Oil barrels now carry $8 war insurance
War‑risk insurance is now adding about $8 to the price of a barrel of crude, according to David Osler, the law and insurance editor at a shipping news outlet. The extra cost flows straight into what American drivers pay at the pump.
Insurance surcharge pushes oil price higher
When a vessel sails through a designated high‑risk area, insurers levy a surcharge that can reach up to 10 % of the ship’s value. A very large crude carrier valued at roughly $140 million may therefore incur several million dollars in added premium for a single trip.
Shipowners normally hold an annual baseline policy covering conflict, terrorism, strikes and riots, costing a few hundred thousand dollars. The recent spike turns that baseline into a hefty extra charge, and the expense is passed along the supply chain to the final retail price.
Claims surge hits marine insurers
Insurers have paid out around $2 billion in claims across more than 70 cases since the conflict began, a figure supplied by a senior market contact and likely higher. This makes the payouts the second‑largest hit to marine insurers in over a decade, after the 2024 collapse of Baltimore’s Francis Scott Key Bridge.
The large loss figure highlights how quickly a regional war can become a global financial burden. It also shows the vulnerability of shipping firms that rely on predictable insurance costs to manage their operating budgets.
High‑risk zone expands along Red Sea
Attacks on vessels linked to Saudi Arabia by the Iran‑backed Houthi militia have prompted insurers to extend the high‑risk designation about 800 kilometers north along the Red Sea coast near the Bab Al‑Mandab strait, the southern gateway to the sea.
As a result, more ships bound for northern ports now face the extra premium. The broader zone means that even routes previously considered safe now carry the additional insurance charge, further nudging the cost up.
Debate over alternative routes
U.S. Treasury Secretary Scott Bessent recently suggested that new pipelines could render the Strait of Hormuz a “worthless piece of water” within two years, as Gulf exporters shift more energy overland.
While the idea of bypassing the strait is appealing, the scale of projects such as Saudi Arabia’s East‑West pipeline or the UAE’s expanded capacity at Fujairah suggests a longer timeline. Heavy investment, labor and material needs could delay completion, and any new infrastructure would still be a target for military action, merely shifting the risk.
Even if overland routes eventually reduce reliance on the strait, the transition will likely be gradual. Existing contracts, geopolitical considerations and the sheer cost of building new corridors mean that oil shipments will continue to use maritime paths for the foreseeable future.
Atkinson also pushed back on predictions that Iran could burn through its oil revenues by December, likening Tehran’s strategy to Muhammad Ali’s “rope‑a‑dope” approach of absorbing punishment while waiting for an opponent to tire.
