Rising insurance costs, war risk boost tanker freight as shippers seek safer waters

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War risk premiums for ships operating in the Persian Gulf have surged to record highs amid the ongoing conflict, and shipping market participants say insurance rates have quadrupled in some cases.

Since the conflict began, 17 ships have been attacked in the Gulf.

Shippers remain hesitant to sail in the region, and many dirty tanker owners are opting to reposition their ships rather than take the risk. 

Traffic data tells the story: only a handful of ships are transiting the Strait on any given day. By comparison, the average number of ships transiting the Strait daily was 135 in February, CAS data shows.

The disruption is feeding straight into tanker markets and has trickled down across crude, refined products and related markets.  

By mid-March, freight for Very Large Crude Carriers on the Persian Gulf-China route had increased 80% since Feb. 27. 

While dozens of ships sit idle, some bunker fuel prices have surpassed $1,000 per metric ton, tanker owners say, and some loaded tankers have been stuck in port for more than a week, incurring demurrage.

Other regions such as the Red Sea and the Americas are seeing more tanker activity, and with the IEA agreeing to release crude from strategic stocks, longer routes could further support freight as disruptions continue.