Market Matters Blog           03/03 10:28

   US and Israel-Iran Conflict Cripples Shipping Industry Through Strait of 
Hormuz

   The conflict has driven up insurance premiums and created a backlog that now 
threatens shortages and delivery delays.

Mary Kennedy
DTN Basis Analyst

   On Feb. 28, the United States and Israel started a war with Iran, targeting 
key military sites and killing Supreme Leader Ayatollah Ali Khamenei. Iran 
retaliated with missile and drone attacks on Israel and U.S. bases in several 
Gulf states.

   The war has caused some oil tankers and container ships sailing through the 
Strait of Hormuz to turn around, while many others have anchored in the Persian 
Gulf and/or the Gulf of Oman. While war insurance rose to massive heights 
during the weekend, many insurers are canceling certain war risks.

   Mike Schuler, managing editor of gCaptain, said in his most recent article 
that, "Over the weekend, multiple members of the International Group of P&I 
Clubs -- which collectively insure approximately 90% of the world's ocean-going 
tonnage -- issued formal 72-hour notices of cancellation for certain war risk 
covers tied to Iran and adjacent Gulf waters. In a statement, the Group said it 
is 'monitoring closely the developments over the weekend and the military 
operations currently taking place in the Persian Gulf,' adding that 
stakeholders would be notified immediately of any changes to mutual cover. 
Among the clubs issuing notices were Gard, Skuld, NorthStandard, The London P&I 
Club, The American Club, and Steamship Mutual. Each cited materially heightened 
geopolitical and operational uncertainty, tightening reinsurance appetite, and 
escalating kinetic risk. Cancellation notices issued March 1 will take effect 
at 00:00 GMT on March 5, 2026, after the required 72-hour notice period."

   Schuler added, "Upon expiry of the notices, war risk coverage under affected 
policies will be automatically terminated for liabilities arising in Iran and 
Iranian waters, including 12 nautical miles offshore, as well as the 
Persian/Arabian Gulf and adjacent waters, including the Gulf of Oman and all 
waters west of a defined boundary line running from Oman's Cape al-Hadd to the 
Iran-Pakistan border. The exclusions apply broadly across fixed premium P&I, 
charterers' liability, ancillary and non-poolable extensions, certain crew and 
specialist covers, and offshore and yacht war risk extensions. Importantly, 
clubs emphasized that mutual P&I cover and Excess War Risks cover under IG 
pooling arrangements remain unaffected. Several clubs, including Steamship 
Mutual and Skuld, are exploring buy-back facilities on an individual risk basis 
-- though pricing is expected to reflect sharply elevated risk." Here is a link 
to the gCaptain article by Schuler. If you scroll below the article, there are 
additional related articles packed with information about the shipping 
conflict: 
https://gcaptain.com/gulf-war-risk-insurance-pulled-as-reinsurers-exit/.

   Karim Bastati, DTN refined fuels analyst, said, "The Strait of Hormuz, the 
narrow connection between the Persian Gulf and the Gulf of Oman, is the largest 
chokepoint for global oil flows. Some 15 million bpd of crude oil and 
condensate, and more than 5 million bpd of petroleum products transit through 
the Strait, representing about 20% of global supply. Live marine traffic 
tracking showed hundreds of tankers have already dropped anchor on both sides 
of the passageway. Many shippers have suspended operations after multiple 
tankers were struck by the Iranian military.

   "Production and refining were also affected by a series of counterattacks. 
Saudi Aramco shut operations at the country's largest refinery following an 
Iranian drone. The Ras Tanura refinery with a capacity of 550,000 bpd is a 
major producer of middle distillates and a key supplier of diesel for Europe. 
European gasoil futures jumped 20% following the closure. Most of the region's 
oil exports are loaded in the Persian Gulf. A prolonged closure of the Strait 
of Hormuz could quickly fill the limited storage space and force some 
production shut."

   Sal Mercogliano, maritime historian and host of "What's Going on With 
Shipping" on YouTube, told DTN that, "The conflict between the United States 
and Israel against Iran has halted traffic through the Strait of Hormuz due to 
danger to the ships and crews and the cancellation of war risk insurance by all 
the major providers to shipping. The Persian Gulf is responsible for 20% of all 
the world's oil and natural gas, and any disruption will cause fluctuations in 
their prices on a global scale. Additionally, the stranding of nearly 750 ships 
in the Persian Gulf will also affect other sectors, such as containers, as the 
loss of the ships and cancellations of voyages into the region with further 
disrupt this sector. Until conflict ends, or the United States and its allies 
can assure the safety of the ships transiting the Strait of Hormuz, or the 
shipping companies obtain the requisite insurance coverage, shipping will be 
holding outside of Hormuz awaiting further developments."

   This is a fluid situation as the war does not appear to be ending anytime 
soon. President Donald Trump has told various news organizations that he 
expects the conflict in Iran could go on for another "four to five weeks, but 
we have capability to go far longer than that."

   See, "US-Iran Escalation Could Drive Up Input Costs as Spring Planting 
Season Hits," 
https://www.dtnpf.com/agriculture/web/ag/columns/washington-insider/article/2026
/03/02/us-iran-escalation-drive-input-costs

   Mary Kennedy can be reached at mary.kennedy@dtn.com

   Follow her on social platform X @MaryCKenn




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