The Strait of Hormuz: Why the Risk Matters Globally
The Strait of Hormuz is one of the world's most important maritime energy corridors.
A prolonged disruption not only affects vessels physically passing through the Strait. It can influence:
crude oil prices;
LNG prices;
bunker prices;
tanker freight rates;
war-risk insurance premiums;
hull and machinery exposure;
cargo insurance;
vessel availability;
charter-party performance;
port congestion;
ship-to-ship transfer operations;
voyage duration;
crew-change arrangements;
global inflation; and
the cost of transporting energy and manufactured goods.
The present crisis has already demonstrated how quickly a regional military conflict can become a global shipping and energy crisis.
Recent tracking data cited by Reuters showed that oil flows through Hormuz had recovered to approximately 2.9 million barrels per day, compared with around 700,000 barrels per day in August, as Gulf producers increasingly returned to the waterway following disruption to alternative export routes. Saudi Arabia also loaded approximately 14 million barrels onto seven VLCCs at Ras Tanura on 20 September.
This recovery, however, should not be interpreted as a return to normality. It demonstrates instead the difficult balance between the enormous commercial value of the cargoes moving through the region and the significant risks being accepted by vessels undertaking those voyages.
Shipping Costs Have Increased Dramatically
One of the most immediate financial consequences has been the increase in the cost of moving oil.
Reports have indicated that the cost of transporting oil through the Hormuz region has risen dramatically as owners demand compensation for increased war-risk exposure, longer voyages, delays and the possibility of vessel damage.
Some industry reports have placed the cost of a tanker voyage at up to approximately US$20 million, compared with substantially lower costs before the escalation of the conflict.
Other reporting indicates that certain Gulf-to-Asia shipping movements have experienced even more extreme increases when additional logistical arrangements, ship-to-ship transfers and alternative routing requirements are taken into account. One recent report cited shipping costs increasing from approximately US$4.5 million to US$63 million per voyage to China in a particular Saudi export scenario.
These figures should not be treated as a single standard freight rate applicable to all tankers. Actual voyage costs vary significantly according to vessel size, cargo, route, insurance terms, war-risk premiums, duration, charter-party arrangements and whether ship-to-ship transfers are required.
Nevertheless, they illustrate the scale of the disruption.
War-Risk Insurance Is Becoming a Major Concern
For shipowners, the physical threat is only one part of the problem.
The insurance implications are potentially just as significant.
A vessel entering a high-risk area may face increased:
war-risk premiums;
additional premiums for hull and machinery;
loss-of-hire exposure;
cargo insurance costs;
crew-related liabilities;
deviation costs;
security expenses; and
contractual disputes over responsibility for additional costs.
The higher the perceived probability of attack, the more expensive it becomes for underwriters to provide cover.
This creates a difficult commercial equation for shipowners.
A vessel may technically be capable of making the voyage, but the question becomes whether the freight earned from the voyage is sufficient to justify the combined war-risk, insurance, security and operational exposure.
For charterers and cargo owners, the same problem appears on the other side of the transaction: the cargo may be commercially valuable, but the cost of moving it can rise dramatically when the shipping route becomes a war-risk zone.
Oil Prices Reflect the Risk Premium
The conflict has also produced significant volatility in international oil prices.
Brent crude moved above US$100 per barrel during the escalation of the Hormuz crisis, with prices subsequently falling below that level as markets responded to indications of increased Gulf exports and possible diplomatic developments. On 22 September, Brent was reported around US$98 per barrel following a decline of more than 2% amid expectations that the supply situation could improve.
The price movement demonstrates an important point: oil prices are now being driven not only by actual supply losses but also by the risk of future supply disruption.
Markets price the possibility that further attacks could reduce exports, delay tanker movements or force producers to rely on less efficient alternative routes.
Consequently, even when physical oil continues to move, the market may retain a significant geopolitical risk premium.
The Cost of the War So Far
The financial cost of the broader Iran war has already reached tens of billions of dollars.
According to the latest U.S. Central Command/Pentagon estimate provided to Congress, the U.S. military's cost of the conflict had reached approximately US$43.6 billion by 3 September 2026.
That figure includes approximately:
US$28.1 billion associated with replacing expended munitions;
approximately US$11.2 billion in incremental operational costs; and
approximately US$4.3 billion relating to damaged or lost equipment.
The estimate does not fully capture future costs or all infrastructure damage to U.S. facilities in the region.
The Congressional Budget Office had separately estimated that the conflict had cost the United States approximately US$38 billion through 1 August, with the cost potentially increasing by approximately US$2–3 billion per month, depending on the intensity of military operations.
Therefore, the US$43.6 billion figure should be regarded as a measure of U.S. military expenditure, not the total economic cost of the war.
The overall economic cost is considerably broader.
It includes the cost of damaged energy infrastructure, lost commercial activity, higher insurance premiums, disrupted shipping, higher fuel prices, reduced trade, military mobilisation, reconstruction, displaced economic activity, and the indirect cost borne by businesses and consumers around the world.
The Hidden Cost to Global Shipping
Perhaps the most difficult cost to quantify is the economic impact on international shipping.
The Strait of Hormuz crisis has forced shipping companies to reconsider traditional voyage planning.
Some vessels have been delayed or diverted, while others have undertaken voyages involving:
longer routes;
additional fuel consumption;
ship-to-ship transfers;
waiting at anchorage;
changes in discharge ports;
additional security measures;
additional crew considerations;
higher insurance premiums; and
significantly higher freight rates.
Recent reporting indicates that container traffic through the Strait has fallen dramatically, with some tracking data showing a decline of approximately 94%, while cargoes that would normally move through major Gulf ports have been redirected towards smaller ports and alternative logistics chains.
For shipowners, every additional day at sea represents additional expenditure in bunkers, wages, insurance, maintenance and opportunity cost.
For charterers, longer voyages reduce vessel availability and may result in higher freight rates.
For cargo owners, the additional shipping costs ultimately feed into the delivered cost of commodities.
The Human Cost Remains the Most Important
Behind the billions of dollars involved in the conflict are seafarers who continue to operate commercial vessels in an active conflict environment.
The recent attack on the LR Stephanie, in which two crew members were injured, is a reminder that merchant ships are not military assets.
The seafarers onboard are commercial personnel whose primary responsibility is the safe operation of their vessel and the carriage of cargo.
The fact that the two latest incidents reportedly resulted in no pollution and that the affected vessels remained operational is positive from an environmental and navigational standpoint. However, the absence of a major spill should not obscure the seriousness of attacks against merchant shipping.
A successful strike on a fully laden crude oil tanker, product tanker or LNG carrier could potentially produce consequences considerably greater than those seen in the latest incidents.
Such an event could involve:
fatalities;
major structural damage;
fire or explosion;
loss of propulsion;
cargo release;
marine pollution;
salvage operations;
wreck removal;
prolonged port disruption; and
substantial P&I and hull-and-machinery claims.
The Pollution Risk Remains a Major Concern
So far, the reported attacks discussed above have not resulted in reported pollution.
This is particularly significant because of the nature of the cargoes commonly carried through the region.
A major casualty involving a crude oil tanker or product tanker could create an environmental emergency in addition to the existing security crisis.
The potential consequences could include:
emergency response;
containment and recovery operations;
shoreline pollution;
fisheries impacts;
closure of coastal facilities;
salvage and wreck-removal costs;
P&I liabilities; and
lengthy investigations and claims.
The absence of pollution in the latest incidents is therefore an important operational outcome, but it should not be interpreted as evidence that the environmental risk is low.
Commercial Shipping Is Being Forced to Adapt
The current situation is producing a new operating environment for shipowners.
Voyage planning now has to incorporate not only conventional maritime considerations such as weather, navigation, draft, port restrictions and machinery condition, but also:
Threat assessment → War-risk insurance → Security measures → Crew considerations → Route selection → Emergency response → Contingency planning.
For vessels proceeding towards the Strait of Hormuz, owners and operators are increasingly required to maintain close communication with maritime security organisations and military authorities.
Shipmasters are also required to remain particularly vigilant regarding suspicious vessels, UAV activity, unusual VHF communications and other indications of potential targeting.
The Contradictory Picture of Hormuz
One of the most interesting aspects of the current crisis is the difference between military and commercial assessments of traffic through the Strait.
U.S. Central Command has reported that its forces have assisted thousands of commercial transits and that substantial quantities of oil have continued to leave the Gulf.
However, independent shipping data has shown much lower levels of commercial traffic.
For example, Kpler data cited by maritime reporting indicated only 17 vessels transited the Strait over one weekend, compared with 37 the previous week. JMIC has similarly reported significantly suppressed commercial traffic.
This divergence is important.
A waterway can be described as technically "open" because vessels are still physically capable of passing through it, while simultaneously being commercially dysfunctional because many owners, insurers and charterers are unwilling to accept the associated risk and cost.
That distinction is increasingly important for the shipping industry.
What Happens Next?
The immediate outlook will depend largely on whether the attacks against commercial shipping continue and whether diplomatic efforts can produce a sustainable reduction in hostilities.
Three developments will be particularly important for the maritime industry:
1. Frequency of attacks
If attacks against merchant vessels become more frequent, shipowners may increasingly suspend Hormuz transits or demand substantially higher freight and war-risk compensation.
2. Insurance market response
A sustained increase in war-risk premiums could make certain voyages commercially unattractive even if physical passage remains possible.
3. Oil and gas supply
The longer the disruption continues, the greater the possibility that energy prices and shipping costs will remain elevated.
Saudi Arabia's recent decision to increase shipments through its eastern Gulf terminals demonstrates the commercial necessity of keeping the maritime corridor functioning despite the security risks.
Conclusion
The attacks on Al Maryah and LR Stephanie on 20 and 21 September represent another serious escalation in the maritime dimension of the Iran conflict.
Although neither incident has so far resulted in a major pollution event or the loss of a vessel, the attacks have demonstrated that commercial tankers remain exposed while operating in and around the Strait of Hormuz.
For the shipping industry, the consequences extend far beyond the individual vessels involved.
The conflict has already generated tens of billions of dollars in documented U.S. military expenditure, while the broader economic cost is substantially larger and continues to accumulate through higher energy prices, increased shipping costs, insurance premiums, disrupted trade and damage to critical infrastructure. The U.S. military's latest estimate alone places its war-related cost at US$43.6 billion as of 3 September, while the CBO expects the U.S. cost to continue increasing by roughly US$2–3 billion per month, depending on the intensity of the conflict.
For the maritime sector, however, the most immediate concern is not simply the monetary value of the war.
It is the increasing normalisation of risk to civilian commercial shipping.
Every tanker that enters the Strait now does so against a background of drone attacks, projectile strikes, surveillance activity, elevated insurance costs and uncertainty over the security of the route.
The continued absence of a major tanker pollution incident is encouraging, but the potential consequences of a future successful strike on a laden tanker remain significant.
As long as commercial vessels continue to be targeted, the Strait of Hormuz will remain not merely an energy chokepoint, but a critical global maritime risk zone whose effects are being felt by shipowners, insurers, charterers, cargo interests, seafarers and consumers far beyond the Gulf.
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