Francesco Di Costanzo
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(16) War-Risk Premium Is the Real Oil Price

/5 min read

The price that clears the voyage

For a Gulf tanker in this crisis, the war-risk quote attached to the ship can determine whether the voyage economics clear. Brent futures settled at $90.12 a barrel on 1 August and $83.55 on 7 August, a $6.57 decline. The insurance quotations documented during the crisis show a separate cost that can reach millions of dollars for one ship.

The comparison needs care. Brent is a market benchmark for a barrel. Additional war-risk premium, or AWRP, in the cited Gulf quotations is charged against a vessel's hull or insured value and may cover a specified period, often seven days. A 5% transit charge calculated against cargo value is a different charge again. Reuters reported on 6 August that Iran sought fees of 5%–7% of cargo price. That is a cargo-value fee; the AWRP figures here use hull or insured value.

The denominator changes the argument

S&P Global Commodity Insights reported on 30 March that pre-war Gulf AWRP had been about 0.1%–0.15% of Hull and Machinery value, or lower, according to two maritime insurers. Lloyd's List put additional premiums for late-February Middle East Gulf trips at 0.15%–0.25%. For a simplified $100 million tanker, those figures imply $100,000–$250,000. The actual quote still depends on the ship, its claims record, route, flag and ownership nexus.

The same denominator makes the crisis quotations legible. S&P Global reported that the premium had reached about 2.5% per seven-day period in the Persian Gulf earlier in March. Lloyd's List reported on 11 March that Hormuz transits were commonly fetching 2.5%, while high-risk vessels had quotes at 7.5% and expectations of 10% or more. On the $100 million assumption, the range is $2.5 million to $10 million. Lloyd's List used a separate hypothetical $138 million VLCC linked to US interests and calculated $10 million–$14 million for passage.

Quotes are conditional

The highest figures applied only to high-risk propositions. Lloyd's List also found safer vessels obtaining 1% or less, and S&P Global reported rates close to 1% by the week ended 27 March, with some transits at 0.8% after a no-claims bonus. Conditions changed again. Marcus Baker, Marsh's global head of marine, cargo and logistics, told The National on 17 July that rates were 3%–10% of hull value. In its 22 July report, S&P Global quoted Baker saying regional AWRP had risen from 1%–3% weeks earlier to 7.5%–10%.

For a shipowner, the relevant number is the premium and condition available for that vessel on that voyage. Seven-day cover can require a fresh decision if a delay extends the insured period. That is an operational inference from the quoted cover terms, rather than a claim that every policy expires at the same moment. The selected evidence shows that AWRP was individually negotiated and had faced cancellations and restricted underwriting; it was therefore less transferable than the published Brent benchmark.

Capacity sets the practical boundary

On 2 March, Reuters reported that Gard, Skuld, NorthStandard, the London P&I Club and the American Club had issued cancellation notices for war-risk cover in Iranian waters, the Gulf and adjacent waters, effective 5 March. MS&AD suspended underwriting of a range of war-risk policies. Skuld was working on a buy-back option. For a shipowner, those actions could make availability and wording part of the freight decision rather than a routine post-fixture cost.

The Lloyd's Market Association offers the necessary caveat. Its Joint War Committee says Listed Areas may require additional war-risk cover, while prices are individually negotiated; the committee itself does not set rates. It also says hull war cover remained available in the London market through Lloyd's syndicates and IUA companies. Physical danger, sanctions, port access and freight costs can also shape a voyage decision. Insurance is one constraint among several.

At a $100 million hull value, a move from a 0.25% baseline to a 7.5% crisis quote adds $7.25 million before fuel, freight and delay. The figures do not apply to identical vessels or cover periods, so the calculation is illustrative. For the next proposed Gulf loading, the actionable price will be the cover available for that tanker, on those terms, for that duration.

Sources

Insurance and shipping

  1. S&P Global Commodity Insights, "War risk insurance cost off highs but still elevated in Persian Gulf" https://www.spglobal.com/energy/en/news-research/latest-news/shipping/033026-war-risk-insurance-cost-off-highs-but-still-elevated-in-persian-gulf

  2. S&P Global Commodity Insights, "Middle East shipping insurance costs rise on Hormuz risks: Marsh" https://www.spglobal.com/energy/en/news-research/latest-news/shipping/072226-middle-east-shipping-insurance-costs-rise-on-hormuz-risks-marsh

  3. Lloyd's List, "Gulf war risk premiums topping double-digit millions of dollars per trip" https://www.lloydslist.com/LL1156586/Gulf-war-risk-premiums-topping-double-digit-millions-of-dollars-per-trip

  4. Reuters, "Maritime insurance premiums surge as Iran conflict widens" https://www.reuters.com/world/middle-east/maritime-insurance-premiums-surge-iran-conflict-widens-2026-03-06/

  5. Reuters, "Marine insurers cancel war risk cover, tanker costs to rise as Iran conflict deepens" https://www.reuters.com/world/middle-east/ship-insurers-cancel-war-risk-cover-due-iran-conflict-2026-03-02/

  6. Reuters, "Proposed Hormuz passage deal not feasible for shipping industry, sources say" https://www.reuters.com/world/middle-east/proposed-hormuz-passage-deal-not-feasible-shipping-industry-sources-say-2026-08-06/

  7. The National, "Shipping insurance surges again as attacks intensify over Strait of Hormuz" https://www.thenationalnews.com/business/2026/07/17/war-risk-shipping-premium-surges-again-as-tensions-escalate-at-strait-of-hormuz/

  8. Lloyd's Market Association, "Joint War Committee" https://lmalloyds.com/committee/joint-war-committee/

Oil market data

  1. WAM, "Oil prices rise as Brent climbs above $90 per barrel" https://www.wam.ae/en/article/17cnllf-oil-prices-rise-brent-climbs-above-90-per-barrel

  2. Trading Economics, "Brent crude oil — price, chart, historical data" https://tradingeconomics.com/commodity/brent-crude-oil