Escalating Tensions: Israel Faces Rising War Risk Premiums Amid Iran Conflict

According to a recent report from Reuters, the cost of war risk insurance for shipments heading to Israel has surged dramatically, now reaching up to three times higher than just a week ago. This spike comes as the conflict between Israel and Iran continues into its fifth day. Currently, shipping premiums for a week-long journey to Israeli ports are estimated between 0.7% and 1.0% of the vessel’s value, compared to approximately 0.2% previously.

While these rates have increased substantially, they still fall short of the peak levels seen in november 2023 when premiums exceeded 2%. This surge followed a devastating Hamas attack that resulted in over 1,200 fatalities and lead to an Israeli military response in Gaza. Each underwriter may assess risks differently; however, this increase translates into tens of thousands of dollars added daily for each voyage.

David Smith from McGill and Partners noted that calls specifically directed at Israel are evaluated individually with rates potentially hitting up to 1% for a seven-day call based on various factors like cargo type and ownership details.

Israel heavily depends on maritime routes for its imports through key ports such as Ashdod—located near Gaza—and Haifa in the north,along with Eilat on the Red Sea coast. Recently, operations at Haifa’s largest oil refinery were halted after an Iranian strike damaged its power supply.

As per MarineTraffic data from Tuesday, nearly thirty vessels were anchored around haifa Bay; however, all port terminals there remained fully operational according to local industry sources.

Shipping companies are increasingly hesitant about navigating towards Israel due to heightened risks associated with ongoing conflicts. The Iran-aligned Houthis from yemen have threatened attacks on any vessels linked to Israel despite having established a ceasefire concerning U.S.- and UK-affiliated ships operating in the Red Sea region earlier this year. In March, they declared a “maritime blockade” against Haifa port as retaliation against Israel’s actions in Gaza.

This evolving situation highlights not only geopolitical tensions but also significant implications for global shipping logistics and insurance markets moving forward.