War risk insurers were reported by the Financial Times to have submitted cancellation notices for policies covering ships moving through Hormuz, citing unnamed insurance brokers. Prices set to rise as much as 50% in the coming days, with the insurance cost for a $100m vessel, set to increase from $250,000 to $375,000 per voyage.
Dylan Mortimer, Marine Hull UK War Leader, Marsh, said on Saturday February 28th that “the primary risks centre on the Persian and Arabian Gulf, particularly the threat of vessel boarding and seizure by Iranian forces and the potential closure of the Strait of Hormuz”.
Although it was very early to tell, Marsh estimated that near-term rate increases for Marine Hull insurance in the Gulf could range from 25% to 50%. However, if there were to be a direct attack on merchant shipping, that could have “major repercussions across war insurance rates”, Mortimer said, adding that “given the military build-up in the region, crew are far more likely to be concerned than they might have been to previous risks. The situation remains very fluid, requiring ongoing attention.”
Tasnim News Agency, an outlet affiliated with Iran’s Islamic Revolutionary Guard Corps (IRGC, external), said that the Hormuz Strait – located in the south of Iran between the Persian Gulf and the Gulf of Oman – would be closed. The agency said that it had been informed that the IRGC would not permit any ship to go through the Strait.
The UK Maritime Trade Operations (UKMTO) also said that it had received multiple reports, external that vessels had received warnings of a closure of the Hormuz Strait. Multiple vessels in the area have received VHF transmission from Iran’s Islamic Revolutionary Guard Corps (IRGC) that “no ship is allowed to pass the Strait of Hormuz,” an official with the EU naval mission Aspides said.
The statement by the IRGC was somewhat disingenuous. The Strait does not have a barrier that can be lowered to stop traffic. Any announced “closure” is something of a metaphor. However, that does not mean it is ineffective.
While Iran possesses naval mines and has threatened to close the Strait in previous crises, sustaining a prolonged shutdown would likely require repeated mining or missile operations, under conditions contested by US Naval forces.
The UK Navy said that any such orders from Iran had no legal basis. It advised vessels to transit with caution.
Javier Blas, energy and commodities columnist at Bloomberg, said on X that “with all the caveats due to GPS jamming, [it] looks like major oil tanker traffic (>150,00 DWT) via the Strait of Hormuz has come to **a precautionary but effective halt** for now”.
A few tankers were still transiting, but on Saturday at least the majority had stopped before reaching it, or had made a U-turn. “Multiple oil companies / traders have asked their tankers to wait on either side of the Strait of Hormuz for now. Everyone is watching on whether the Iranian navy and/or IRGC move to lay mines, and on whether the US made good on its promise to neutralize the Iranian navy”, Blas wrote.
Martin Kelly of EOS said on Saturday that “at least three ships have U-turned from transit via the Strait of Hormuz”.
From 1984 to 1988 there were the so-called “tanker wars”. The relevance of this is that it showed that “closure” can in fact be the cumulative effect of several different influences.
Three major factors could be:
- Soaring insurance premiums making journeys relatively uneconomic
- An efficient laying of sea mines by Iran
- A need for military convoys to defend against sea-based attacks
On Sunday March 1st Japanese carriers operating in the Middle East shifted their operations from “high alert” to a total standstill. On Sunday, Japan’s largest shipping companies announced a formal suspension of operations in the Persian Gulf.
Leading shipper Nippon Yusen KK (NYK) confirmed that it had halted all operated vessels from traveling through the Strait of Hormuz. Similarly, Kawasaki Kisen Kaisha Ltd (KKK) and Mitsui OSK Lines Ltd (MOL) ordered their fleets to remain on standby in safe waters. Japan currently relies on the Middle East for about 90% of its crude oil.
On Saturday the US military advised all commercial traffic to maintain a 30-nautical-mile buffer from American assets, in order to avoid being caught in a potential crossfire.
Meanwhile, Greece’s Ministry of Maritime Affairs and Insular Policy issued an urgent advisory on Saturday directing all Greek-flagged vessels to exercise maximum vigilance and avoid key shipping lanes. The European Union is withdrawing non-essential personnel from the region, while the EU’s Aspides naval mission has been placed on high alert in the Red Sea.
Multiple advisories warned that jamming and spoofing of satellite navigation systems was likely throughout the warning zone.
On a corporate rather than state level, several tanker owners, oil majors and trading houses suspended crude oil, fuel and liquefied natural gas shipments via the Strait of Hormuz. “Our ships will stay put for several days,” one top executive at a major trading desk said.
Satellite images on Saturday indicated vessels piling up next to big ports, such as Fujairah in the UAE.
Tanker association INTERTANKO said the US Navy had warned against navigation in the area – the whole of the Gulf, Gulf of Oman, North Arabian Sea, and the Strait of Hormuz – saying it could not guarantee the safety of shipping.
As of Saturday evening 14 LNG tankers had shown signs of slowing down, U-turning or stopping in or around the Strait, according to Laura Page from consultancy Kpler. She said that this number was likely to rise, posing a threat to LNG exports from Qatar.
Windward reported Sunday morning that widespread GPS jamming had affected more than 1,100 ships in the Middle East Gulf in the previous 24 hours, erroneously placing vessels at airports, a nuclear power plant, and on land in Iran, Oman, and the UAE.
The seriousness of the events in Iran was underlined by statements from all the major airlines that they had diverted or cancelled flights to the region, citing safety concerns.
Airspaces over Iran, Israel, Iraq, Qatar, Bahrain, Kuwait, Syria and the UAE remain closed on Sunday morning, while there was a partial closure in Saudi Arabia. Jordanian and Lebanese airspace remained open, but there was limited flight activity.
Virgin Atlantic said it had cancelled its VS400 service from London Heathrow to Dubai and warned that flights to the Maldives, India and Saudi Arabia might experience longer flight times due to re-routing. It said that it was suspending services between Heathrow and Riyadh on Sunday.
Qatar Airways confirmed the temporary suspension of flights in and out of the capital, Doha, due to the closure of Qatari airspace, saying operations would resume at 19:00 local time on Sunday.
British Airways cancelled flights to Tel Aviv and Bahrain until Wednesday; Saturday’s service to Amman was grounded as well.
One flight, the BA123 service from Heathrow to Doha, which took off on time at 20:00 local time Friday night, was ordered to turn around a third of the way into the trip.
Wizz Air confirmed that it has suspended all flights to and from Israel, Dubai, Abu Dhabi and Amman with immediate effect up until and including next Saturday March 7th. Flights to and from Saudi Arabia will be cancelled until Tuesday.
Emirates Airlines suspended operations temporarily until 15:00 Sunday local time. Lufthansa, Air India and Turkish Airlines are other carriers to have announced cancellations for the region.