Tanker insurance has sharply increased due to escalating tensions in the Persian Gulf, especially after the onset of the U.S. war against Iran. This increase has profound impacts on the energy market and its supply chain, leading to serious challenges for refineries and fuel supply in Asia and Europe.
Major Changes in Logistics Costs
Currently, the war risk premium for tankers, which was previously about 0.05% of the cargo value, has risen to at least 0.5%. To put it more concretely, the insurance for a $120 million tanker before the war reached about $40,000 per trip and has now risen to about $800,000. This increase in costs directly affects the total price of each barrel of oil and is ultimately passed on to end consumers.
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The London marine insurance market, which traditionally had stable and calm pricing, is now under severe pressure. Shipowners have only 12 hours to finalize insurance rates due to momentary fluctuations in security risk. This situation reflects an increase in uncertainty in the market.
Consequences of Insecurity for the Energy Supply Chain
Ship traffic through the Strait of Hormuz has also drastically decreased. Before the war began, about 125 commercial vessels passed through this waterway daily, while recently only 7 vessels have done so. Since the onset of this insecurity, at least 75 vessels have been targeted due to attacks. This situation not only affects transportation costs but may also lead to emergency shutdowns of many refineries.
Passage through the Bab-el-Mandeb Strait is also facing serious obstacles, forcing ships to choose longer routes. For example, a journey that previously took 17 days has now increased to 35 days. This change in time has major impacts on fuel supply and the quality of services to end customers.
Overall, this security crisis not only affects transportation costs but also influences the strategic decisions of buyers. When an Asian buyer turns to other sources instead of Middle Eastern oil, this change in route requires more time to meet their needs, ultimately leading to price increases.
It seems that these changes will continue in the near future, and the energy industry will face more challenges due to insecurity and high transportation costs.
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