Supertanker rates nearly doubled in a single day
The benchmark freight rate for Very Large Crude Carriers jumped to $423,736 per day on March 3, an increase of more than 94% from the previous session. Spot shipping rates on the key Middle East-to-China route have nearly tripled since January, with the cost of hiring a single VLCC now running at roughly $12 million per voyage.
Behind those numbers sits a shipping market in turmoil. Traffic through the Strait of Hormuz has dropped 90% since U.S. and Israeli strikes on Iran began February 28. Roughly 150 tankers and LNG carriers sit at anchor outside the strait, unable or unwilling to transit.
Five major insurers walked away
The real chokepoint isn't mines or missiles. It's paperwork.
Five of the world's largest Protection & Indemnity clubs - Gard, Skuld, NorthStandard, the London P&I Club, and the American Club - canceled war risk coverage for vessels in Iranian waters and the broader Gulf, effective March 5. Japan's MS&AD Insurance Group suspended underwriting war risk policies in the region altogether.
Without P&I cover, a ship owner faces unlimited personal liability for crew injuries, cargo loss, and environmental damage. No major operator will send a vessel through contested waters on those terms.
Skuld said it was "working on a buy-back option to reinstate cover," but offered no timeline.
Premiums that break the math
For ships that can still get insured, the price has become punishing. War risk premiums climbed from about 0.125% of a vessel's insured value before the crisis to as high as 1% in a matter of days. On a tanker worth $100 million, that is a jump from roughly $125,000 to $1 million for a single transit.
Marcus Baker, global head of marine at Marsh, estimated that near-term hull insurance rate increases "could range from 25% to 50%, barring any direct attack on merchant shipping." If a tanker is actually hit, he warned, those numbers go far higher.
The arithmetic is straightforward. At current premium levels, the insurance cost alone can exceed the profit margin on a cargo. That leaves many owners parked at anchor, burning fuel and running up demurrage charges while they wait for either the war or the insurance market to blink.
Washington stepped in, but with limits
President Trump announced on March 4 that the U.S. Development Finance Corporation would offer political risk insurance for Gulf shipping at a "reasonable price," and that Navy warships would begin escorting tankers through the strait.
The gesture calmed nerves briefly, but the DFC's mandate is development finance, not marine underwriting. Its policies carry coverage caps well below what Lloyd's or the P&I clubs provide, and the fine print excludes several scenarios that keep risk managers awake at night.
Chubb has since emerged as the main U.S. insurer still writing coverage for Persian Gulf voyages, though details of its terms remain tightly held.
The costs pile up downstream
Freight and insurance are only part of the bill. Ships rerouting around the Cape of Good Hope add roughly 10 to 14 days and hundreds of thousands of dollars in fuel to every voyage. That time penalty tightens vessel supply elsewhere, pushing up rates on routes that have nothing to do with the Gulf.
Dutch and British wholesale gas prices soared nearly 50% in the first week of the crisis. Asian LNG spot prices jumped almost 39%. Those increases ripple straight into electricity bills and factory costs across Europe and East Asia.
Iran, meanwhile, has kept its own crude flowing to China through the same strait it closed to almost everyone else. That detail has not gone unnoticed by shipowners stuck outside the chokepoint.
What to watch
The shipping market is now pricing in a protracted standoff. If insurers restore war risk cover at manageable premiums, traffic could resume within days. If the crisis drags on, the knock-on effects will dwarf the direct cost of idle tankers: higher consumer fuel prices, constrained LNG supply to Europe, and possible rationing in import-dependent Asian economies.
For now, the strait stays quiet. The ships stay parked. And the meter keeps running.