Global maritime trade has always been sensitive to geopolitical developments, but the recent escalation of tensions in the Middle East has once again highlighted how fragile critical shipping corridors can be. The Strait of Hormuz and surrounding waters—long considered strategically important—are now facing renewed scrutiny from insurers, shipowners, and cargo stakeholders. As military confrontations intensify, the maritime insurance landscape is rapidly adjusting to reflect heightened risks.

According to Balasundaram R., Head of Marine Insurance at Policybazaar for Business, the region had already been flagged as high risk even before the current crisis unfolded.

“The Middle East, especially the Red Sea, has been under close scrutiny for some time by the War Risks Underwriters. In fact, many ports in the region were already identified as High Risk Areas (HRA) wherein the conventional War Risks were no longer included under the Marine Hull and Cargo Insurance, which could be purchased only by paying extra premiums.”

For several years, insurers had been gradually tightening underwriting conditions for vessels operating in the Red Sea and surrounding maritime corridors. As threats ranging from regional conflicts to missile attacks and piracy persisted, insurers began classifying many ports as High Risk Areas (HRA). In such zones, standard marine insurance policies typically exclude war-related damages unless shipowners and cargo operators purchase additional war risk coverage at an extra premium.

However, the situation has evolved dramatically following the latest round of military actions in the region. The strikes carried out by Israel and the United States on Iranian targets, followed by retaliatory actions by Iran, have intensified security concerns across key shipping lanes.

Balasundaram notes that this sudden escalation has fundamentally altered the risk calculations for insurers.

“The sudden escalation of the situation, however, with the strikes by Israel and the US on Iran and the consequent retaliation by Iran, has changed the scenario completely. With the active engagement already underway, the War Risks premiums, which were previously charged, are found to be grossly inadequate.”

The shift from a heightened-risk environment to active military engagement has significantly increased the exposure for vessels navigating the region. As a result, underwriters are reassessing premiums, coverage structures, and even the viability of continuing coverage under existing terms.

20% of world’s oil supply

One of the most critical choke points affected by this situation is the Strait of Hormuz, a narrow maritime corridor that carries immense global economic significance. The strait serves as the primary gateway for oil exports from the Persian Gulf, facilitating the movement of roughly 20% of the world’s oil supply.

Although Iran itself exports oil through the strait, it is equally vital for other major producers including the United Arab Emirates, Qatar, Kuwait, Saudi Arabia, and Iraq. Any disruption to shipping in this corridor can have immediate ripple effects across global energy markets and supply chains.

In addition to the strategic importance of the route, the operational risks for vessels have surged. Ships operating in the Persian Gulf—whether carrying cargo or sailing empty—now face increased exposure to missile strikes, drone attacks, and other forms of military escalation. Ports across the region are also vulnerable, further complicating risk assessments for insurers and shipping operators.

London insurance market response

In response to the evolving threat landscape, the London insurance market, which remains a global hub for marine insurance underwriting, has begun taking precautionary measures. Notices have already been issued cancelling certain war risk coverages under hull policies. Similar cancellations for cargo and Protection & Indemnity (P&I) policies are widely expected to follow.

While coverage may still be reinstated, it will likely come at substantially higher premiums that reflect the heightened geopolitical volatility.

For shipowners, charterers, and cargo interests, these developments present difficult commercial decisions. Operating without war risk coverage is rarely viable in such volatile environments, yet the sharply rising premiums add significant financial pressure to already complex shipping operations.

Ultimately, stakeholders across the maritime ecosystem may find themselves weighing cost against risk in real time. As Balasundaram suggests, securing insurance cover—even at elevated premiums—may prove to be a necessary safeguard as geopolitical tensions continue to unfold.

A stark reminder

In a region where strategic waterways underpin global trade and energy supply, the evolving insurance landscape serves as a stark reminder that maritime security and global commerce remain deeply interconnected. As tensions persist, insurers, shipowners, and cargo stakeholders will need to continuously adapt to a risk environment that is changing faster than ever before.