Strait of Hormuz Becomes World’s Costliest Shipping Route
Prior to the conflict, the Strait of Hormuz handled roughly 20% of global seaborne crude oil. Iranian retaliatory attacks on tankers, coupled with Western insurers and shipping companies pulling back, have effectively brought traffic to a standstill.
Before the escalation, war risk insurance for a Gulf tanker ranged between 0.02% and 0.05% of its value. Since February 28, premiums have soared to 0.5% to 1% or more. The cost for a single voyage has jumped from around $40,000 to between $600,000 and $1.2 million for a typical tanker, with at least 16 vessels hit since the fighting began.
Reports warn that consumers could soon feel the effects at the pump or in supermarkets due to the rising shipping costs.
The United States has pledged naval escorts through the strait, with President Donald Trump urging oil-importing nations to assist in securing the waterway. Even with naval protection, companies are expected to continue treating the strait as a high-risk operating environment, according to Christopher Long of maritime security firm Neptune P2P Group.
Iran maintains that the Strait of Hormuz remains open for friendly or authorized vessels. Indian Foreign Minister S. Jaishankar said on Sunday that diplomatic negotiations, such as those allowing two Indian-flagged gas tankers to pass safely, remain the most “effective way” to restart transit.
Russia, a major crude exporter, is not involved in the conflict and does not rely on the Strait of Hormuz to deliver its oil. Its Urals blend reaches India via the Baltic and Black Seas, passing through the Suez Canal and Red Sea, bypassing the Persian Gulf entirely.
While Russia and India have partnered with Iran to develop the International North-South Transport Corridor (INSTC) as an alternative route, its current use for significant crude oil shipments remains limited.
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