Ripple Effect: Rising Tensions Disrupt Global Oil Supply Chains

Insurance firms are cancelling war risk coverage for vessels due to heightened Iran conflict, leading to oil supply disruptions. At least five tankers were damaged, two personnel killed, with 150 ships stranded in the Strait of Hormuz. Oil and gas prices are escalating amid fears of prolonged strife.

Heightened tensions in the Middle East have led to significant disruptions in global oil supply chains as insurance companies withdraw war risk coverage for vessels navigating the Gulf. The Iran conflict has resulted in damages to at least five tankers, the loss of two personnel, and around 150 ships stranded in the strategically crucial Strait of Hormuz.

The Strait of Hormuz, a critical passage for roughly a fifth of the world's oil and substantial quantities of gas, has seen shipping activities grind to a halt following Iran's retaliatory actions to U.S. and Israeli strikes. This suspension has triggered a surge in oil and European natural gas prices, with Brent crude futures witnessing an increase of up to 13% due to multiple oil and gas shutdowns across the Middle East.

As fears of a prolonged closure loom, companies such as Gard, Skuld, NorthStandard, the London P&I Club, and the American Club have announced their war risk coverage cancellations to take effect from March 5. This situation is causing shipping rates to soar, alongside rising costs from the Middle East to Asia, already at a six-year high, as shipowners exercise caution in deploying vessels to the region.

(With inputs from agencies.)