LNG tankers divert from Strait of Hormuz as war risk insurance is axed

2026-03-02 - 15:24

LNG tankers have begun diverting from the Strait of Hormuz as seven of the world’s largest marine insurance associations move to cancel war risk coverage for vessels entering the Gulf from Thursday. The withdrawal of coverage, which takes effect at midnight London time on March 5, applies to ships entering the Persian Gulf, Iranian waters, or specified adjacent areas. The notices were issued by more than half of the 12-member clubs of the International Group of P&I Clubs, which provides marine liability cover for approximately 90% of the world’s ocean-going fleet. At least 13 empty liquefied natural gas (LNG) tankers have already changed course away from the eastern side of the waterway, according to ship-tracking data compiled by Bloomberg. The diversions followed initial military strikes by the United States and Israel against Iran over the weekend, prompting most shipowners and traders to avoid the transit point. The insurers withdrawing war risk cover include Gard AS, NorthStandard, Steamship Mutual Underwriting, Assuranceforeningen Skuld, the American Club, the Swedish Club, and the London P&I Club. The decision is restricted specifically to war risk insurance—which protects shipowners and charterers against third-party damages from war, terrorism, and piracy—while all other terms of coverage remain unchanged. The move is expected to significantly reduce risk appetite for loading cargoes within the region. The affected geographic area extends to the Gulf of Oman and waters west of Ras al Hadd in Oman, stretching northeast to the border between Iran and Pakistan. The disruption poses a severe threat to global energy supplies. Exports from Qatar, the world’s second-largest LNG supplier after the United States, must pass through the Strait of Hormuz to reach customers in Asia and Europe. Goldman Sachs warned that a one-month halt in navigation could cause Asian spot LNG prices to surge by 130% to $25 per million British thermal units. “LNG shipping disruption will continue, and traders must plan for the possibility of a temporary halt to transit through the Strait of Hormuz for a few days,” said Leslie Palti-Guzman, founder of the energy and shipping consultancy Energy Vista. “We are in an untested situation.” The insurance cancellations follow a weekend of conflicting signals regarding the safety of the strait and reports of attacks on oil tankers. While some shipowners have issued orders to halt all voyages due to safety concerns, others are currently re-evaluating costs as risk premiums escalate.