Why does a threat to shipping raise oil prices and insurance bills?

A threat to shipping raises oil prices and insurance bills because both depend on what might happen as well as what has happened. The Energy Information Administration (EIA) says that the inability of oil to pass a major chokepoint, even temporarily, can cause supply delays and raise shipping costs, potentially raising world energy prices. Traders and insurers do not wait for a ship to be stopped: they price the risk.

Start with insurance. Marine insurance covers the physical loss or damage of ships, cargo, terminals and the transport that carries property from origin to destination. General hull insurance does not cover a vessel sailing into a war zone, so shipowners buy separate war risk insurance, and the premium varies with the expected stability of the countries the ship will visit. The war risk areas are set by the London-based Joint War Committee. Wikipedia reports that, before the 2026 Israeli-US strikes on Iran, insurance for the Strait of Hormuz rose from 0.125 percent to between 0.2 and 0.4 percent of a ship's insured value per transit, a quarter of a million dollars more for a very large tanker. Once the fighting began, the same article says, rates were reported by 9 March 2026 to have risen four to six times in a week.

Prices respond to the same fear. In June 2025 the EIA noted that the Brent price rose from $69 to $74 a barrel in a day although it had seen no blockage of traffic through the Strait of Hormuz. In January 2011 Brent briefly hit $100 a barrel on concerns that Egyptian protests would lead to the closure of the Suez Canal. Futures contracts are widely used both for hedging price risk and for speculative trading, so people who want to protect themselves, and people who want to bet, can both push a price up on a threat.

The size of the reaction can differ from the size of the problem. An energy economist, James Williams, said that in light of existing stocks a few days of slowdown in oil delivery is not critical to the market.