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The cost of insuring a ship sailing through the Strait of Hormuz has increased 12-fold, even after Donald Trump vowed to block trade through the key oil chokepoint.
Brokers said shipowners were bid up millions of dollars to transit the strait or sail into nearby high-risk waters, as premiums soared to 3 percent of a ship’s cost on Wednesday, up from about 0.25 percent before the war.
The US President said on Truth Social that the US Development Finance Corporation will provide insurance and guarantees “at a very reasonable cost” for the financial security of all maritime trade traveling through the Gulf, especially energy.
London insurers were racing on Wednesday to understand how the proposal might work and whether it could help drive down prices. Many of the world’s largest insurance brokers said they were surprised by Trump’s announcement.
“We haven’t heard anything other than that true social statement,” said David Smith of specialist broker McGill. He also said that despite a pledge to insure “all” trade through the Gulf, insurers were unsure how widely the support would be implemented.
“For example, would this apply to Chinese oil cargoes carried on European tankers?” Smith said. “We don’t know.”
Other maritime experts questioned how much help could come from the DFC, whose main role is to facilitate private investment in poor countries, when freight costs and the risk of attack – rather than insurance availability – were the main concerns for shipowners operating in the region.
Ed Finlay-Richardson, shipping investor and founder of Contango Research, said of the DFC announcement, “It could perhaps be a way to take an edge off the price of oil, but at first glance I don’t think it will change anything. We already have insurance.”
Brent crude fell slightly on Trump’s announcement but remains at about $81 a barrel, 12 percent higher than the start of the war.
The cost of insuring ships sailing near the Middle East has soared after insurers began informing customers over the weekend that they were canceling their war-risk insurance policies.
Brokers said some insurers had canceled policies to reinstate cover at higher prices reflecting current risk levels, but others had pulled out of the market and many were refusing to provide cover through the strait, where traffic had come to a halt in recent days.
At least seven tankers have been attacked in the strait and surrounding waters since Sunday, and ships reported receiving radio messages, apparently from the Islamic Revolutionary Guard Corps, telling them to stay out of the waterway.
Marsh broker Dylan Mortimer told the FT that typical prices in the high-risk area now range from 1 to 1.5 percent of a ship’s cost, while prices for ships bound for the US, Britain and Israel are reported to be three times those rates.
Trump said on Truth Social that “If necessary, the United States Navy will begin moving tankers through the Strait of Hormuz as soon as possible.”
Maritime security experts said naval escort would help reduce the threat to ships being protected, but it may be unrealistic to provide protection for all tankers currently operating in areas threatened by Iran because it would require too large a number of warships and other military assets.
A maritime security adviser, speaking on condition of anonymity, said US naval ships would also be at risk if they moved into the strait before Tehran’s navy was significantly weakened. “Their fear is that if they put a warship in that area, every single Iranian missile will be fired at them. They will be completely overwhelmed.”
