How shipping insurance rates are rising, as Hormuz, Bab al-Mandeb shut down

Global shipping corridors face severe disruptions as two critical maritime chokepoints have become conflict zones, driving insurance costs to unprecedented levels. The Strait of Hormuz, which historically handled 120–140 vessels daily including approximately 20 million barrels of oil per day, has experienced dramatic traffic collapse. Recent data shows only ten vessels passed through on Tuesday, compared to 16 on Monday, reflecting the deteriorating security situation.

Iran's Islamic Revolutionary Guard Corps claimed responsibility for an explosion that set a tanker ablaze in the strait, asserting control over the waterway and warning that no oil tankers would be permitted passage while US military operations continue in the region. The incident prompted two additional vessels to reverse course, further constraining traffic flow through this essential global trade route.

Maritime insurance premiums have responded sharply to the heightened risk environment. War-risk insurance costs, which previously represented 1–3 percent of a vessel's hull value, now constitute 7.5–10 percent. Shipping costs from the Gulf to China reached $77.96 per metric tonne on Wednesday, representing a fourfold increase over the five-year average of $18.91 per metric tonne. The rate peaked at approximately $140 per metric tonne in March when conflict intensity was highest.

Disruptions extend beyond the Hormuz Strait to the Bab al-Mandeb, where Yemen's Houthi group announced a blockade of Saudi Arabian ports and vessels. This dual closure of critical maritime passages threatens global supply chains and energy markets dependent on these waterways.