Middle East Conflict Shakes Energy Markets
The ongoing conflict in the Middle East has reportedly created the "largest supply disruption in the history of oil markets," according to a new report. Emergency crude releases haven't calmed fears, and the closure of the Strait of Hormuz is impacting global trade, leading to rising energy prices that are darkening the UK's housing outlook.
The Middle East conflict is already impacting insurance, with rising risks in aviation, shipping, and energy markets. Acts of war are typically excluded from policies, but the conflict indirectly affects insurers through disrupted transport, trade, and energy. This instability influences underwriting, market capacity and pricing, prompting businesses to anticipate these effects. Marine insurers are canceling war risk coverage for vessels in the Persian Gulf, effectively halting oil and gas shipments through the Strait of Hormuz. The Iranian Revolutionary Guard Corps has threatened ships, and major companies like Maersk are suspending shipments, leading to skyrocketing crude oil and LNG prices. Tanker rates from the Middle East to China have surged, and shipping companies are imposing risk surcharges. The closure of the Strait of Hormuz creates uncertainty for insurers, with potential claims related to vessels unable to move cargo. War risk policies often include "blocking and trapping" provisions that allow total loss claims after prolonged detention. Despite the risks, some analysts believe losses will remain manageable for diversified insurers.
