Iran has reportedly closed the Strait of Hormuz following Israeli strikes on Lebanon - adding to ongoing disruption in one of the world’s most critical maritime chokepoints, with potential implications for insurers, shipping operators and global supply chains.
The ceasefire agreed between the US and Iran had a provision for the temporary reopening of the crucial maritime channel. However, effectively, the strait has remained closed as traffic had not immediately increased in the hours after the ceasefire announcement.
Tehran had agreed on Wednesday that it would offer safe passage in line with its armed forces, though its coast guard said any ship trying to transit without permission would be “targeted and destroyed”.
Now, Israel has launched huge strikes on Lebanon – killing around 250 – with US President Donald Trump insisting that Lebanon was not included in the ceasefire agreement. Iran has responded by closing the Strait – which may have huge implications for the longevity of the agreement.
The Strait of Hormuz is a key artery for global trade, with around 20% of the world’s oil supply transiting the route under normal conditions. Recent conflict in the region has already led to significant disruption, with reduced vessel traffic, stranded ships and continued uncertainty despite ceasefire discussions.
While Iran has indicated that safe passage may be permitted under certain conditions, shipping activity has not immediately normalised, and operators remain cautious about transiting the region.
The situation has had a direct and measurable effect on marine insurance markets for months. According to analysis from Howden Re, the original closure triggered a sharp increase in risk premiums across marine, energy and political violence lines, with insurers rapidly repricing or withdrawing capacity.
War risk premiums for vessels transiting the Strait have risen sharply, in some cases increasing from around 0.2% of hull value to as much as 1.0% within days. This represents a fivefold increase, significantly raising the cost of a single voyage and, in some cases, rendering transit commercially unviable.
At the same time, several marine insurers have cancelled or restricted war risk cover for vessels operating in the region, reflecting the shift from standard commercial risk to active conflict exposure.
Marine insurance is a prerequisite for global shipping, with vessels requiring hull, cargo and Protection & Indemnity (P&I) cover to operate. The withdrawal or repricing of this cover has effectively reduced shipping activity, even in the absence of a formal naval blockade.
Coverage has, in many cases, moved to voyage-by-voyage placement, with insurers reassessing risk on an individual basis. This has introduced operational delays and increased administrative complexity for shipowners and brokers.
Even where passage is technically possible, insurers and shipowners remain cautious. Marine insurance premiums are expected to stay elevated in the near term due to continued geopolitical uncertainty and the risk of further escalation.
The situation represents more than a single-line event. The disruption is already affecting multiple classes of business, including energy, trade credit and political violence, with potential knock-on effects for global inflation and insurer capital.
Recent reporting indicates that even with a ceasefire in place, insurers do not expect a rapid return to normal pricing or capacity, with war risk premiums likely to remain elevated as tensions persist.
