Shipping premiums stay elevated despite Hormuz recovery

Vessel traffic rose from around 27 daily transits to more than 60 in late June.

Shipping insurers are expected to keep charging higher premiums as renewed hostilities around the Strait of Hormuz continue to raise risks for vessels.

Bernard Aw, Chief Economist for Asia Pacific at Coface, said insurers are expected to remain cautious even if the Strait reopens, keeping marine insurance premiums elevated. 

He said supply chain disruptions have created shipping backlogs that could take weeks or months to clear, whilst port congestion is also expected to slow the recovery in trade flows.

Coface said the latest developments suggest shipping through the Strait is unlikely to return to normal quickly, even under the US-Iran 14-point memorandum of understanding. 

The assessment supports the insurer's latest Risk Review, which downgraded the country risk ratings of eight markets, including five in Southeast Asia.

Vessel traffic through the Strait had been recovering, increasing from around 27 transits a day between 21 and 23 June to more than 60 on 24 and 25 June. 

However, the renewed conflict has disrupted shipping again, raising concerns over the safety of the route.

Aw added that shipping costs are likely to remain high because markets price in the risk of future disruptions, not just current conditions. 

He also said uncertainty is expected to persist as key issues, including sanctions and Iran's nuclear programme, remain unresolved under the interim agreement, leaving businesses without clarity on the longer-term geopolitical outlook.