Insurance companies are cancelling war risk coverage for vessels in the Gulf as the widening Iran conflict disrupted shipping, leaving at least four tankers damaged, a seafarer killed and 150 ships stranded around the Strait of Hormuz. Shipping through the strait between Iran and Oman, which carries around one fifth of oil consumed globally as well as large quantities of gas, has ground to a near halt after vessels in the area were hit as Iran retaliated to U.S. and Israeli strikes. The disruption and fears of prolonged closure have caused oil and European natural gas prices to jump, with Brent crude futures up more than 7% as the conflict triggered multiple oil and gas shutdowns in the Middle East.
At least 150 vessels including oil and liquefied natural gas tankers had dropped anchor in the Strait of Hormuz and surrounding waters, shipping data showed on Sunday.
Iran has said it has closed navigation through the critical waterway, prompting Asian governments and refiners – key buyers – to assess oil stockpiles.
The tankers were clustered in open waters off the coasts of major Gulf oil producers, including Iraq and Saudi Arabia, as well as liquefied natural gas giant Qatar, according to ship-tracking data from the MarineTraffic platform. In the latest incident, projectiles hit the U.S.-flagged products tanker Stena Imperative in the port of Bahrain early on Monday, causing a fire that was later extinguished, two maritime security sources said. On Sunday, a projectile hit the Marshall Islands-flagged product tanker MKD VYOM, killing a crew member as the vessel sailed off the coast of Oman, its manager said on Sunday, and two other tankers were also damaged. Also on Sunday, a projectile hit the Gibraltar-flagged oil bunkering tanker Hercules Star off the UAE coast, manager Peninsula said in a statement. The tanker returned to anchorage in Dubai on Sunday morning and the crew were safe, Peninsula added.
INSURERS CANCEL WAR RISK COVER
As a result of the incidents, marine insurers are cancelling war risk coverage for vessels and oil shipping rates are set to surge further.
Companies including Gard, Skuld, NorthStandard, the London P&I Club and the American Club said their cancellations would take effect from March 5, according to notices dated March 1 on their websites.
War risk cover will be excluded in Iranian waters, as well as the Gulf and adjacent waters, according to the notices. Skuld added in its notice that it was working on providing new cover under new conditions.
Japan’s MS&AD Insurance Group told Reuters it had suspended underwriting of a range of insurance policies covering war risks in the waters around Iran, Israel and neighbouring countries.
OIL SHIPPING COSTS TO RISE FURTHER
Meanwhile, costs of shipping oil from the Middle East to Asia – already at six-year highs – are set to rise further as the widening Iran conflict is deterring shipowners from sending vessels to the region, market sources and analysts said on Monday.
Spot shipping rates from the Middle East to Asia, more commonly known as TD3C, are expected to extend gains, shipbrokers said. The benchmark has nearly tripled since the start of 2026.
Brokers pegged the spot rate for hiring a very large crude carrier on the key Middle East to China route early in Asia on Monday about 4% higher than on Friday, near W225 on the Worldscale industry measure or equivalent to at least $12 million.
“TD3C rates were rising exponentially before the attacks and will continue to remain elevated as countries scramble to meet their energy needs,” said Emril Jamil, a senior LSEG analyst.
There is still a lot of uncertainty on where the final rate would be on Monday but all Middle East loading routes are expected to hold firm, a shipbroker said. They declined to be named as they were not authorised to speak to the media.
Meanwhile, the market will need more ships to load crude from the U.S. and West Africa on longer voyages which could support freight on those routes, a source from a shipping company said.
(Reporting by Emily Chow and Jeslyn Lerh in Singapore and Jonathan Saul in London; Additional reporting by Trixie Yap and Ruth Chai in Singapore, Nidhi Verma in New Delhi; Writing by Nina Chestney; Editing by Florence Tan and Aidan Lewis)