Hormuz insurance rates hit 10 percent

War-risk insurance for a single passage through the Strait of Hormuz has jumped from roughly 0.25% to 4–5% of a vessel's hull value, with some quotes reaching 10% (S&P Global, DW). No pipeline has been cut. No terminal has gone dark. But the cost is real, and it is already moving through Europe's energy system.

The Strait of Hormuz, where the Persian Gulf narrows between Iran and Oman, carried almost 21 million barrels per day of crude and petroleum products in the first half of 2025, roughly a fifth of global oil-related supply (CFR). After renewed US-Iran strikes in early July, vessel traffic fell sharply. Lloyd's Market Association (the body that coordinates London's marine-insurance market) stressed that war-risk cover remains available, but that ships are staying away because of safety concerns for crews and vessels (LMA). The route is not legally closed. It is becoming commercially unattractive.

How insurance moves gas prices

Insurance is the first gate. When premiums spike, shipowners pass the cost through war-risk surcharges in charter contracts. Crews can refuse the voyage. Charterers can decline the surcharge. Cargoes wait for a lower-risk window. Fewer ships move, those that do cost more, and the risk enters commodity benchmarks before any confirmed supply outage.

European gas prices moved within hours. On 13 July, the front-month Dutch TTF contract (Europe's main wholesale gas benchmark) opened at about €50.4/MWh, up roughly 3.5% from the previous session (OilPrice, TradingPedia).

TTF had already risen more than 15% over the prior week. Four Dutch energy suppliers responded by raising fixed gas tariffs by 1.2–1.5% (Energievergelijk). The Gulf shock does not need to shut off gas to change what a Dutch household pays on a new contract.

Italy's substitution test

Italy shows what happens when the cost chain reaches a country that depends on the route. More than 46% of Italian LNG came from Qatar in 2024 (BNP Paribas). After QatarEnergy reportedly declared force majeure on shipments through Hormuz, Italy's Adriatic LNG terminal at Porto Tolle kept volumes close to normal by taking US cargoes instead of Qatari ones, according to Italian energy press reports. The lights stay on. But spot-market procurement costs more than long-term Qatari contracts, and the substitution holds only as long as US LNG remains available at workable prices.

Eni chief Claudio Descalzi told the Italian parliament that the problem extends beyond crude: after cutting Russian supply, about 60% of the continent's diesel and jet fuel comes from the Gulf, while European refining capacity has shrunk (Corriere della Sera). Those are corporate claims, not independent statistics. But Descalzi sits inside the supply chain he describes.

Spain complicates the picture. Madrid argues its direct Hormuz exposure is small, and Spanish regasification capacity is the EU's largest. But terminals that can unload LNG cannot make a scarce cargo cheaper. When global risk drives up the price of the marginal LNG shipment, Spain competes with Asia and every other buyer (El País). Infrastructure buys flexibility, not immunity.

What the EU can and cannot control

Kaja Kallas, the EU's foreign-policy chief, framed the task as protecting navigation "both in the Gulf, but also in the Red Sea" (EEAS). The European Commission maintains that gas storage targets remain achievable and that spare LNG import capacity provides a buffer. But extending ASPIDES (the EU naval mission created in 2024 to protect Red Sea shipping) toward Hormuz is reportedly contested, with Spain and Italy favouring diplomacy over a wider military commitment.

The EU can manage stocks. It cannot set the insurance premium, the charter rate, or the war-risk surcharge that determines whether a ship sails. Europe does not need Hormuz to close to feel the damage. It needs only for insurers, shipowners, crews and charterers to decide, voyage by voyage, that the passage no longer justifies the risk. That process is already underway.