Marine Insurers Cancel War Risk Cover as Iran Conflict Escalates

Marine insurers are canceling war risk coverage for vessels and oil shipping rates are set to surge further after the widening Iran conflict left at least three tankers damaged, a seafarer killed and 150 ships stranded around the Strait of Hormuz.

Iran has responded to U.S. and Israeli strikes that began on Saturday with retaliatory attacks that have sharply increased risks to commercial shipping in the past 24 hours.

In the Strait of Hormuz and surrounding waters, at least 150 vessels including oil and liquefied natural gas tankers had dropped anchor, shipping data showed on Sunday.

Editor’s note: Marsh’s Dylan Mortimer, marine hull UK war leader, provided the following comment on the US-Iran conflict:

“The primary risks centre on the Persian and Arabian Gulf, particularly the threat of vessel boarding and seizure by Iranian forces and the potential closure of the Strait of Hormuz. It is very early to tell at this point, but we would estimate that near-term rate increases for marine hull insurance in the gulf could range from 25% to 50%, barring any direct attack on merchant shipping, which could have major repercussions across war insurance rates. Given the military build-up in the region, crew are far more likely to be concerned than they might have been to previous risks. The situation remains very fluid, requiring ongoing attention.“

Typically, ships carrying oil equal to about one-fifth of global demand from Saudi Arabia, the United Arab Emirates, Iraq, Iran, and Kuwait sail through the Strait along with tankers hauling diesel, jet fuel, gasoline and other products.

The disruption sparked a 9% jump in global oil prices on Monday.

Insurers Cancel War Risk Cover

Companies including Gard, Skuld, NorthStandard, the London P&I Club and the American Club said their cancellations would take effect from March 5, according to notices dated March 1 on their websites.

War risk cover will be excluded in Iranian waters, as well as the Gulf and adjacent waters, according to the notices.

Skuld added in its notice that it was working on a buy-back option to reinstate cover.

Japan’s MS&AD Insurance Group told Reuters it had suspended underwriting of a range of insurance policies covering war risks in the waters around Iran, Israel and neighboring countries.

Oil Shipping Costs to Rise Further

Meanwhile, costs of shipping oil from the Middle East to Asia — already at six-year highs — are set to rise further as the widening Iran conflict is deterring shipowners from sending vessels to the region, market sources and analysts said on Monday.

Spot shipping rates from the Middle East to Asia, more commonly known as TD3C DFRT-ME-CN, are expected to extend gains, shipbrokers said. The benchmark has nearly tripled since the start of 2026.

Brokers pegged the spot rate for hiring a very large crude carrier on the key Middle East to China route early in Asia on Monday about 4% higher than on Friday, near W225 on the Worldscale industry measure or equivalent to at least $12 million.

Exponential Rise

“TD3C rates were rising exponentially before the attacks and will continue to remain elevated as countries scramble to meet their energy needs,” said Emril Jamil, a senior LSEG analyst.

There is still a lot of uncertainty on where the final rate would be on Monday but all Middle East loading routes are expected to hold firm, a shipbroker said. They declined to be named as they were not authorized to speak to the media.

Meanwhile, the market will need more ships to load crude from the U.S. and West Africa on longer voyages which could support freight on those routes, a source from a shipping company said.