The conflict between Israel and Iran has led to a fivefold increase in insurance costs for tankers. While oil prices rose by just 0.7% on Monday (June 23, 2025), following the U.S. bombing of Iran, maritime shipping costs have surged dramatically. According to Flexport, a specialist in international supply chains, insurance premiums have quintupled in some cases over the past few days. For example, insurance for a seven-day voyage to Israeli ports has risen to 1% of the vessel’s value, up from 0.2% before the crisis began. This translates to an additional cost of up to $1 million per trip for ships valued at approximately $126 million. The concern extends beyond voyages to Israeli ports; insurers are particularly worried about the 33-kilometer journey through the Strait of Hormuz. This narrow 55-kilometer-wide passage between Iran and the United Arab Emirates could be closed or mined by Iran in the coming days to disrupt global oil and gas shipments. One-fifth of the world’s energy supplies depend on this sea route. The Iranian parliament has already approved the closure, according to state media, though final approval from the Supreme National Security Council, led by Ayatollah Ali Khamenei, is still required. Shipping rates have doubled within a week. Even before the U.S. airstrikes on Iran, tanker charter rates increased by 20.5%, as calculated by the global VLCC charter rate index on June 19. The spot price for the Middle East to East Asia route climbed from $10.28 to $15.78 per ton in just four days. Following the airstrikes on Saturday night (June 21, 2025), experts anticipate further increases. VLCC operators on the Middle East-China route paid $60,000 per day last week—almost double compared to the previous week, according to London-based Clarksons Research. The situation could worsen if shipowners invoke war clauses, which allow them to prohibit vessels from traveling through certain dangerous areas. Such detours would burden charterers with extra costs. Historical conflicts, like the Iran-Iraq war, made voyages costly for ship operators but profitable for those willing to take missile risks. Even without missile fire or Iranian fast-boat attacks, the Persian Gulf remains perilous. Just last week, the five-year-old crude oil tanker ‘Front Eagle’ and the 2002-built Adalynn collided off Fujairah, likely due to GPS interference. Tensions extend beyond the Persian Gulf, with Houthi militants in Yemen threatening ships linked to the U.S. in the Red Sea. The conflict could also overwhelm container terminals in distant countries. Each year, 33 million standardized containers pass through the Strait of Hormuz to UAE ports like Jebel Ali and Port Khalifa. A worsening situation might see shipping companies avoiding these hubs, leading to congestion at alternative ports like Mumbai or Colombo. Re-routing and cancellations are already happening. American logistics firm Flexport reports longer transit times, with some carriers canceling departures as precautionary measures. Germany’s largest container shipping company, Hapag-Lloyd, has already bypassed the port of Haifa. Danish competitor Maersk may also cease journeys through the Strait of Hormuz in the future.
Global Shipping Shock: Insurance Costs for Tankers Quintuple Amid Israel-Iran Conflict
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