'Over 200 tankers stuck inside the Persian Gulf,' as war risk drops out and insurance rates double

Several P&I Clubs have cancelled war risk coverage, and insurance rates are doubling toward the upper end of the established range.

Kpler senior risk and compliance analyst, Dimitris Ampatzidis, told Riviera that from 28 February, 15:30 UTC onwards, most vessels in the area either performed U-turns, began idling, or diverted to alternative routes outside the Strait of Hormuz. Overall traffic fell by 75% by the end of the day compared with 27 February (see MarineTraffic animation above).

Mr Ampatzidis added that after 1 March, 08:30 UTC, the remaining traffic in the Straits consists only of Iranian or Chinese vessels, based on AIS data.

Kpler tracking as of 2 March, 02:00 UTC shows 706 non-Iranian tankers positioned across three ’exposure zones’: 334 crude tankers, 109 DPP tankers and 263 CPP tankers. The exposure zones are defined as the Persian Gulf (west of the Strait of Hormuz), the Gulf of Oman (immediately east of the Strait) and the Arabian Sea (further east from the Strait).

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Kpler said the distribution "highlights the balance between continued loading inside the Gulf and slower clearing through the chokepoint".

Heidmar chief executive Pankaj Khanna told Riviera that transits through the Strait are effectively at a standstill following reports over the weekend of broadcasts from Iran declaring the Straits closed and reports that four vessels have been hit.

“There are over 200 tankers stuck inside the Persian Gulf,” he said.

Kpler-observed west-to-east Strait of Hormuz crossings tied to Middle East Gulf exports fell to just three tankers on 1 March: one crude oil cargo of roughly 2,000 kb (about 2.0 million barrels), one CPP cargo of 506 kb and one DPP cargo of 307 kb. Total eastbound outflow was 2,813 kb, compared with roughly 21,000–22,000 kb on both 27 and 28 February.

LNG trade flows evaporate as conflict grips Middle East

ICIS senior LNG analyst Alex Froley noted on social media that no new LNG carriers have transited the Strait of Hormuz since the afternoon of 28 February, while numerous Qatari vessels are already en route to Europe and Asia.

Greece has hundreds of vessels in the region, most outside Persian Gulf

Greece, one of the world’s largest maritime nations, is particularly affected. Greek Minister of Maritime Affairs and Insular Policy, Vasilis Kikilias, said on the morning of 2 March that approximately 325 vessels linked to Greece – but sailing under foreign flags – are in the wider area, while 10 Greek-flagged vessels remain in the Persian Gulf.

Risk of official closure of Strait of Hormuz remains, but unlikely

Marine war risk and insurance specialist Vessel Protect director of strategy and operations Munro Anderson told Riviera that the core risk for global shipping is a protracted conflict rather than a short-lived escalation.

“Iran may seek to establish a de facto closure of the strait through threats alone,” Mr Anderson said. “However, an operating environment in which vessels are targeted using asymmetric means, such as seaborne or limpet mines, or conventional mines, could significantly undermine the commercial viability of the region across a wide range of markets for a prolonged period.”

While Iran’s naval forces have been targeted in US strikes, Bimco chief safety & security officer Jakob Larsen assessed that they retain the capabilities they are designed for, to disrupt shipping through the Persian Gulf. 

"In the short term, it is assessed that Iran will be able to coerce commercial shipping to decide against entering the conflict area," Mr Larsen said, noting that there is a high level of expectation that US forces will ’eventually’ clear a path for commercial vessels to move through the region’s waterways.
"It is assessed that within a few days, US air and naval superiority will eventually establish a level of security which will enable commercial shipping to resume transport in and out of the Persian Gulf and adjacent waters," he said.

Bimco said that, while vessels with business connections to US or Israeli interests are more likely to be targeted, a high degree of risk remains for other vessels that could be targeted deliberately or in error.

War risk cancellations and doubling of insurance rates

Bimco also said it expects insurance rates to increase manyfold, and that "ships with business connections to the US or Israel approaching the area are probably not going to be able to get insurance".

As it stands, P&I Clubs and war risk underwriters are declining to provide cover for vessels trading in and around the Strait of Hormuz and the broader Persian Gulf region altogether.

Bloomberg reported on 2 March that seven of the 12 members of the International Group of P&I Clubs have issued notices stating that from 5 March, war-risk cover will be automatically terminated if vessels enter the Persian Gulf, its adjacent waters, or Iranian territorial waters.

“This is not a repricing, but a withdrawal of capacity altogether,” Optima Shipping Services head of market analysis and decarbonisation strategies, Angelica Kemene, told Riviera. “Some owners may choose to trade uninsured, accepting full liability themselves, but that is an extraordinary risk posture that very few balance sheets can absorb.”

Marine underwriting sources told Riviera that rates for vessels operating within the Persian Gulf are likely to rise rapidly toward the upper end of the established range, potentially doubling to around 0.5% net, assuming a 50% no claims bonus (NCB).

Sources added that some vessels may struggle to secure cover for any attempted transit of the Strait of Hormuz, even if they are willing to attempt passage.

From an underwriting perspective, further tightening of terms is expected. “Underwriters are likely to begin issuing notices of cancellation, with renewal periods potentially reduced to seven days of cover instead of the usual 14. In more acute scenarios, notice periods could be shortened to 48 hours instead of the standard seven days,” the sources highlighted.