Strait Of Hormuz: Current Situation And Implications For Marine Insurance

Analysis of shipping risks, war risk premiums and marine insurance challenges arising from continued instability in the Strait of Hormuz.

The Strait of Hormuz remains the most significant maritime chokepoint in the world. Approximately one-fifth of global oil trade and substantial volumes of LNG exports from the Gulf traditionally transit through the Strait. Following the outbreak of hostilities involving Iran earlier in 2026, the waterway has become a focal point of military, commercial and insurance concerns.

While the Strait is not formally closed under international law, commercial shipping continues to operate in an environment characterised by military activity, attacks on merchant vessels, navigational interference, mine threats and rapidly changing insurance requirements.

Security Situation

The security environment remains highly volatile.
According to the Joint Maritime Information Center (JMIC), the threat level in the Strait of Hormuz and surrounding waters remains either “Severe” or “Critical”, depending on the specific area and reporting period. Recent advisories refer to continued risks from missile and drone attacks, Iranian Revolutionary Guard Corps (IRGC) surveillance activities, navigational interference, and the possibility of drifting or uncharted mines.

Commercial traffic remains significantly below historical levels. Prior to the conflict, approximately 130 to 140 vessels transited the Strait daily. Recent industry and JMIC reports indicate that traffic remains heavily suppressed, with many operators delaying voyages or transiting under special security arrangements.

Recent incidents demonstrate that the threat is far from theoretical. On 31 July 2026, an LNG carrier was struck by a projectile while transiting the Strait, resulting in a fire and loss of propulsion. A VLCC also reported a near miss from an unidentified projectile in the same period.

Although the United States has announced the clearance of mines from established traffic separation schemes, industry bodies such as INTERTANKO have warned that mine clearance alone is insufficient to restore normal commercial operations because vessels still face risks from attacks, interference and geopolitical escalation.

The response of the Shipping Industry, a new normal

Shipowners continue to conduct voyage-by-voyage risk assessments rather than treating transits through Hormuz as routine operations. INTERTANKO has expressly advised that the decision to transit remains a matter for individual owners based on their own assessment of vessel, crew and trading exposure.

Many tankers and LNG carriers that continue trading to Gulf ports are reportedly doing so with enhanced security measures, military coordination, and intensive voyage planning. In some cases, vessels have elected to wait offshore rather than enter the risk area immediately.

The disruption has also generated substantial charterparty and contractual issues, including force majeure arguments, deviations, war risks clauses, employment disputes and claims for additional freight and security costs. Lloyd’s List has reported increasing legal activity arising from the Hormuz crisis, drawing comparisons with disputes that followed the closure of the Suez Canal.

We have reached peak disruption. However, traders do not believe that we will run out of oil. The shipping industry is adapting to the new situation, but this is not a normal market. What is increasing, more than the price of crude oil, is the price of oil products. For example, the price of diesel is now around US$200 a barrel (crude oil is less than US$100). This is gradually becoming a major crisis. The refinery capacity is heavily stretched. Less oil products are coming out from the Middle East. At the same time, Ukraine has been successful in attacking the Russian oil installations and oil refineries. The global refinery system has to work flat out to satisfy demand, and this is increasing the price of oil products considerably.

Marine Insurance Implications

Hull and War Risks Insurance

The most significant impact has been on war risks insurance. Since the beginning of the conflict, marine insurance has paid out around 2 billion dollars in war risk claims. Insurers are responding to an elevated risk in the Gulf.

Following the escalation of hostilities in early 2026, the London market and the Joint War Committee expanded designated high-risk areas covering the Persian Gulf, Gulf of Oman and Strait of Hormuz. This triggered a dramatic increase in Additional War Risk Premiums (AWRP).

Before the crisis, war risk premiums for a Hormuz transit might have been approximately 0.125% to 0.25% of a vessel’s insured value. During the conflict, reported premiums rose to between 1% and 5% of the vessel value, with some reports suggesting even higher quotations, up to 10%, depending on vessel type, nationality, cargo and voyage profile.

For a vessel insured for US$100 million, this can translate into an additional war risk premium ranging from US$1 million to US$5 million for a single voyage.

P&I Cover

A number of P&I Clubs and war risk underwriters either suspended or restricted cover for operations involving the most affected areas during the height of the conflict. Operators wishing to transit the region have often been required to negotiate bespoke cover, obtain individual quotations and comply with strict underwriting conditions.

From a liability perspective, shipowners must carefully review:

• War risk exclusions.
• Terrorism exclusions.
• Notice of cancellation provisions.
• Additional premium requirements.
• Compliance with voyage reporting obligations.
• Sanctions-related exclusions.

Cargo Insurance

Cargo owners face similar challenges.
Standard cargo policies generally exclude war perils unless specific Institute War Clauses are incorporated. Consequently, many cargo interests discovered that their ordinary cargo cover did not respond to losses caused by missile attacks, drone strikes, mines or seizure risks.

Cargo owners moving goods through Gulf ports now frequently require:

• Separate war risks extensions.
• Increased insured values.
• Additional transit risk premiums.
• Enhanced sanctions screening.
• Alternative routing assessments.

Crew Risks

Crew welfare has become an increasingly important insurance and operational concern.

Shipowners transiting Hormuz are frequently required to pay additional crew compensation, enhanced death and disability benefits and special bonuses. Some operators have faced difficulties securing crew willing to enter the highest-risk areas.

Insurers also continue to focus on evidence that owners have undertaken comprehensive risk assessments addressing crew safety, security procedures and evacuation planning.

Conclusion

The shipping industry is adapting to a new situation, where the risk for the vessels transiting in the Gulf is elevated and the costs of insurance are increasing.

Recent US announcements regarding mine clearance and escorted transits are positive developments. However, the insurance market continues to view the region as presenting exceptional risk. Industry bodies stress that normality cannot return until vessel operators, charterers and underwriters are satisfied that attacks, interference and mine threats have materially reduced. For the foreseeable future, voyages through the Strait of Hormuz are likely to remain subject to elevated war risk premiums and continuing uncertainty regarding future military escalation.

The Strait of Hormuz remains navigable but challenging. For shipowners, charterers, cargo interests and insurers, the issue is no longer merely freedom of navigation but the allocation and pricing of extraordinary risk. In practice, insurance has become one of the principal determinants of whether a vessel can trade through the region and on what terms. As long as the current security environment persists, marine insurance considerations will remain central to every decision involving Gulf trade.