Saudi Arabia has shut down the pipeline that has kept its oil flowing since the Strait of Hormuz effectively closed earlier this year. For the marine and energy insurance markets, including brokers and underwriters here in Canada, that's the story, not the oil price.
The kingdom's Energy Ministry confirmed on Friday that the East-West pipeline, which can carry up to 7 million barrels of crude a day from the Eastern Province to the Red Sea port of Yanbu, was shut down after being struck multiple times. The ministry said the attacks, in the Riyadh and Madinah regions, caused a number of injuries and that emergency crews were sent to secure the line and assess the damage. CNN reported that US officials believe drones launched from Iraq hit pump stations along the route, with satellite images showing fire damage at one facility.
To most readers, that's a supply-disruption story. To underwriters, brokers and risk managers, it's a reminder of why war risk, political violence and contingent business interruption coverage have been some of the fastest-moving lines this year, on both sides of the border.
The East-West pipeline, also known as the Petroline, was built decades ago as a hedge against the day Hormuz might close. That day came earlier in 2026, when the US-Iran conflict effectively halted the roughly 15 million barrels a day that normally pass through the strait and forced Riyadh to send crude overland to Yanbu instead. Reuters reported that the pipeline was already hit once this year, in April, in what an industry source described as an Iranian attack. Friday's strike knocks out the one workaround the kingdom had left.
The Wall Street Journal reported Brent crude trading above $104 a barrel on Friday, and cited Capital Economics economist Hamad Hussain estimating that a serious, sustained hit to the pipeline, combined with the Houthis' reported seizure of Perim Island and advance toward the town of Dhubab near the Bab al-Mandeb strait, could push Brent toward $120 a barrel. A move like that flows through to fuel costs, freight rates and, eventually, claims costs across commercial auto, marine cargo and property lines, including for insurers writing business in Canada.
The pricing history in this market tells its own story. Before the wider conflict, war risk premiums for a vessel transiting the strait sat around 0.15% to 0.25% of hull value for a week's cover. By midyear, that had changed sharply: additional war risk premiums in the region jumped from roughly 1%-3% of hull value to 7.5%-10% within weeks, according to S&P Global, which cited Marcus Baker, global head of marine, cargo and logistics at Marsh. For a $100 million tanker, that's the difference between a few hundred thousand dollars in cover and a bill running into the millions for a single voyage, The National reported. As Baker put it, war rates have been "on a roller coaster" tracking the price of oil.
Capacity hasn't been the constraint. Marsh has previously put global hull war capacity at $2.5 billion to $3 billion, enough in theory to place cover on a typical $100 million Hormuz-transiting vessel roughly 25 times over, per S&P Global. The problem is appetite: underwriters have grown reluctant to write spot cover at any price as attacks have become more frequent and harder to predict.
Timing is what makes Friday's attack more than an isolated pipeline story. Per the Journal's reporting, Houthi forces have simultaneously tightened their grip on the Bab al-Mandeb strait, having taken Perim Island and pushed toward the Yemeni town of Dhubab. A working Red Sea route was already the fallback for tankers avoiding Hormuz. A pipeline outage on top of pressure at Bab al-Mandeb puts both of Saudi Arabia's main export arteries under strain at the same time.
That's a scenario for marine war risk, protection and indemnity (P&I) clubs, and political risk insurance, typically placed through Lloyd's of London and the broader London market, with the Joint War Committee responsible for designating the high-risk areas that trigger additional premiums. Rates in Gulf countries were already expected to climb by as much as 20-30% this year as insurers repriced political risk exposure, even before Friday's attack, according to Willis's Insurance Marketplace Realities report.
This can look like a Gulf story that belongs to the London market. It isn't. Shipping in the Persian Gulf or Red Sea, airlines and the companies that lease to them, airports, infrastructure contractors, and commodity traders all carry some version of this risk, along with exporters that lean on cargo, credit or political risk coverage to satisfy lenders and counterparties.
Morningstar DBRS's Marcos Alvarez, quoted in reporting, put the likely pattern plainly: "the most likely spillovers are not blockbuster losses but smaller, harder-to-model events" spanning several lines at once. Brokers there also point to a broader shift away from narrow terrorism wordings toward standalone marine cargo war and strikes cover, voyage-specific war risk, aviation war, and crisis products like kidnap and ransom and evacuation response.
Canada has real history with this exposure. Export Development Canada, the federal export credit agency, has long sold political risk insurance covering political violence, war, expropriation and currency-transfer restrictions to Canadian companies operating abroad. That coverage isn't theoretical: Calgary-based Suncor Energy collected roughly $600 million from EDC and commercial insurers after unrest in Libya and Syria wiped out the value of its Middle East assets It's the kind of claim history that Alberta-based energy companies with Gulf joint ventures, and the Canadian insurers and reinsurers standing behind them, will be thinking about again this week.
Sustained higher oil prices also feed into loss costs on this side of the Atlantic, showing up in auto physical damage and other lines where parts, freight and energy costs sit inside claims severity, at a time when Canadian carriers are already managing elevated claims inflation.
Saudi authorities have not said who they believe carried out the attack, and the extent of the physical damage to the pipeline is still being assessed. Two things are worth watching in the coming days: whether the Joint War Committee widens its high-risk designations, and whether Yanbu's throughput, the market's last major relief valve, can be restored before the Red Sea situation worsens further. For Canadian insurers and brokers with exposure to Gulf energy, marine or political risk lines, this is one to track closely rather than file away as an oil-market curiosity.
