War-risk insurance premiums hit 1,000% as Houthi attacks and U.S.-Iran tensions disrupt shipping through Hormuz and the Red Sea, adding $3-$4 per barrel to Indian crude import costs.
War-risk insurance premiums have surged as much as 1,000% over the past week as fresh Houthi attacks in the Red Sea and escalating U.S.-Iran tensions around the Strait of Hormuz disrupt shipping lanes, three marine insurance brokers said.
A tanker transiting the Bab el-Mandeb strait now pays roughly $500,000 per voyage for hull and cargo coverage, up from $50,000 before the Houthi campaign began in November, one London-based broker said. The spike reflects re-insurers pulling capacity from the region and underwriters demanding 48-hour notice for any vessel entering the high-risk zone.
The cost surge hits crude importers directly. India, which relies on the Hormuz chokepoint for roughly 80% of its crude oil imports, faces a $3-$4 per barrel increase in delivered costs for April-loading cargoes, two Singapore-based traders said. Indian refineries have started booking alternative routes via the Cape of Good Hope, adding 12-15 days to voyage times and pushing up freight rates for VLCCs on the Middle East-to-Asia route by 40% over the past month.
The Persian Gulf-to-India route now carries a war-risk surcharge of $2.50 a barrel, up from $0.30 in December, according to data from the Baltic Exchange. That is the widest spread since the 2019 tanker attacks off Fujairah.
Global oil markets are already pricing the disruption. Brent crude settled at $87.50 a barrel on Friday, up 6% for the week, its biggest weekly gain since October. The backwardation in the front-month contract widened to $1.20 a barrel, signaling immediate supply tightness rather than long-term demand anxiety.
Insurance brokers said the premium spike could persist through the second quarter. The Houthis have not signaled a ceasefire, and the U.S. military's Operation Prosperity Guardian has not stopped attacks. One Gulf-based maritime security firm said it had advised clients to reroute all vessels over 50,000 deadweight tonnes around the Cape until June.
For Indian crude buyers, the math is shifting. A 1,000% jump in insurance costs on top of higher freight and longer voyage times makes spot purchases from West African or U.S. suppliers more competitive than Persian Gulf cargoes, two Mumbai-based refinery traders said. That could reshape India's crude slate over the next two months, favoring lighter, sweeter grades from the Atlantic Basin over heavier Middle Eastern sour crude.
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