The cost of insuring ships passing through the Strait of Hormuz has increased 12-fold, even after US President Donald Trump promised to support trade through the key oil route, the Financial Times reports, writes UNN.
Details
According to brokers, shipowners were offered millions for insurance when crossing the strait or sailing in adjacent high-risk waters, amid insurance premiums jumping to 3% of the ship's value on Wednesday, compared to approximately 0.25% before the war.
The US President stated on Truth Social that the US Development Finance Corporation (DFC) will provide insurance and guarantees "at a very reasonable price… for the financial security of all maritime trade, especially energy carriers, passing through the Persian Gulf."
On Wednesday, London insurers struggled to understand how this offer might work and whether it would help lower prices. Several of the world's largest insurance brokers said they were caught off guard by Trump's statement.
"We haven't heard anything beyond the Truth Social statement," said David Smith of specialist brokerage McGill, adding that insurers are unsure how widely this support will extend, despite the promise to insure "all" trade through the Persian Gulf.
"Will this extend, for example, to a cargo of Chinese oil carried by a European tanker?" Smith asked. "We don't know."
Other maritime experts questioned how useful DFC assistance could be, whose primary role is to facilitate private investment in poorer countries, when the main problems for shipowners operating in the region are freight costs and the risk of attack, rather than the availability of insurance.
"Perhaps it was a way to mitigate the fall in oil prices," said Ed Finley-Richardson, a shipping investor and founder of Contango Research, commenting on the DFC statement, "but, at first glance, I don't see how it changes anything. We already have insurance."
The price of Brent crude oil fell slightly after Trump's statement but remains significantly higher than at the start of the war.
The cost of insuring ships operating near the Middle East has risen sharply since insurance companies began notifying clients over the weekend of the cancellation of war risk insurance policies.
According to brokers, some insurers canceled policies to reinstate coverage at higher prices reflecting current risk levels, but others left the market, and many refused to provide insurance coverage through the strait, where ship traffic has virtually stopped in recent days.
At least 7 tankers have been attacked in the strait and adjacent waters since Sunday as of Wednesday, and vessels reported receiving radio messages, apparently from Iran's Islamic Revolutionary Guard Corps, instructing them to stay away from the waterway.
Typical prices in this high-risk region are now between 1 and 1.5 percent of the ship's value, while US, UK, and Israeli-linked vessels were offered prices three times these figures, broker Marsh's Dylan Mortimer told the Financial Times.
Trump added on Truth Social: "If necessary, the US Navy will begin escorting tankers through the Strait of Hormuz as soon as possible."
Naval escort would help reduce the threat to ships, maritime security experts said, but providing protection for all tankers operating in areas currently threatened by Iran may be unrealistic, as it would require a very large number of warships and other military assets.
US naval ships would also be at risk if they entered the strait before Tehran's navy was significantly weakened, one maritime security adviser said. "They fear that if they send a warship into the area, all Iranian missiles will be fired at them. They will be completely overwhelmed."
US military says it hit or sank over 20 Iranian vessels04.03.26, 21:50 • [views_8368]
Iran clarified which vessels are prohibited from the Strait of Hormuz
Meanwhile, as CNN notes, on Thursday, Iran's Islamic Revolutionary Guard Corps stated that the Strait of Hormuz is closed only to vessels from the US, Israel, Europe, and other Western allies.
"We previously stated that, based on international law and resolutions, during wartime, the Islamic Republic of Iran will have the right to control passage through the Strait of Hormuz," the Islamic Revolutionary Guard Corps said, according to state broadcaster IRIB.
If vessels belonging to the US, Israel, Europe "and their supporters… are spotted, they will certainly be attacked," the IRGC warned.
The strait has effectively been closed since the US and Israel launched a joint operation against Iran on Saturday, driving up oil prices and threatening to overturn the global economy.
Maersk and Hapag-Lloyd, two of the world's largest ocean freight companies, informed customers that they are no longer accepting most cargo bound for Persian Gulf ports due to hostilities in the region.