Iran Conflict Drives War Risk Insurance Costs to Record High

War risk insurance is significantly increasing the cost of oil production and transportation. According to David Osler, law and insurance editor at shipping news outlet Lloyd's List, a barrel of crude now carries up to $8 in war risk insurance costs due to the conflict with Iran. This increased cost flows directly into what American consumers pay at the pump.

The additional premium insurers charge for vessels entering high-risk zones has jumped from a fraction of a percentage point to as much as 10% of a vessel's value. For a very large crude carrier worth $140 million, this can mean millions of dollars in added insurance costs for a single voyage, which gets passed through the supply chain.

Insurers have paid out around $2 billion in claims since the conflict began, making it the second-largest hit to marine insurers in over a decade. The risk zone itself has also grown, with attacks on vessels linked to Saudi Arabia pushing insurers to extend high-risk designation along the Red Sea coast.