Donald Trump’s offer of US-backed insurance and naval convoys to travel through the Strait of Hormuz has not stopped marine premiums from rising, as underwriters scramble to reassess risks for oil, gas and cargo ships.
Following the Strait of Hormuz is effectively closed to shipping US attack on IranOn Tuesday the president wrote on Truth Social that the US would provide protection “at a very reasonable price … for the economic security of all maritime trade, especially for the power to sail through the Gulf.”
Naval convoys can be used to provide safe passage for tankers in the Persian Gulf, which routes 20% of the world’s oil supply to market.
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A cargo ship is approaching Dubai. File photo: AP
Experts at Lloyds of London, the world’s oldest insurance market, told Sky News the president’s proposal was vague and naval convoys could increase the risk to shipping.
On Tuesday, the Joint Warfare Committee (JWC) of the Lloyds Markets Association, which represents Lloyds market participants, expanded its “high-risk” area in the Middle East to cover the entire Persian Gulf.
Underwriters have already started canceling or refunding war-risk insurance for ships in the region, but JWC secretary Neil Roberts told Sky News the market was working and American intervention was unnecessary.
“As far as we know, I don’t think anyone has been given the details of such a plan and it will take time and the appetite is unknown to implement it,” he said.
“Essentially our market is still underwriting the risks and there is no perception that there is a need for intervention at this time.”
Lloyd’s of London
Mr Roberts said premiums would rise to reflect the increased risk in the Gulf, suggesting a 12-fold increase between reports and that US convoys could be targeted rather than acting as a deterrent.
“There will be those who think it could increase targeting, because the Iranians are targeting the US military. They don’t know how capable they are against the new drone and missile threats we’re seeing. It’s not like the 80s.”
“Yes, obviously people want to see the details, they want to do that, and if you’re a tanker owner, on the one hand you’re happy to give it, on the other hand you’re trying to understand whether it increases the risk or not, and do you want to accept it?”
Satellite mapping from AIS ship trackers on Tuesday shows a build-up of stationary tankers in the Strait of Hormuz.
He said: “What happened over the weekend has changed the risk profile of the region, and given the new risks insurers will have to reassess their position. And we recently increased our listed areas for the Joint Warfare Committee by adding US bases that were previously unlisted targets.
Several tankers in the Gulf have been directly attacked since the conflict began with oil, gas and cargo infrastructure in Saudi Arabia, Qatar and the United Arab Emirates (UAE).
With several ships anchored on either side of the Strait of Hormuz, oil and gas prices have risen along with shipping costs.
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For now, the economic impact is largely confined to commodity markets, but a prolonged shutdown that consumes global oil reserves could lead to wider impacts and trade disruptions.
Supplies of food and goods from Europe, Africa and Asia to the Gulf states may also be disrupted.
The UAE government said earlier this week it had four to six months of supplies, but asked citizens to buy only what they need and avoid shopping sprees to “ensure there is enough for everyone”.
