Amid the uncertainty created by the US and Israeli war on Iran, some insurance companies have tightened the conditions under which they will cover shipowners passing through the Strait of Hormuz. According to a newspaper report cited by Danish trade publication ShippingWatch, insurers are now requiring shipowners to obtain prior approval from the Iranian authorities before transit. An unnamed insurance executive questioned how viable this requirement is in practice, telling the publication, "In practice, it is highly uncertain whether shipping companies can reach a viable agreement with the Iranian authorities."
The Strait of Hormuz is a critical chokepoint through which roughly one-fifth of global oil supply and a significant share of liquefied natural gas pass. International insurance markets — through P&I (Protection and Indemnity) clubs and war-risk underwriters — typically respond to acute geopolitical crises by adding affected zones to the Joint War Committee (JWC) list, exposing operators to additional war-risk premiums. Hormuz is currently being aggressively priced under that framework; the demand by some clubs that owners obtain permission from Iranian authorities takes that approach to a new operational threshold.
The principal reason this requirement is problematic in practice is that most Western shipowners have no direct diplomatic or commercial channel with Iran due to sanctions. The US sanctions regime against Iran — and recent OFAC guidance specifically warning that Iran-linked Hormuz payments could trigger sanctions exposure — make it legally hazardous for owners to negotiate a written guarantee or transit note with Iranian counterparts such as the IRGC Navy or the Ports and Maritime Organisation. The implied compliance, contractual and information-disclosure requirements push the demand into unacceptable territory for many owners — meaning that some tonnage may end up postponing Hormuz transits or redirecting routes.
For supply chains and freight costs, the indirect effects are potentially severe. An insurance-driven constriction of Hormuz traffic could amount to a de facto closure of the strait — pushing crude, LPG and LNG prices upward and tightening rates simultaneously. The cost dynamic feeds directly into freight rates; VLCC time-charter spot rates breaking above USD 100,000 per day in recent weeks reflect exactly this pressure. Short-term supply chain actions include alternative-route planning (Indian Ocean routings, Cape of Good Hope instead of Suez, multimodal options) and the renegotiation of insurance clauses in long-term cargo and charter contracts.
Key Takeaways:
1. Some insurance companies are requiring shipowners to obtain prior approval from the Iranian authorities before passing through the Strait of Hormuz.
2. An insurance executive warned that reaching a viable agreement with the Iranian authorities is highly uncertain in practice.
3. The Strait of Hormuz is a critical chokepoint carrying roughly one-fifth of global oil supply and a significant share of LNG.
4. The US sanctions regime and OFAC warnings make direct negotiation with Iran practically impossible for most Western owners.
5. Insurance-driven constraints could amount to a de facto closure of the strait, with strong upward pressure on freight and energy prices.
