Shipping through the Gulf gets costlier as risks climb

Sea freight rates on key Gulf trade lanes have surged sharply since the start of the Middle-East crisis, as rising war risk costs and disrupted routes begin to reshape maritime trade. Container rates from Shanghai to Jebel Ali, which stood at around $1,800 per container in January 2026, have now crossed $7,000 as of late March 2026, according to Judah Levine, head of research at Freightos, a digital freight marketplace and logistics technology company. The spike reflects a mix of higher insurance premiums, surcharges and costly rerouting linked to tensions around the Strait of Hormuz.

At the centre of the current disruption is the sharp rise in war risk insurance, a cost that is now becoming visible across freight invoices. War risk insurance is an additional cover taken by ship and cargo owners to protect against losses caused by conflict. This includes risks such as missile strikes, drone attacks or naval incidents, which are not covered under standard marine insurance.

However, what shippers actually pay is the war risk surcharge. This is added by carriers to recover higher insurance premiums and the operational risk of sailing through conflict-prone waters. The distinction is critical. Insurance is paid to insurers, while the surcharge is passed on directly to customers.

Data from a recent Lockton market report, shows just how steeply war risk insurance costs have climbed as insurers reassess exposure amid the US–Iran–Israel. Lockton is a global insurance brokerage and risk management firm that provides advice and arranges insurance for clients in sectors like marine, aviation, and corporate risk. Marine war risk premiums for voyages through the Strait of Hormuz have surged by 200–300%, with some extreme cases rising more than tenfold, compared with levels before the conflict, according to Darshan Parikh, Senior Director for marine and aviation solutions at Lockton India. Premiums for tankers and other vessels are now in the range of around 3–5% of a ship’s value, up sharply from approximately 0.2–0.5% previously. Parikh, in the report mentioned that this repricing is likely to be structural, with underwriters tightening terms, invoking short notice cancellation clauses, and in some cases declining certain exposures outright, as they factor in elevated risks such as missile threats and corridor shutdown scenarios.

A key reason behind the disruption is not just higher premiums, but the way the insurance market itself has reacted to the crisis. A March 2026 report by Transport Intelligence shows that war risk premiums for transits through the Strait of Hormuz jumped from around 0.2% of a vessel’s value to nearly 1% within 48 hours of the escalation, adding close to $800,000 to the cost of a single large tanker voyage. In some cases, vessels connected to the US, UK, or Israel faced premiums as high as 5–7.5%, or were refused coverage entirely. At the same time, all major P&I Clubs issued short-notice cancellations for war risk extensions, following pressure from reinsurers. Protection and Indemnity Clubs (P&I Clubs) are mutual insurance organisations for shipowners that provide them with cover for third-party risks such as cargo damage, pollution and crew liabilities. While insurance has not been withdrawn completely, it has been repriced at levels that make many voyages commercially unviable, effectively forcing ships to avoid the region.

According to Pramod Sant, Director General of the Federation of Freight Forwarders’ Associations in India, the impact goes far beyond higher premiums. “This crisis is not just increasing insurance premiums. It is forcing a fundamental shift in how cargo moves, how contracts are interpreted, and how risk is allocated across the supply chain,” he said. “What we are witnessing is logistics transitioning from cost management to risk management.” He added that while war risk premiums have risen sharply, the bigger concern is disruption, with vessels in some cases unable to complete voyages and returning to India.

Operational disruption is large-scale and first of its kind which we have not encountered in past 
Pramod Sant, FFFAI

The disruption at sea is adding multiple layers of cost and complexity. Carriers are suspending bookings, rerouting vessels and offloading cargo at intermediate ports, leading to a cascade of operational challenges. Sant pointed out that this has resulted in documentation complications, additional handling and storage, disputes over liability and even cargo being pushed back into the domestic market at lower value. At the same time, new charges are being imposed mid-contract. “Higher costs like war-risk surcharges, deviation charges and emergency surcharges are being imposed,” he said, underlining the unpredictability of the current environment.

A major driver behind the surge in freight rates is the shift away from direct shipping routes through the Strait. With access disrupted, carriers are being forced to adopt longer and less efficient alternatives. Judah Levine explained that containers are now moving through indirect pathways, with cargo being routed to ports on India’s west coast or to locations in Oman and the UAE outside the Strait, followed by feeder services or long-distance trucking into final destinations. Some shipments from Europe are also being routed via Jeddah before moving inland. “The logistics of moving containers to Gulf states is very complicated now,” he said, adding that “these are not the optimal way of moving containers… it’s very expensive.” The sharp rise in rates, he noted, is being driven more by rerouting and operational inefficiencies than by insurance alone.

A similar strain is now visible across the broader logistics network, with congestion and delays beginning to build up at key export hubs. Jitendra Srivastava, CEO of Triton Logistics & Maritime, said operations are facing what he described as “network friction”, as disruptions in primary corridors begin to affect cargo movement and planning. “We are currently managing a backlog where some shipments are facing 7 to 10-day wait times,” he said, pointing to delays in cargo evacuation and limited movement options.

He added that the situation is forcing customers into difficult choices. “Clients are now forced into a ‘triage’ mindset, prioritising only the most critical shipments, while lower-priority cargo remains backlogged,” Srivastava said. This reflects a wider shift in how supply chains are functioning, where capacity constraints, delays and rising costs are forcing exporters to rethink shipment planning and timelines.

Despite the disruption, shipping activity has not come to a halt, but operators are proceeding with caution. Pushpank Kaushik of Jassper Shipping said operations remain stable for now, particularly at Indian ports. “As things are still moving smoothly from an operational standpoint, with no congestion or supply issues on the Indian side, it’s more about staying cautious, managing costs smartly, and keeping clients informed,” he said. At the same time, he acknowledged that war risk premiums are now playing a much larger role in decision-making. “What used to be a negligible cost has become a noticeable add-on… it directly affects voyage economics,” Kaushik noted, adding that shipowners are becoming more selective about route exposure.

The impact is also being felt unevenly across Indian trade lanes. N Shyam Sundar of CMA CGM said the disruption is more pronounced at west coast gateways such as Nhava Sheva and Mundra, while exposure from south and east India remains relatively limited. “As a shipping line, the impact is high in terms of increase in bunker cost and vessels not able to bring volumes from the Gulf, which in turn is affecting overall vessel performance,” he said. He added that cargo movement is already changing, with shipments now largely limited to essential goods. “Today movements are more of foodstuff and not any other cargoes. Automotive needs to send parts but cannot afford to ship at high rates, and consignees are not keen to take delivery in the current uncertain situation,” Sundar noted.

The impact, however, remains uneven across the global market. While Gulf-bound routes have seen a sharp rise in rates, the broader container shipping market has not yet experienced a similar spike. Levine pointed out that the disruption is still largely regional, with limited spillover so far because only a small share of global volumes is directly linked to the Strait. “We don’t really see freight rates change very much beyond the Gulf,” he said. However, carriers have begun introducing fuel surcharges across multiple routes, typically ranging from $200 to $500 per container, indicating early signs of wider cost pressure building in the system.

At the same time, the disruption is prompting changes in supply chain strategies. According to inputs from Militzer & Münch, customers are increasingly exploring alternative corridors, including multimodal routes via Central Asia, as part of a broader effort to reduce exposure to high-risk maritime zones. These shifts are not replacing ocean freight, which remains the backbone of global trade, but are instead part of a wider strategy to diversify risk and maintain continuity.

For India, the impact is already visible across several sectors. Sant highlighted that industries such as chemicals, fertilisers, pharmaceuticals, textiles and perishables are among the most exposed. Exporters with low margins and strict delivery timelines are facing the greatest pressure as freight costs rise and supply chains become more unpredictable. “Both cost and execution challenges are clearly visible,” he said, noting that the situation is affecting both imports and exports.

The current crisis has not shut down maritime trade through the Gulf, but it has significantly altered how it operates. Higher insurance costs, added surcharges and complex rerouting are making shipping more expensive and less predictable. What was once a system driven largely by cost efficiency is now increasingly shaped by risk, and as long as tensions persist around the Strait of Hormuz, this shift is likely to continue.