War risk insurance premiums for vessels transiting the Strait of Hormuz have reached between 4 and 10 percent of hull value, according to maritime industry data reported by Caixin Global and Bloomberg last week. Before the war began on February 28, the standard war risk premium for a Hormuz transit was 0.25 percent. [1] [2]

The arithmetic is blunt. A tanker worth $100 million now pays between $4 million and $10 million per transit in war risk coverage alone — assuming a carrier will write the policy. At the lower end, that is a sixteen-fold increase in the insurance cost of moving a cargo of oil through the world's most important energy chokepoint. At the upper end, it is a forty-fold increase. [2]

This paper reported the structural insurance dynamics when the minefield was first confirmed in early March. The premium trajectory since then has been linear upward. Bloomberg documented 5 percent of hull value by March 16 — roughly five times the earliest post-conflict level. Caixin reported 4-10 percent by last week. The range has widened as underwriters disagree about the actual risk profile. [3]

The CNBC analyst who appeared Friday morning was direct about the direction: "Shipping war risk insurance premiums are likely to continue rising." The statement requires no hedging. The Houthi entry into the conflict on Saturday, which widened the war's geographic exposure, will add another premium layer when the market opens this week. [4]

War risk insurance is not incidental to the oil price. It is a component of it. Every barrel that transits Hormuz — or reroutes around it — carries insurance costs embedded in its delivered price. Those costs are passed to refiners, who pass them to distributors, who pass them to the number on the gas station sign. The $4 gallon is partly the cost of a war risk premium that was 0.25 percent forty-four days ago.

-- DARA OSEI, London