15th October 2026
Rising war-risk premiums are adding millions of dollars to the cost of sending ships through one of the world's most important energy routes. The latest attacks could make it even harder to keep oil and other goods moving.
The growing number of attacks on commercial shipping around the Strait of Hormuz is creating a second crisis beyond the immediate threat to ships and their crews. Insurance costs have surged, and shipowners face the prospect of paying millions of dollars more for a single voyage through the area.
The Strait of Hormuz, between Iran and Oman, is one of the world's most important maritime chokepoints. A substantial share of internationally traded oil and liquefied natural gas normally passes through it, supplying markets in Asia, Europe and elsewhere.
When the security of this route deteriorates, the consequences extend well beyond the Gulf. Higher insurance premiums, increased freight charges and delays to deliveries can all add to the cost of energy and other goods reaching Britain.
Insurance costs have risen dramatically
Ships travelling through dangerous waters can face additional war-risk insurance premiums on top of their normal cover. These charges are commonly calculated as a percentage of the vessel's insured value for the particular voyage.
Before the current crisis, additional premiums for a transit through the area could be around 0.1 to 0.25 per cent of a vessel's insured value. During the escalation of the conflict, reported market quotations rose into the several-per-cent range, with some reports in August putting rates at 7.5 to 12.5 per cent.
The precise charge varies according to the vessel, its flag, ownership, cargo, route and the insurer's assessment of the risk. These figures should therefore be treated as reported market ranges rather than a standard tariff applying to every ship.
Nevertheless, the financial implications are substantial.
For a vessel insured for $100 million, a premium of 0.25 per cent would amount to $250,000. At 7.5 per cent, the cost would rise to $7.5 million. At 10 per cent, it would reach $10 million for the insured voyage.
Those are illustrative calculations, not confirmation of the price currently being quoted to every shipowner. But they demonstrate why a route that was commercially attractive before the conflict can become much harder to justify.
And insurance is only one part of the bill. Shipowners must also consider the possibility of damage, loss of cargo, injury to crew, delays and the costs of operating under dangerous conditions.
The latest attacks make the calculation harder
The problem for insurers is that the risk is not simply theoretical. Commercial vessels have been exposed to attacks involving projectiles and other weapons, while the threat extends across different types of shipping.
Each new incident makes it more difficult for underwriters to estimate the likely scale of future claims. Insurers may respond by increasing premiums, reducing the cover available or declining to insure particular vessels and voyages altogether.
That last possibility is especially important. Even a shipping company prepared to pay a very high premium cannot proceed normally if it cannot obtain adequate insurance.
Some owners may decide to wait outside the danger area. Others may seek alternative routes where possible, although there is no straightforward alternative maritime passage capable of replacing the Strait of Hormuz for all the oil and gas normally transported through it.
The result can be a reduction in the number of ships willing to enter the Gulf, adding to the disruption caused by the attacks themselves.
From shipping costs to the price of diesel
The consequences do not stop with shipping companies and insurers.
Oil companies and traders must take account of the cost and reliability of transporting supplies. If fewer cargoes leave the Gulf, or deliveries become more expensive and unpredictable, buyers may have to compete more aggressively for supplies from elsewhere.
That can place upward pressure on international oil prices. Higher freight and insurance charges can also add to the delivered cost of oil, although the final effect on prices depends on wider market conditions.
For Britain, the implications include petrol and diesel prices, heating oil, aviation fuel and the cost of transporting goods. Businesses dependent on road haulage may face higher operating costs, while farmers and food producers can be affected by more expensive fuel, fertiliser and other imported inputs.
The effect on households is not necessarily immediate. Oil prices, exchange rates, refinery margins, taxes and competition all influence what motorists pay at the pump. Heating oil prices also depend on local supply and distribution costs.
But a prolonged disruption would make it harder to avoid additional pressure on household budgets and business costs.
The danger of a prolonged disruption
The insurance market provides another way of understanding why the situation is so serious.
A tanker does not have to be destroyed for the conflict to disrupt oil supplies. If the cost of insurance becomes prohibitive, or the risk to the vessel and crew is considered unacceptable, its owner may simply refuse to send it through the area.
When enough shipping companies make that decision, the amount of oil reaching world markets can fall even if some vessels continue to operate.
That creates a difficult cycle. Attacks increase the perceived risk, insurance becomes more expensive, fewer ships are willing to sail and the cost of moving available supplies rises. If the disruption continues, energy markets must adjust to a less reliable flow of oil and gas.
Governments can explore insurance guarantees, emergency arrangements and other forms of support to help maintain essential shipping. Such measures may help, but they cannot remove the physical danger to crews or guarantee that commercial operators will be willing to sail.
Nor would a reduction in military activity necessarily bring shipping costs immediately back to previous levels. Insurers would need to be satisfied that the threat had genuinely diminished before reducing their charges substantially.
A warning for Britain
The rising cost of insuring ships in the Strait of Hormuz illustrates how an overseas conflict can reach British businesses and households through several different channels.
The immediate concern is the safety of seafarers and the destruction or damage of commercial vessels. The wider economic concern is that the cost of moving energy supplies may rise sharply even before a lasting shortage becomes apparent.
For consumers already facing pressure from fuel and heating costs, another sustained increase in oil prices would be unwelcome. For businesses, the uncertainty itself makes planning more difficult, particularly when fuel, transport and imported materials account for a significant part of their costs.
The crucial question is not simply how high insurance premiums will rise after the latest attacks. It is how long shipping companies, insurers and energy traders believe the danger will persist.
If confidence in safe passage through Hormuz is not restored, the world could face a prolonged period of higher shipping costs, less reliable energy supplies and renewed pressure on prices.
The Strait of Hormuz may be thousands of miles from Scotland, but the cost of keeping ships moving through it can eventually be felt at the filling station, on the farm and in the household heating-oil tank.