Hormuz Insurance Costs Hit 10%

The Strait of Hormuz is still open on the map. In practice, parts of the shipping market are beginning to treat it as if it is closing. Shipowners, insurers and banks are making the decision voyage by voyage, clause by clause, credit line by credit line.

That matters because roughly 20 million barrels per day normally pass through this narrow exit from the Persian Gulf (BBC Afrique). With US-Iran military escalation turning each transit into a bigger commercial gamble, access to the route is being rationed privately. Europe is already paying higher energy costs without any formal blockade having been declared.

Captains wait, insurers reprice, Europe pays

Greek-managed vessels show how this works in real time. Some operators refused a US-coordinated passage scheme, while around nine Greek LNG carriers stayed inside the Gulf rather than risk the transit (Capital/Reuters). More than 130 tankers and gas carriers were tracked waiting west of Hormuz (OT). Ships that did move switched off tracking transponders and kept close to Oman's coast (Politiken).

The strait can be crossed. The question for captains and crews is whether the crossing is worth it.

War-risk insurance premiums have jumped to 3%–10% of hull value, from about 0.25% before the crisis (The National). The Lloyd's Market Association has pushed back against reports that insurers had stopped writing policies altogether. Cover is still available, it said, but traffic has fallen because crews and vessel operators are judging the voyage too dangerous (LMA).

That distinction matters. The market has not shut Hormuz with a single decision. It is narrowing the route through a series of private risk calls. Container carriers have issued selective booking stops and emergency surcharges for Gulf ports (Jordex). VLCC spot rates, for very large crude carriers, rose 11.7% in one week (Sahmino).

The price chain into European kitchens

Europe does not need to lose a cargo before the bill arrives. Energy benchmarks price the next available replacement cargo, so any expected squeeze on Gulf supply moves costs immediately.

The TTF front-month contract, Europe's main gas benchmark traded in the Netherlands, reached a one-month high as Gulf disruption tightened expectations for LNG supply (BusinessAM, Investing.com). Mediterranean refined-product quotations rose 12.82%–17.08% in a single week (FIGISC). Dutch petrol prices moved from €2.205 to €2.297 per litre over two weeks (CBS).

There is not much spare road around the problem. Pipeline and overland routes can divert roughly 3.5–5.5 million barrels per day of the 20 million barrels that normally go through Hormuz. For LNG, there is no comparable workaround (Les Clés du Moyen-Orient).

Eni chief executive Claudio Descalzi described this as the worst crisis since the 1980s, pointing to diesel, jet fuel and LNG as the sharpest pressure points. Crude oil has more options for rerouting. Refined products and gas have far fewer (Corriere della Sera). Europe entered the summer with average jet-fuel stocks covering fewer than 30 days (Corriere della Sera).

For Ireland, the route is indirect but real. We are not sitting at the mouth of the Gulf, but Irish households and businesses buy into European fuel and gas markets. When benchmark prices move in Rotterdam, Amsterdam or the Mediterranean, the effect does not stay politely abroad.

No European mandate for Hormuz

The EU does have a naval mission protecting merchant shipping. EUNAVFOR ASPIDES has shielded more than 670 vessels in the Red Sea (EEAS). But EU foreign policy chief Kaja Kallas has said member states want that mission to remain focused there.

Extending ASPIDES towards Hormuz would need new operational planning and unanimous agreement among EU governments. Neither is under way (EEAS). That unanimity point is not procedural trivia. It is the mechanism that decides whether Europe can turn a shared economic exposure into a shared security response.

France has warships positioned for Gulf contingencies, but foreign minister Jean-Noël Barrot has tied any escort or demining role to calmer conditions and consent from coastal states, including Iran (Quai d'Orsay, BFMTV). NATO's mutual-defence clause, Article 5, applies only to attacks on member territory in Europe and North America. Iranian strikes on US facilities in Bahrain or Kuwait would not automatically trigger it (NATO Treaty).

Hormuz is already producing European costs, even without a closure order or a naval confrontation. The clearest evidence will sit in war-risk clauses, letters of credit and cancelled cargoes. Insurers, banks and traders are the actors now deciding how open the strait really is, and European governments have no simple lever to command their appetite for risk.