Hormuz Insurance Hits 10%

War-risk insurance for a single passage through the Strait of Hormuz has risen 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 gas terminal has gone dark. Yet the bill is already moving through Europe's energy system, the same system that sets the wholesale prices behind household tariffs and business costs in Malta.

Hormuz is the narrow channel between Iran and Oman through which Gulf energy reaches the world. In the first half of 2025 it carried almost 21 million barrels per day of crude oil and petroleum products, 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, which coordinates London's marine-insurance market, said war-risk cover was still available, but ships were staying away because owners were worried about crews and vessels (LMA). In practical terms, the route is not closed. It is becoming too expensive to use without hesitation.

How insurance moves gas prices

Insurance is the first gate in the chain. When premiums jump, shipowners pass the cost into charter contracts through war-risk surcharges. Crews may refuse the voyage. Charterers may reject the surcharge. Cargoes wait for a calmer window.

That is how risk reaches the price before any confirmed shortage. Fewer ships move, the ones that sail cost more, and commodity markets price in the possibility that the next cargo may not arrive when expected.

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

TTF had already risen by more than 15% over the previous week. Four Dutch energy suppliers then raised fixed gas tariffs by 1.2-1.5% (Energievergelijk). The Gulf shock does not need to stop gas flows to alter what a European household pays on a new contract. Malta is insulated by its own energy structure and public pricing choices, but it is not outside the European market that prices fuel, power and imported goods.

Italy's substitution test

Italy shows what happens when this cost chain reaches a country directly dependent 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.

That is substitution, not comfort. The lights stay on, but spot-market procurement costs more than long-term Qatari contracts. The workaround lasts only while US LNG is available at prices Italy can accept.

Eni chief Claudio Descalzi told the Italian parliament that the problem goes beyond crude oil. 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). These are corporate claims, not independent statistics. But Descalzi is speaking from inside the supply chain, and Malta knows what it means when fuel costs move through shipping, aviation and basic imports.

Spain complicates the picture. Madrid says its direct exposure to Hormuz is limited, and Spain has the EU's largest regasification capacity, meaning it can receive and convert more LNG than any other member state. But terminals cannot make a scarce cargo cheap. When global risk raises the price of the marginal LNG shipment, Spain is competing with Asia and every other buyer (El País). Infrastructure buys flexibility. It does not buy immunity.

What the EU can and cannot control

Kaja Kallas, the EU's foreign-policy chief, said the task was to protect navigation "both in the Gulf, but also in the Red Sea" (EEAS). The European Commission says gas storage targets remain within reach and that spare LNG import capacity gives the bloc a buffer. Extending ASPIDES, the EU naval mission set up in 2024 to protect Red Sea shipping, towards Hormuz is reportedly contested, with Spain and Italy favouring diplomacy over a wider military role.

The EU can manage stocks. It can coordinate diplomacy and, within limits, protect shipping lanes. It cannot set the insurance premium, the charter rate or the war-risk surcharge that decides whether a ship sails.

Europe does not need Hormuz to close to feel the damage. It needs only insurers, shipowners, crews and charterers to decide, voyage by voyage, that the passage no longer justifies the risk. That decision is already being made.