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War risk insurance adds up to $8 a barrel amid Iran conflict
Insurers have paid about $2 billion in war risk claims across more than 70 cases since the conflict began, and the surcharge can reach as much as 10% of a vessel’s value in designated high-risk zones.
War risk insurance linked to the Iran conflict is increasing the cost of crude oil, with Lloyd’s List law and insurance editor David Osler saying a single voyage through high-risk waters can add up to $8 to the price of a barrel of oil, according to reporting by AGBI. Osler said insurers have paid roughly $2 billion in claims across more than 70 cases since the conflict began, and that the expense is the second-largest hit to marine insurers in more than a decade, after payouts tied to the 2024 collapse of Baltimore’s Francis Scott Key Bridge. The cost increase is tied to higher premiums when vessels enter designated war-risk zones. Osler said shipowners typically carry baseline annual war-risk coverage of several hundred thousand dollars, but the surcharge can rise from a fraction of a percentage point in normal conditions to as much as 10% of a vessel’s value in high-risk areas, translating into millions of dollars for a very large crude carrier on a single voyage. The high-risk area has also expanded, with insurers reportedly extending the zone about 800 kilometers north along the Red Sea coast near the Bab Al-Mandab strait, raising premiums for more vessels bound for northern ports. AGBI also cited US Treasury Secretary Scott Bessent on the idea that new pipelines could make the Strait of Hormuz less relevant within two years, while Neil Atkinson of the National Center for Energy Analytics said the timeline is doubtful, as Gulf exporters consider shifting more supply overland.
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