Peter Beard, manager of technical services at Insurance Advisernet, said the Strait of Hormuz crisis is exposing coverage gaps across multiple lines, including marine, agriculture, property, transport, and aviation, and is prompting Australian brokers to review sums insured, war risk positions, and business interruption triggers to manage client and professional indemnity exposures.
On Feb. 28, 2026, US and Israeli forces launched strikes on Iran. In response, Iran effectively closed the Strait of Hormuz, a chokepoint that normally carries about 20% of global oil and gas shipments. Five weeks later, commercial traffic through the strait remains close to zero. Energy markets have split between paper and physical pricing. Brent crude futures are around US$104 a barrel, while physical Gulf crude is reported at about US$160. The International Energy Agency has stated that the disruption now exceeds the combined impact of the 1970s oil shocks.
On March 28, Houthi rebels formally entered the conflict with missile strikes on Israel and publicly threatened to close the Bab al‑Mandeb, the remaining major export route for Gulf oil. Former US President Donald Trump has set April 6 as a deadline for Iran to reopen Hormuz, creating a focal date for potential further escalation or partial easing of constraints. Beard told the National Insurance Brokers Association of Australia (NIBA) that the crisis is already evident in client businesses – in diesel costs, freight rates, input prices, and construction budgets – and is testing the adequacy of programs placed under earlier assumptions.
Marine and cargo placements are among the most affected by the changing conditions. Standard Institute Cargo Clauses exclude war and warlike operations, leaving shipments originating in, or transiting through, the Gulf and surrounding waters without protection for conflict-related losses unless additional war cover has been arranged. War risk premiums on affected routes have risen by three to five times, and some markets have withdrawn capacity for higher-risk areas. Following the March escalation, underwriters are actively pricing Red Sea and Bab al‑Mandeb war risk, and appetite is tightening. Beard said brokers should review all open covers, annual cargo policies, and certificates with Gulf, Middle East, Indian Ocean, or Red Sea exposure; confirm war risk positions in writing; and access specialist markets, including Lloyd’s, where appropriate to maintain or adjust cover.
Fuel supply and pricing are also flowing through to local accounts, particularly in regional and transport-dependent sectors. Diesel shortages have been reported in regional Queensland, New South Wales, and South Australia. The federal government has authorised higher‑sulphur fuel for a 60‑day period. For farm and machinery clients, this raises questions where breakdown policies exclude damage arising from non-approved fuel grades.
Rural asset values are under pressure from inflation in diesel, steel, and plastics. Beard estimates that farm reinstatement values are 15% to 30% below current replacement cost in many schedules, creating underinsurance risk for buildings, equipment, and infrastructure. Urea fertiliser prices have moved from about US$475 to US$680 per tonne, and many business interruption policies that require physical damage as a trigger may not respond to fuel supply disruption alone.
In transport and logistics, brokers are reporting freight rate increases of around 30% to 40%. Existing goods‑in‑transit sublimits may no longer capture the higher values at risk per movement, and fleet agreed values set before the crisis may not reflect current replacement costs for vehicles and trailers. Aviation accounts are experiencing similar fuel-driven strain. Jet fuel typically represents 25% to 30% of an airline’s operating expenses. Major and regional carriers have begun applying surcharges to manage higher costs, while brokers and insurers revisit hull agreed values, passenger liability sublimits, and any cover that responds to fuel price shocks or route changes.
Construction cost inflation is a continuing feature across property and industrial lines, now reinforced by the latest oil shock. Higher prices for steel, plastics, other petroleum-derived materials, and labour are increasing the gap between historic valuations and current reinstatement costs. Strata schemes are seen as particularly exposed, with widespread underinsurance for both residential and commercial buildings. Beard has encouraged brokers to schedule reinstatement value reviews, work with professional valuers, and document client decisions where recommended adjustments are not adopted.
Manufacturing and industrial clients are also facing higher prices for petrochemical feedstocks and building materials. Some are substituting raw materials or altering processes to cope with supply constraints, which can alter product liability and product recall profiles. Many standard business interruption wordings still require direct physical damage to insured property for a claim to respond, leaving upstream supply chain disruption outside traditional cover.
The National Insurance Brokers Association (NIBA) is highlighting the professional indemnity implications of the crisis for the broking profession. It notes that the current situation represents a material change in the risk environment for many commercial clients and that obligations under the General Insurance Code of Practice include acting in the client’s best interests and providing advice that is accurate and complete.
The association states that this extends to explaining material changes in exposure and coverage adequacy, even where a client has not raised a specific concern. Failure to do so could lead to professional indemnity or errors and omissions claims if clients later argue that underinsurance, war risk gaps, or business interruption limitations were not properly communicated. Beard has recommended that brokers keep detailed file notes of reinstatement value discussions, war risk advice, BI trigger explanations, and supply chain extension options, including where clients decline changes. Clear records of what was presented, what the client chose and when the conversation took place are regarded as important risk controls.
NIBA is also placing the Hormuz crisis within a wider shift in the global risk environment. Its report, “Ready or Reacting? Shaping the Future of the Insurance Broking Profession,” identifies the “new risk landscape” as one of the top three disruptive forces likely to reshape broking over the next decade. The report finds that while 76% of brokers believe they will need to expand into new risk domains to remain relevant, only 64% say they are prepared for that change. That preparedness gap is emerging as geopolitical instability, supply chain fragility, cyber threats, and climate-driven events increasingly intersect. For brokers, the current conflict illustrates how those risks can converge. Beard’s core message is that brokers who systematically triage portfolios, communicate with clients about emerging exposures, and document their advice will be able to address both the immediate shock and the evolving risk landscape it signals.
