Author：Wall Street CN
The escalating conflict in the Middle East has led to continued obstruction of the Strait of Hormuz.Insurance costs and freightThis dual impact is sending a far-reaching signal to the global supply chain.
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The impact has spread from large shipping companies to small and medium-sized enterprises in the United States. According to the Associated Press, footwear designers, pistachio growers, and horticultural suppliers are among those affected.Small business owners are facing a triple pressure: disrupted imports and exports, soaring costs, and shrinking demand..
Insurance premiums have skyrocketed, disrupting traditional pricing models.
Neil Roberts stated that before the Middle East conflicts, the typical quote for shipping insurance was approximately 0.2% to 0.3% of the vessel's value; after the escalation of the conflicts,Premiums quickly increased to 1% to 3%..
MSN, citing Lloyd's of London data, pointed out thatInsurance premiums for some high-risk routes have climbed to 3% to 7.5%.Traditional war risk pricing typically ranges from 0.1% to 0.25%. For example, if the premium for a large oil tanker worth $200 million to $300 million increases from 0.25% to 3%, the insurance cost for a single voyage will skyrocket from approximately $600,000 to $7 million to $9 million—a leap that would completely rewrite the economic logic of a voyage.
The combined costs of freight and detours are putting increasing pressure on the entire supply chain.
Insurance costs are only one part of the rising costs of shipping operations. Neil Roberts points out that...Shipping companies also have to bear the costs of freight, fuel, and delays caused by vessels detouring.
According to MSN, to avoid high-risk waters, more and more boat owners are choosingAlternative routes such as those around the Cape of Good HopeThis move is inWhile significantly extending travel time, this also further increases fuel costs.
Premiums for cargo war risk insurance have also risen sharply.MSN reports indicate that...Cargo insurance premiums in affected areas have risen from approximately 0.03% to nearly 1%, directly driving up the landed costs of crude oil, liquefied natural gas, and high-value manufactured goods.This forces importers and exporters to renegotiate contracts or reduce profit margins.
Small businesses are bearing the brunt; a "perfect storm" has already taken shape.
According to the Associated Press, small and medium-sized enterprises in the United States are suffering the direct impact of the conflict.
Nichols Farms, a four-generation pistachio company in California, exports 50% of its products, primarily to Europe and the Middle East. Following the blockage in the Strait of Hormuz, supplies to Saudi Arabia, Iran, and the UAE were disrupted, leaving approximately $5 million worth of goods stranded at sea. Meanwhile, Kansas City gardening suppliers stockpiled fertilizer in anticipation of price increases, while Chicago electronics store owners were struggling with soaring oil prices.
Brandon Fried, executive director of the Airforwarders Association, pointed out that the combined effects of rising costs, route changes, and tightening capacity have created a "perfect storm" for small businesses. Business owners generally believe that...Although the current shock has not yet surpassed the supply chain crisis during the pandemic, if the conflict continues for several months, the level of damage may gradually approach that level.
Structural risks are emerging, and the market is seeking response mechanisms.
The current surge in insurance premiums may foreshadow a structural shift. Increased geopolitical fragmentation and new warfare technologies are making risk assessments increasingly complex, rendering traditional actuarial models ineffective. Estimates suggest that premiums on the riskiest shipping routes could approach 10%—a level that could render some routes commercially unprofitable without state support or naval protection.
Therefore, governments and industry organizations in many countries, including India, are...Explore the establishment of a domestic war risk insurance poolThis is to ensure accessibility and affordability of coverage. Neil Roberts emphasized that...The existence of insurance coverage is often more crucial than the price itself.Without insurance, banks typically won't allow ships to set sail. This means that the willingness of the insurance market to underwrite will directly determine whether global trade can function normally.
