Energy market experts and maritime industry analysts warned on Monday that the insurance market crisis triggered by the escalating Middle East conflict could prove more difficult and time-consuming to resolve than the military conflict that caused it. Marine war risk insurance, once withdrawn from a geographic zone due to active conflict, does not necessarily return quickly when the shooting stops. The cautious, actuarially driven logic of the insurance industry means that the effective closure of shipping routes could persist long after the immediate military threat has passed.
The history of war risk insurance in conflict zones supports this concern. Following major maritime incidents in conflict regions, insurance markets have historically been slow to return to normal. Underwriters need to reassess risk models, rebuild confidence in the safety of specific routes, and observe a sustained period of incident-free navigation before they are willing to offer coverage at commercially viable rates. This process can take months rather than weeks, even after the military situation has improved significantly.
The practical consequences for global shipping are significant. Tanker operators and their customers need affordable war risk insurance as a condition of operating commercially in a risk zone. If insurance is unavailable or prohibitively expensive, ships cannot operate commercially in the affected area regardless of the military situation. This means that the effective closure of the Strait of Hormuz could persist well beyond any ceasefire or de-escalation agreement, as the insurance market takes its own time to reassess and restore coverage.
The shipping industry has developed some mechanisms for managing war risk in conflict zones over the years, including specialist war risk insurers, government-backed insurance schemes, and mutual protection and indemnity clubs that pool risk among shipowner members. However, none of these mechanisms is designed for a scenario in which one of the world’s most critical maritime chokepoints is actively contested in a major regional military conflict. The scale and nature of the current risk may exceed the capacity of existing insurance frameworks to manage.
For energy markets, the insurance dimension of the crisis adds to the uncertainty about the timeline for supply restoration. Even optimistic scenarios that envision a relatively quick military resolution must account for the additional time required for the insurance market to restore commercial shipping coverage in the affected region. This lag effect means that the supply disruption could persist for longer, and at a higher level, than the military timeline alone would suggest. Energy markets will need to price this additional uncertainty into their assessments of supply availability and price trajectories.