The escalating conflict in the Middle East has plunged the global maritime shipping industry into unprecedented chaos, creating a volatile environment that logistics experts and shippers are calling a “wild west”. For the global insurance market, the crisis is manifesting in a surge of risk-related costs, complex liability disputes, and a drastic reshaping of maritime supply chains.
According to Fertmax’s Daejin Lee, war risk premiums are up to 1,000% higher than before the crisis - and he doesn’t think that we’ve reached peak premium yet. “Unfortunately it’s likely to go up further,” he told CNBC. "It’s not just this region,” he continued, “we’re seeing Oman and the Red Sea become Red zones [for insurance] too."
The disruption is rooted in the effective closure of the Strait of Hormuz and persistent Houthi attacks in the Red Sea, forcing major shipping lines to abandon standard routes and suspend bookings. Compounding the crisis, recent strikes on Jebel Ali - Dubai’s primary port - have triggered massive congestion and widespread cancellations. Approximately 3,200 vessels are currently trapped in the Gulf as a direct consequence of the strikes, heavily choking a region that handles roughly 8% of global seaborne trade.
As carriers scramble to mitigate their own exposures, cargo owners and their insurers are being saddled with the fallout.
To avoid conflict zones, major shipping conglomerates - including MSC, Maersk, CMA CGM, and Hapag-Lloyd - have informed customers that they reserve the right to invoke a century-old maritime rule. This provision allows carriers to discharge containers at the nearest safe port, shifting the logistical burden and financial expense entirely onto the client.
The real-world consequences have been immediate and costly. John Mason International, a removal group, reported that cargo destined for the Middle East and Saudi Arabia has been abruptly offloaded in Nhava Sheva, India, and Khor Fakkan in the UAE.
For cargo insurers, this operational unpredictability raises complicated questions regarding “transit clause” coverage, cargo abandonment, and who bears the ultimate liability when perishable or time-sensitive goods are dumped halfway to their destination. The fresh produce sector has been hit particularly hard during its peak export season to the Middle East. Refrigerated containers are being dropped as close to the region as possible, forcing suppliers to navigate a highly competitive land transportation market and complex border control requirements.
Philippe Binard, general delegate of the European fresh produce industry group Freshfel, told the Financial Times that the logistical hurdles were a “huge nightmare”.
The physical dangers of the Iran war have directly translated into astronomical costs, driven largely by spiking insurance premiums and emergency fuel surcharges. CMA CGM explicitly stated that its recent surcharges were implemented to offset mounting security, fuel, and insurance costs.
On specific routes, shipping charges have quadrupled. Moving a standard 20-foot equivalent unit (TEU) container from the UK to Jebel Ali, which previously cost roughly £1,500, has surged to nearly £6,000. When factoring in impromptu storage, land transport, and port fees, shippers are facing unplanned costs extending into the five-figure range per container.
The crisis has grown severe enough to trigger emergency federal intervention in the United States. In a bid to stabilize volatile oil markets rattled by the Iran war, President Donald Trump issued a 60-day waiver of the Jones Act on Wednesday morning.
The longstanding 1920 shipping law traditionally mandates that all goods transported between US ports be carried on American-flagged vessels. White House press secretary Karoline Leavitt confirmed that the temporary suspension will allow foreign vessels to step in, enabling “vital resources like oil, natural gas, fertilizer, and coal to flow freely to US ports for sixty days”.
For the domestic maritime insurance sector, the 60-day waiver introduces a brief but notable shift. By allowing foreign-flagged ships to operate on domestic routes, a portion of the cargo and liability exposure will temporarily shift from US underwriters to the international Protection and Indemnity (P&I) clubs that insure these foreign vessels.
As the war persists, the global shipping market remains effectively shut in the Gulf region-a scenario some customers claim is causing even greater disruption than the COVID-19 pandemic. Insurers, carriers, and clients are now left to navigate a fractured supply chain where the only certainty is rising risk.
