The short answer is that for some vessels transiting the Persian Gulf right now, shipping insurance premiums are indeed approaching or exceeding the value of the cargo onboard. Following U.S. and Israeli military strikes against Iranian targets on February 28, 2026, war risk premiums for Strait of Hormuz transits have surged from roughly 0.25% of hull value to 0.5% or higher — translating to single-voyage costs of $375,000 to $750,000 or more for a large container vessel. For smaller ships carrying partial loads of non-premium goods, those numbers can rival or surpass the cargo’s worth. But the bigger story is even worse: for many shipowners, insurance is not just expensive — it is simply unavailable at any price.
Seven major Protection and Indemnity clubs, representing more than half of the International Group that covers approximately 90% of the world’s ocean-going fleet, have cancelled war risk coverage for vessels entering the Persian Gulf effective midnight London time on March 5, 2026. Tanker traffic through the Strait of Hormuz has already dropped to zero. At least 13 empty LNG tankers have diverted away from the eastern side of the waterway. This is not a theoretical pricing exercise — it is a real-time shutdown of one of the most critical shipping corridors on earth. This article breaks down the insurance crisis in detail: what triggered it, how premiums have moved, which ships and routes are affected, what historical precedent exists, and what happens next for global energy markets and consumer prices.
Table of Contents
- How Much Does Persian Gulf Shipping Insurance Actually Cost Right Now?
- Why Seven Major Insurers Pulled the Plug Simultaneously
- The Strait of Hormuz Traffic Shutdown Is Already Happening
- How This Compares to the Red Sea Insurance Crisis
- The Consumer Price Impact Is Coming but Hard to Quantify
- What Happens to Ships Already in the Gulf
- Where the Insurance Market Goes From Here
- Conclusion
- Frequently Asked Questions
How Much Does Persian Gulf Shipping Insurance Actually Cost Right Now?
Before the February 28 strikes, war risk premiums for a single transit through the Strait of Hormuz ran about 0.25% of a vessel’s hull value. That was already elevated by historical standards, partly a hangover from the Red Sea crisis of 2024–2025 when Houthi attacks pushed maritime insurance costs sharply higher across the broader Middle East region. For a $150 million container vessel, a single transit cost roughly $375,000 in war risk premiums alone — expensive, but manageable when spread across a full cargo manifest of high-value goods. Now those premiums have doubled or more. Insurance broker Marsh estimates near-term marine hull rate increases of 25% to 50%, with war risk surcharges climbing even faster. That same $150 million container vessel now faces a premium of approximately $750,000 for a single voyage through the strait. For a $100 million VLCC supertanker, the per-voyage insurance cost has surged to roughly $400,000, up from about $250,000.
These figures cover only the war risk component — standard hull and cargo insurance comes on top. For context, in 2025, Strait of Hormuz war risk premiums ranged from 0.125% to 0.4% of hull value, and broader Middle East Gulf rates were 0.2% to 0.5%, according to S&P Global data. We have blown past those ceilings. The “insurance costs more than the cargo” framing is most accurate for smaller vessels or partial loads. A $375,000 to $750,000 war risk premium is imposed based on hull value regardless of what is actually being carried. A mid-sized cargo ship hauling a partial load of agricultural commodities, textiles, or manufactured goods worth $300,000 to $500,000 would indeed face insurance costs rivaling or exceeding the value of the shipment. For fully laden supertankers carrying $80 million or more in crude oil, the premium is painful but proportionally smaller. The crisis is not uniform — it hits different ships and cargo types very differently.
Why Seven Major Insurers Pulled the Plug Simultaneously
The cancellations came from Gard AS, NorthStandard, Steamship Mutual, Skuld, the American Club, the Swedish Club, and the London P&I Club. These are not fringe players. They are among the 12 member clubs of the International Group of P&I Clubs, which collectively insures roughly 90% of the world’s ocean-going tonnage. When more than half of that group simultaneously cancels coverage for a specific region, the effect is immediate and industry-wide. Japan’s MS&AD Insurance Group has also suspended war risk underwriting for waters around Iran, Israel, and neighboring countries. The mechanics of P&I club coverage matter here. These clubs operate on a mutual basis — shipowners pool risk together, and the clubs set the terms.
When a club cancels war risk cover for a region, every vessel insured through that club loses its ability to legally transit the area. Most port states, flag states, and financing agreements require active P&I coverage as a condition of operation. without it, a ship cannot legally enter port, cannot access letters of credit, and in many cases cannot even leave its current berth to head toward the affected zone. However, cancellation by some clubs does not necessarily mean zero coverage exists. The remaining five International Group clubs have not yet pulled out, and standalone war risk underwriters in the Lloyd’s of London market may still offer coverage — at dramatically higher rates. The critical limitation is that ships with business connections to the United States or Israel may be unable to obtain coverage at any price, effectively barring them from the region entirely. This selective uninsurability creates a two-tier system: vessels with no U.S. or Israeli commercial ties may find coverage if they are willing to pay the premium, while others are simply locked out.
The Strait of Hormuz Traffic Shutdown Is Already Happening
The insurance cancellations have not just threatened shipping — they have already stopped it. According to the Maritime Executive, tanker traffic through the Strait of Hormuz dropped to zero as P&I clubs pulled war risk cover. This is the waterway through which roughly 20% of the world’s oil supply passes on any given day. A complete halt in tanker traffic, even for a few days, sends shockwaves through global energy markets. At least 13 empty LNG tankers have diverted away from the eastern side of the strait, a signal that shipowners are not waiting to see if the situation improves before rerouting. These diversions add time and fuel costs to every voyage. For LNG carriers that were heading to terminals in Qatar or the UAE, the alternatives are limited — there is no overland pipeline network that can replace seaborne LNG transport at scale.
The vessels must either wait for the insurance market to stabilize or seek entirely different supply sources. The speed of this shutdown is striking. The military strikes occurred on February 28. By March 2, tanker traffic was at zero and LNG carriers were already diverting. The insurance cancellations do not take formal effect until March 5, meaning the market moved ahead of the deadline. Shipowners and their financing banks were not willing to risk even a few days of uncertain coverage, so they pulled vessels preemptively. This kind of anticipatory shutdown is a feature of modern maritime insurance — the announcement of cancellation has nearly the same effect as the cancellation itself.
How This Compares to the Red Sea Insurance Crisis
The Red Sea crisis of 2024–2025 offers the closest recent parallel. Houthi attacks on commercial shipping in the southern Red Sea and Gulf of Aden pushed war risk premiums sharply higher and forced many vessels to reroute around the Cape of Good Hope, adding roughly two weeks to Europe-Asia transit times. That crisis demonstrated how quickly insurance markets can reshape global shipping patterns. But the Persian Gulf situation is materially worse in at least two respects. First, the volume of cargo at stake is far larger. The Strait of Hormuz handles roughly 21 million barrels of oil per day and massive quantities of LNG, compared to the Red Sea’s role primarily as a transit corridor. Losing Hormuz access means losing direct access to the oil and gas supplies of Saudi Arabia, Iraq, Kuwait, Qatar, and the UAE — not just a longer route to the same destination.
Second, the Red Sea crisis involved attacks on shipping by a non-state actor with limited military capability. The current crisis involves direct military confrontation between the United States, Israel, and Iran, which represents a categorically different risk profile for insurers. The tradeoff for shipowners is stark. Rerouting Red Sea traffic around Africa was expensive and slow, but it was possible. There is no equivalent alternative route for Persian Gulf oil and gas. Pipelines from the Gulf to the Red Sea coast exist but have limited capacity. The practical choice for many operators is not between an expensive route and a cheaper one — it is between paying extraordinary insurance costs or not moving the cargo at all.
The Consumer Price Impact Is Coming but Hard to Quantify
The immediate risk for consumers is an energy price spike. If Hormuz remains effectively closed to insured tanker traffic for more than a few days, oil and LNG prices will rise sharply. Oil markets have already priced in some disruption, but a sustained closure would push crude prices well above current levels. Every dollar increase in oil prices feeds through to gasoline, diesel, jet fuel, heating oil, and the cost of transporting virtually every physical good. The less obvious impact is on manufactured goods and agricultural products that transit the Gulf. The UAE’s Jebel Ali port is a major transshipment hub for goods moving between Asia, Africa, and Europe.
If container vessels cannot obtain insurance to call at Gulf ports, those supply chains will break. This would not show up immediately at American retail stores, but within weeks, shortages and price increases would become visible in categories ranging from electronics components to processed foods. A critical limitation on any price forecast is that the situation is evolving by the hour. If the military confrontation de-escalates quickly and insurers reinstate coverage, the disruption could be measured in days rather than weeks. But if hostilities continue or expand, the insurance market will not simply snap back to normal. P&I clubs that have cancelled coverage will require a sustained period of calm before reinstating it, and premiums will remain elevated for months even after a ceasefire. The 2024–2025 Red Sea experience showed that war risk premiums stayed high long after the most intense period of attacks subsided.
What Happens to Ships Already in the Gulf
Vessels currently inside the Persian Gulf face a particularly difficult situation. Once their P&I clubs cancel war risk cover on March 5, they will be operating without standard insurance protection. Exiting through the Strait of Hormuz means transiting the most dangerous waters without coverage. Staying in port means incurring daily costs while generating no revenue, with no clear timeline for when coverage might be restored.
Some shipowners may turn to government-backed insurance schemes. During previous crises, including the Tanker War of the 1980s, state-run programs stepped in to provide coverage when private markets withdrew. The U.S. government’s own war risk insurance program, administered through the Maritime Administration, exists for exactly this scenario — but it covers only U.S.-flag vessels, which represent a tiny fraction of global tonnage. Whether other governments will create similar backstops remains to be seen.
Where the Insurance Market Goes From Here
The most likely near-term outcome is a bifurcated market. A handful of specialist underwriters — primarily in the Lloyd’s market — will continue to offer Persian Gulf war risk coverage at dramatically elevated premiums, possibly 1% of hull value or higher for a single transit. This would price out most routine commercial traffic while still allowing the highest-value cargoes, particularly crude oil shipments, to move when the economics justify it. Meanwhile, the major P&I clubs will remain on the sidelines until the geopolitical situation stabilizes, which could take weeks or months.
The longer-term question is whether this crisis accelerates structural changes in how maritime war risk is underwritten. The combination of the Red Sea disruption and now the Persian Gulf shutdown has demonstrated that the traditional model — where a handful of mutual clubs and Lloyd’s syndicates bear the risk of geopolitical conflict for the entire global fleet — may not be sustainable. Governments, sovereign wealth funds, and new insurance vehicles may need to play a larger role. For now, though, the immediate reality is simpler and grimmer: one of the world’s most important shipping lanes is functionally closed, and the insurance industry is the mechanism that closed it.
Conclusion
The Persian Gulf shipping insurance crisis is not primarily a story about premium increases, though those are dramatic enough — war risk costs doubling or tripling overnight, with single-voyage premiums reaching $750,000 or more for large vessels. The real story is about availability. When seven of the twelve major P&I clubs cancel coverage for a region that handles 20% of global oil supply, the result is not just higher costs but a functional blockade enforced not by navies but by actuaries. For smaller vessels and lower-value cargoes, the headline is accurate: insurance can now cost more than the cargo.
For everyone else, the problem is worse — insurance may not be available at all. What happens next depends almost entirely on the military and diplomatic trajectory of the U.S.-Iran confrontation. A rapid de-escalation could see coverage gradually restored within weeks, though premiums will remain elevated for months. Continued hostilities will extend the shutdown indefinitely and force governments to consider emergency insurance backstops, strategic petroleum reserve releases, and alternative supply arrangements. Consumers should expect energy prices to rise in the near term regardless of outcome, with broader goods inflation following if the disruption persists beyond early March.
Frequently Asked Questions
Can ships still transit the Strait of Hormuz without war risk insurance?
Technically a vessel can sail anywhere, but practically no. Port authorities, flag states, and banks that finance vessels all require active P&I coverage. Without it, ships cannot enter most ports, access letters of credit, or meet regulatory requirements. Operating without insurance also exposes shipowners to unlimited personal liability.
How long will the insurance cancellations last?
There is no fixed timeline. P&I clubs will reassess based on the security situation. During the Red Sea crisis, elevated premiums and restricted coverage persisted for months after the most intense attacks. A full military de-escalation between the U.S., Israel, and Iran would be the prerequisite for reinstatement, and even then clubs would likely wait weeks before restoring coverage.
Will gas prices in the United States go up because of this?
Almost certainly yes, at least in the short term. The Strait of Hormuz handles roughly 21 million barrels of oil per day. Even a brief disruption to that flow pushes global crude prices higher, which feeds through to U.S. gasoline prices within one to two weeks. The magnitude depends on how long the disruption lasts and whether strategic reserves are tapped.
Are there alternative routes that avoid the Strait of Hormuz?
Unlike the Red Sea, where ships can reroute around Africa, there is no viable alternative sea route out of the Persian Gulf. Some oil can move via pipeline — Saudi Arabia’s East-West pipeline and the UAE’s Abu Dhabi Crude Oil Pipeline bypass Hormuz — but these have limited capacity and cannot replace seaborne transport at scale.
Does this affect all ships equally?
No. Vessels with business connections to the United States or Israel face the most severe restrictions and may be unable to obtain coverage at any price. Ships flagged in neutral countries with no U.S. or Israeli commercial ties may still find standalone coverage in the Lloyd’s market, though at significantly elevated premiums.