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

Maritime insurance costs are soaring as critical global shipping lanes, the Strait of Hormuz and the Bab al-Mandeb, become theaters of conflict, disrupting vital economic arteries. The Bab al-Mandeb Strait, a key connection between the Red Sea and the Indian Ocean, is now subject to a blockade announced by Yemen's Iran-aligned Houthi group, targeting Saudi Arabian ports and vessels.

This situation exacerbates existing disruptions in the Strait of Hormuz, a chokepoint for oil transport. Tensions between Iran and the US have intensified, with Iran's Islamic Revolutionary Guard Corps (IRGC) reporting an explosion that set a tanker ablaze. The IRGC asserted control over the Strait, warning that it remains closed to oil tankers as long as US actions in the region persist.

Before the current conflicts, the Strait of Hormuz saw daily passage of 120-140 vessels, including approximately 20 million barrels of oil daily. Traffic has since plummeted. Insurance premiums for ships navigating the Hormuz have surged, with war-risk insurance costs now representing 7.5 to 10 percent of a ship's hull value, up from 1 to 3 percent. Shipping costs per metric ton of crude oil from the Gulf to China have also risen substantially, nearly four times the five-year average.

“

The powerful IRGC Navy emphasises that the Strait of Hormuz is under our control and that as long as America’s evil deeds in the region continue, it is completely closed and no oil tanker will enter or exit [the strait]