing and potentially cancelling existing policies before renegotiating terms. The Lloyd’s Market Association’s Joint War Committee is expected to update its listed areas imminently. Protection and indemnity clubs, whose cover is equally critical in determining whether a vessel actually sails, have yet to issue public circulars — but their response will be closely watched in the coming days.

The freight market was already signalling disruption before the strikes began. Xeneta data showed spot rates from China to the UAE had risen 5 per cent in the ten days preceding the military operation, reaching $1,572 per FEU as of 15 February. With the Gulf now effectively closed to commercial container traffic, that trajectory is expected to accelerate sharply. Based on Container Management’s analysis of rate movements during the early Red Sea disruption, when spot rates on affected lanes doubled within weeks, a similar trajectory is plausible if Gulf closures persist.

The broader rate environment compounds the pressure. Freightos Baltic Index (FBX) Global Composite data showed the global average container spot rate at $1,946 per FEU as of 20 February — down from the January peak driven by Chinese New Year front-loading, but still elevated above the pre-Red Sea baseline. The Iran escalation arrives into this environment as a fresh supply shock.

With carriers now executing full regional withdrawals rather than selective diversions, the capacity absorbed by longer Cape of Good Hope routing will tighten available tonnage on major east-west trade lanes. Several major container lines did not respond to requests for comment on the scope or expected duration of their Gulf suspensions.

The cost accumulation for shippers is becoming layered: war risk surcharges, emergency fuel surcharges for Cape diversions, and potential congestion surcharges at alternative transhipment ports are all likely to materialise in the coming days. Marco Forgione, director general of the Chartered Institute of Export and International Trade (CIEIT), warned that supply chain disruption could persist for months.

For shippers with Gulf-dependent supply chains, the calculus is immediate. Those with cargo in transit need contingency routing now. Those planning new bookings need to factor in not just higher freight rates, but the full surcharge stack and the possibility that certain vessel operators simply cannot obtain the insurance required to enter the region.