Commercial ships anchor off the coast of the United Arab Emirates due to navigation disruptions in the Strait of Hormuz, Dubai on March 2, 2026.
Stringer | Anadolu | Getty Images
Oil supertanker costs in the Middle East climbed to their highest level on record as conflict between the U.S. and Iran disrupts shipping through the strategically vital Strait of Hormuz.
Major marine war risk providers have started to scrap cover for vessels operating in the Persian Gulf as the fallout from a sudden security shock hobbles key shipping routes in the region.
The benchmark freight rate for Very Large Crude Carriers (VLCCs) — used to ship 2 million barrels of oil from the Middle East to China — hit an all-time high of $423,736 per day on Monday, data from LSEG showed. That marked an increase of more than 94% from Friday’s close.
Alongside a significant jump in oil and gas prices, the stratospheric rise in the cost of hauling crude oil follows the U.S. and Israeli attacks on Iran over the weekend. The expanding conflict has resulted in the effective halt of shipping traffic through the Strait of Hormuz — one of the world’s most important oil choke points, located in the gulf between Oman and Iran.
An Iranian Revolutionary Guards senior official said Monday that the Strait of Hormuz had been closed and warned any vessel attempting to pass through the waterway would be attacked, state media reported. The claim has since been disputed by the U.S. military’s Central Command, CENTCOM, Fox News reported.
“Charterers in the VLCC segment stepped back from the market and avoided securing vessels as multiple incidents have led to increased threat levels around the strait of Hormuz, despite the waterway not being officially closed,” Sheel Bhattacharjee, head of freight pricing in Europe at Argus Media, told CNBC by email.
Oil producers in the Middle East have not yet announced a halt to any production or loading yet, and ports in the UAE, Oman and Kuwait remain operational, Bhattacharjee said, citing market sources.
“But most shipowners were avoiding transits through the strait of Hormuz after insurers cancelled the war risk coverage for vessels in certain areas of the region,” Bhattacharjee said.
It is estimated that roughly one-third of seaborne crude oil trade moves through the strategically important waterway, alongside 19% of global liquefied natural gas (LNG) flows and 14% of global refined products trade, according to Argus Media.
‘A double whammy’
Leading maritime insurers have canceled war risk cover for vessels operating in the Middle East over recent days, amid reports of attacks on multiple ships traversing through the Strait of Hormuz.
Alongside the New York-based American Club, marine insurers including Norway’s Gard and Skuld, Britain’s NorthStandard and the London P&I Club said they were scrapping war risk cover for ships in the region.
Adrian Beciri, CEO of DUCAT Maritime, a Cyprus-based logistics firm specializing in dry bulk, said the knock-on effects of the sprawling Middle East conflict were being felt across the globe.
“We were trying to hire a dry bulk vessel to carry our typical rice food supplies to West Africa, which is around the Cape of Good Hope. You would think that is a million miles away from the conflict zone,” Beciri told CNBC’s “Squawk Box Europe” on Tuesday.
“We actually lost the ship. Someone had paid 50% more than they typically would do to carry coal from Indonesia to the west coast of India. Why did that vessel attract such a high rate? The answer is because the vessel owner was uncertain of getting cargo from the Persian Gulf area,” he continued.
“So, the consequences are far and wide, and this is potentially a double whammy. If we’re looking at the Hormuz closing and the Suez effectively being tampered with by the Houthis, this could be quite significant — much like what we saw during the Covid era and the attacks that were happening there.”
Shipping giants divert vessels
Even if oil tankers are only temporarily blocked from the Strait of Hormuz, it can ratchet up global energy prices, raise shipping costs and create significant supply delays.
The Strait of Hormuz is also key for global container trade. Ports in this region, such as Jebel Ali and Khor Fakkan, are specialized transshipment hubs that serve as intermediary points in global networks.
Shipping giants, including MSC, Maersk, Hapag-Lloyd and CMA CGM, have also issued fresh guidance, seeking to prioritize safety amid a deteriorating security situation.
Maersk, widely regarded as a barometer of global trade, said on Monday that it would suspend special cargo acceptance in and out of the United Arab Emirates, Oman, Iraq, Kuwait, Qatar, Jordan, Bahrain and Saudi Arabia until further notice.
It had previously said all sailings on the Middle East-India to Mediterranean and Middle East-India to east coast U.S. services would be rerouted around the Cape of Good Hope.
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