War Risk Insurance and the Current Crisis in the Persian Gulf

After enduring more than two years of elevated war risk premiums tied to Houthi attacks in the Red Sea, the container shipping industry is now being further disrupted by events unfolding in the Persian Gulf. These events are reshaping the cost structure of container logistics in real time, with far-reaching consequences for freight rates, trade flows and the cargo owners who depend on the world’s most critical maritime chokepoint.

Roughly 20% of global oil passes through the Strait of Hormuz, the only maritime gateway to ports in the United Arab Emirates, Kuwait, Iraq, Qatar, Bahrain and parts of Saudi Arabia. When the Persian Gulf becomes a conflict zone, there is no viable bypass. Cargo either moves through the strait or it doesn’t move at all.

That reality is now testing the industry’s limits. On March 2, a wave of coordinated responses from the world’s largest container lines signaled that the escalating conflict in the Gulf crossed a financial threshold that carriers could no longer absorb without making changes.

Insurers and Carriers React

The speed of the insurance market’s reaction was striking. Within days of the initial hostilities near the Strait of Hormuz, including attacks on at least four tankers, the world’s largest maritime insurance mutuals moved to withdraw war-risk coverage for vessels entering the Persian Gulf. The American Steamship Owners Mutual Protection and Indemnity Association issued a formal notice of cancellation covering Persian Gulf and Gulf of Oman waters, effective 72 hours from March 2. The London P&I Club and Assuranceforeningen Skuld followed with similar notices, citing what Skuld described as a materially heightened level of geopolitical and operational uncertainty.

Marine insurance specialists at Marsh estimated that near-term rate increases for marine hull coverage in the Gulf could range from 25% to 50% in the absence of direct attacks on merchant shipping, with the caveat that any such attack could trigger far more severe consequences across the war insurance market broadly.

Carriers didn’t wait for insurance markets to settle before acting. Hapag-Lloyd introduced a war risk surcharge of $1,500 per 20-foot equivalent unit (TEU) for standard containers and $3,500 per container for reefer and special equipment, effective March 2, covering cargo to and from the region. CMA CGM responded with its own emergency conflict surcharge of $2,000 per 20-foot dry container, $3,000 per 40-foot dry container, and $4,000 per reefer or special equipment unit, with the charges applied to a broad scope of origins and destinations including Iraq, the UAE, Qatar, Saudi Arabia, Kuwait, Oman, Bahrain, Jordan, Egypt, Djibouti, Sudan, Eritrea and Yemen. Both surcharges apply retroactively to cargo already on the water but not yet discharged.

A Coordinated Industry Pullback

The surcharges were only one facet of the industry’s response. Mediterranean Shipping Co., the world’s largest container line by capacity, halted new cargo bookings for the Middle East entirely. Maersk and Hapag-Lloyd suspended all transits through the Strait of Hormuz, with Maersk also rerouting its ME11 and MECL services, which had only recently been reinstated through the Suez Canal, back around the Cape of Good Hope. CMA CGM instructed vessels already operating in the Gulf to proceed to designated shelter areas pending further instructions, and simultaneously suspended Suez Canal passage for affected services.

COSCO Shipping Holdings announced that its containerships would halt Hormuz transits  on safety grounds, a decision consistent with its approach during the Houthi campaign, when Chinese-linked vessels also voluntarily avoided the Red Sea.

According to Lloyd’s List Intelligence vessel-tracking data, approximately 60 containerships were anchored at the southern entrance to the Strait of Hormuz with no vessels recorded actively transiting. The operational standstill, even if temporary, underscores how rapidly a deteriorating situation can bring commercial shipping to a halt.

The Cost of a New Risk Regime

Understanding the financial mechanics behind war-risk insurance helps explain why these events carry such disruptive power. War-risk coverage operates separately from standard marine insurance and is typically structured as a percentage of a vessel’s hull and machinery value for a defined period of coverage. Prior to the current crisis, premiums for Gulf transits had already climbed from approximately 0.125 percent of hull value to between 0.2 and 0.4 percent, a range that added material daily costs to vessel operations without yet deterring most transits.

What has changed in the current environment isn’t just the level of premiums but the availability of coverage at any price. When P&I clubs and hull insurers issue cancellation notices, ship operators must either negotiate individually priced buy-back arrangements — typically at significant additional cost — or accept that they are operating without coverage. For most commercial shipping companies, the latter isn’t a viable option. Without insurance, vessels can’t secure port entry, financing covenants are breached, and cargo owners face potentially uninsured losses.

This dynamic explains the industry’s rapid and near-uniform response. The surcharges imposed by Hapag-Lloyd and CMA CGM aren’t simply cost-recovery mechanisms — they are signals to the market that the economics of Gulf operations have fundamentally shifted. Linerlytica co-founder Hua Joo Tan characterized the surcharges as a knee-jerk response, noting that many carriers imposed the charges before deciding whether they would accept new bookings at all.

Compounding Effect on the Red Sea

The timing of the Persian Gulf escalation is particularly damaging for an industry that had been cautiously optimistic about the trajectory of the Red Sea disruption. In early 2026, Maersk had completed its first successful Red Sea transit since hostilities began in late 2023, and the ME11 service had resumed Suez Canal passages in mid-February. Industry analysts at DSV and other freight forwarders had begun projecting freight rate softening as shorter Asia-Europe routings gradually returned.

Those expectations are now on hold. CMA CGM reversed its decision to return its FAL1, FAL3, and MEX services to the Red Sea, citing what it described as a complex and uncertain international context. The subsequent Persian Gulf crisis has effectively eliminated the near-term probability of a broad Red Sea return for major carriers. Any progress on normalization has been set back, and the Cape of Good Hope diversion —with its 11,000 additional nautical miles, 10 to 14 additional transit days, and substantially higher fuel costs — will remain the default for East-West trade on most carrier networks.

Freight rate implications are shifting accordingly. The structural overcapacity that had been expected to compress rates through 2026 is being partially offset by the extended diversion of vessel capacity into longer route configurations. Spot rates from China to the UAE had already risen approximately 5% in the weeks preceding the recent military action in the region. Further rate increases across affected trade lanes are widely anticipated.

Jebel Ali and the Regional Port Equation

No single port illustrates the stakes of Arabian Gulf disruption more clearly than Jebel Ali in Dubai, the largest container terminal in the Middle East and a critical transshipment hub connecting South Asia, East Africa and the broader Gulf hinterland. Analysts at Xeneta noted that there is no viable alternative to moving containers in and out of Jebel Ali by ocean if the Gulf is off limits. Carriers that omit Gulf port calls will divert boxes to least-worst alternative discharge points, requiring onward overland transportation — adding cost, time and complexity for every cargo owner in the region.

The near-term operational picture for Gulf ports involves a backlog of vessels sheltering near the Strait of Hormuz awaiting safe passage windows, deferred schedule calls, and significant uncertainty around cargo availability and equipment positioning. The disruption, while currently more acute than the early stages of the Red Sea crisis, is expected to be more regionally concentrated — significant enough to cause severe disruption at a regional level, but unlikely to replicate the seismic global impact of Red Sea rerouting in the near term, according to Xeneta’s chief analyst Peter Sand.

What’s Next for the Container Industry

The insurance market’s response will largely be determined by the kinetic situation on the water rather than diplomatic signals alone. As analysts at Kpler observed following the Red Sea disruptions, insurance rates don’t decline based on declarations from militant groups or ceasefire announcements — they decline when sustained periods without incidents, combined with meaningful political progress and verified reductions in threat capability, provide underwriters with statistical confidence that the risk environment has genuinely improved.

For supply chain professionals managing Gulf-connected trade, the near-term priorities are clear: Assess exposure across booking pipelines for cargo already on water or not yet shipped, understand the retroactive application of new surcharges, and model the cost and time implications of routing disruptions for inventory and procurement cycles. The Persian Gulf’s lack of alternative routing means that tolerance for operational uncertainty must be paired with genuine contingency planning, whether through inventory buffers, modal alternatives where possible, or accelerated engagement with freight providers on alternative port options.

An Evolving Market

The cascading crisis in the Persian Gulf isn’t simply an acute disruption; it’s the latest data point in a structural shift in how the maritime insurance market prices geopolitical risk. After the Black Sea conflict, the Red Sea campaign, and now the escalation in the Strait of Hormuz, underwriters are moving away from binary risk-on/risk-off pricing toward sustained elevated baselines that account for rapid relapse potential in multiple regions simultaneously.

For the container industry, this means that war-risk surcharges are no longer exceptional line items that appear and disappear with individual conflicts. They’re becoming embedded features of operating cost structures in the Middle East, and potentially other regions as geopolitical volatility extends its reach. Organizations that treat them as temporary anomalies rather than persistent variables in their freight procurement and supply chain design will be poorly positioned for what appears to be an extended period of elevated maritime risk.

Beth Hoke is sales director at USA Containers.