The fragile truce holding together the world's most important oil chokepoint appeared to be in tatters on Wednesday, after the United States launched its heaviest wave of strikes on Iran since February and Tehran's Revolutionary Guard hit back at American bases in Bahrain and Kuwait.
US Central Command said it had struck more than 80 targets – including dozens of Islamic Revolutionary Guard Corps (IRGC) boats, air defence systems and missile launch sites – in retaliation for attacks this week on three commercial tankers transiting the Strait of Hormuz. Iran responded within hours, striking what it said were 85 US military facilities and shooting down an American drone.
For insurance professionals who have spent four months watching marine war rates gyrate with every twist in the conflict, Wednesday's escalation is the moment the market feared: a ceasefire, signed on 17 June and already strained by a round of strikes on 27 June, appears to be unravelling entirely – just as underwriters had begun cautiously easing pricing.
Hull war premiums for vessels transiting the Strait had fallen by more than half in the weeks after the ceasefire, from around 5% of vessel value to roughly 2% after discounts, as nervous capacity returned to the market. Before the war began in February, rates stood at roughly 0.25% of hull value; at their peak they touched 10% – a near 4,000% increase, according to Dylan Saunders-Mortimer, UK war leader at Marsh.
That recovery was always described as conditional rather than settled. Calvin Gray, global head of marine at Intact Insurance, warned that war risk pricing would remain on edge even after the Strait reopened, saying "the Strait may be officially open, but we are far from seeing normality restored," and that capacity "will be deployed selectively, based on real-time assessments of risk rather than political announcements."
James Reason, a broker at WTW, struck a similarly cautious note, telling this publication that while "the longer this continues without incident, rates will continue to improve," underwriters remained wary because "there are still reports of mines in parts of the Strait of Hormuz transit corridors." Raj Abrol, chief executive of Galytix, was blunter still: "Insurance premiums that spiked won't come down until underwriters believe the risk has genuinely changed."
That belief now looks further away than ever. The latest strikes followed the US Treasury's decision to revoke a licence permitting Iranian oil sales – part of the memorandum of understanding signed alongside the ceasefire – with a US official saying Washington intended to "impose heavy costs" on Tehran. Iran's deputy foreign minister, Kazem Gharibabadi, called the strikes a "serious violation" of the agreement and warned of "decisive actions to safeguard its national interests."
Even before Wednesday's exchange, analysts had warned that a swift reversal in rates was structurally unlikely. Current industry estimates put war-risk pricing at between 3% and 8% of vessel value – translating into bills of $3 million to $8 million for a single large tanker transit. Brokers have repeatedly noted that premiums are, as one Singapore-based underwriter told Lloyds List, "quick to go up, slow to come down."
Rahul Kapoor, vice-president and global head of shipping at S&P Global Energy, has cautioned against reading insurance pricing alone as the barrier to normal traffic. "The Strait of Hormuz is not seeing those transits because of insurance challenges," he said. "It's not seeing those transits because of the safety of the crew, safety of the cargo, and the vessel." That distinction is likely to matter again this week: even if rates hold rather than spike further, renewed strikes make it harder for shipowners' masters to certify a voyage as safe.
The Joint War Committee of the Lloyd's Market Association has already expanded its high-risk designation to cover the entire Persian Gulf, and reinsurers have been left absorbing losses across marine hull, cargo, energy infrastructure and political violence lines simultaneously – what Howden Re has described as a "rare multi-line insurance event testing the global reinsurance market simultaneously."
Iran's unresolved plan to charge tolls through its Persian Gulf Strait Authority – an entity already designated by the US Office of Foreign Assets Control – adds a further complication that London underwriters have called commercially and legally unworkable, regardless of how the current military exchange resolves.
For now, the message from the market is one of familiar caution. As Marcus Baker, global head of marine, cargo and logistics at Marsh, put it before this week's escalation: "there is a degree of nervousness around the situation." Wednesday's strikes will have done nothing to ease it.
