Iran War: Latest Industry Comments and Insights -

Israel Reported Impact Locations and Strike Risk MAPPING INSURANCE RISKS

(Header image; MIS) Quick round up of the latest reactions;

PARATUS

Commenting on the impact of the Middle East conflict on energy markets, Gus Majed, CEO of Paratus, the reinsurer specialising in underwriting energy price risk, said:

“Energy markets reacted immediately to the weekend’s developments in the Middle East, repricing geopolitical risk even before there is clear evidence of sustained physical disruption. The speed and magnitude of the move confirm that perceived tail risk across crude, refined products, LNG and freight has increased materially.

“Crude has moved first and fastest, with Brent now trading around $82–83/bbl, up roughly $5–7/bbl over recent sessions. This price action reflects a rapid rebuild of geopolitical risk premium, with the market increasingly factoring in a meaningful disruption scenario centred on Gulf export flows.

“Refined markets are reinforcing the tightening signal. Distillate cracks remaining elevated in the low-to-mid $30/bbl range indicate the products complex is firming ahead of any confirmed crude disruption. This sequencing is typical in geopolitical episodes, where logistics friction and precautionary inventory behaviour transmit first through middle distillates and jet fuel.

“Approximately 5% to 10% of globally traded diesel and gasoil, and roughly 15% to 20% of jet fuel exports, transit the Gulf system. As a result, even modest shipping friction can tighten prompt product balances disproportionately.

“What happens next will depend less on headlines and more on physical indicators. Historically, crude leads on initial risk sentiment; products and freight determine whether that shock embeds; and gas and power markets follow if LNG flow disruption becomes credible and prolonged.

“The key variables are observable: volumes transiting the Strait of Hormuz, vessel routing behaviour and congestion patterns, changes in war risk premia, and any verified impact on processing facilities, terminals or export infrastructure.

“In the absence of de-escalation, heightened volatility and a persistent geopolitical risk premium are likely to remain embedded in fuel and power pricing until markets gain clarity on the geographic scope and duration of the disruption.”

VESON NAUTICAL

There is no way around the Strait of Hormuz. With the geopolitical situation in the Middle East, the Tanker markets face unprecedented challenges — not to forget the challenges to global energy markets should this last. 20-25% of global seaborne crude and oil product exports are dependent on safe passage through the Strait, which currently is de facto closed. Safeguarding crews and assets is the priority of shipowners who now find their vessels shut-in as tensions show no signs of cooling.

In the period leading up to the attack by Israel and the US on Iran, we witnessed increased activity for the transportation of oil. The largest importers, China and India, increased import volumes from the Middle East as an early indication for expectations of a geopolitical crisis, which is now evident in a hard disruption to trade flows. Tanker rates, especially for the VLCC’s, were already firming to levels rarely seen through history, and quotes for the benchmark MEG-China have doubled to north of 400,000 USD/day since the attacks. Of course, these levels may turn out to be more theoretical than actuality as no serious shipowner would instruct its vessels and crew to navigate through the strait at the current time.

Nobody can say how long the situation will last, but a result will be increased demand for oil and oil products outside of the Gulf of Oman as an attempt to cover for the shut-in volumes. No one is placed to do so in full, but increased oil flows from the Americas, North Sea, and Africa is to be expected. That means that vessels outside of the Persian Gulf will be facing high demand in the short-term, and Tanker rates originating in the Atlantic will continue to strengthen.

A long-drawn conflict on the other hand would see a 20-25% reduction in global seaborne trade volumes with detrimental consequences for Tanker utilization and trade, even with c.5% of the VLCC capacity idling inside the Strait of Hormuz.

While short-term rate spikes may appear supportive for owners positioned outside the region, the broader structural impact of a prolonged disruption would ultimately weigh on global trade flows and fleet utilization. In that scenario, what initially looks like an earnings windfall for parts of the fleet could translate into longer-term instability for Tanker markets as a whole.

CYBER WAR COULD BE AN ISSUE

GCHQ has warned that the US-Israel war against Iran could lead to Iranian cyber attacks on UK businesses.

In response, Aaron Le Marquer, Head of Policyholder Disputes at law firm Stewarts, has issued the following comment:

“The warning of potential Iranian cyber attacks is particularly worrying even for those businesses who carry comprehensive cyber insurance, since in most cases state-backed cyber attacks are excluded from cover. Exactly how a policyholder is to establish whether an attack is in fact state-backed remains to be seen in practice, with various different mechanisms proposed but not yet tested. Add to that a myriad of different exclusion wordings in the market (with 48 approved Lloyd’s versions at last count), and it is easy to see a chaotic coverage picture emerging in the event of widespread attacks.”

MCKENZIE INTELLIGENCE SERVICES

David Heathcote, Head of Intelligence at McKenzie Intelligence Services, comments on the current situation in the Middle East and its implications for the insurance industry.

“In scenarios like these, insurers’ decision making is limited by the information available to them. In the absence of quality intelligence, often the decision is to take a step back from cover while getting a better understanding of the exposures and risk environment. The one thing the insureds do not have, however, is time to take stock. To uphold the value of the cover they sell, insurers need to be sufficiently well-informed to take proportionate, considered action and maintain cover wherever possible.

“The situation is evolving rapidly. So far, the recorded strikes across the region have targeted military sites, energy infrastructure, port infrastructure, civilian airports and high profile hotels in countries with close proximity to Iran, including Saudi Arabia, Kuwait, Bahrain, the UAE and Qatar, as well as a number of direct retaliatory strikes on Israel.

“A number of civilian international airports have been hit and the straits of Hormuz are closed, with maritime traffic also being hit by strikes. The conflict is creating significant disruption throughout the region, with travel restrictions and business interruption likely to drive further losses down the line.

“Conflicts create a considerable amount of chaos which is often reflected in the reporting from media outlets, making it hard to cut through the noise and know what insights can be trusted. Insurers need trusted intelligence to be able to uphold the promise sold to their customers.”