Shipping through the Persian Gulf and the Strait of Hormuz is becoming significantly more perilous and expensive as the ongoing conflict between Iran and Israel intensifies, prompting both geopolitical threats and sharp hikes in insurance costs.

According to Marsh McLennan, the world’s largest insurance broker, the cost of hull and machinery insurance for vessels sailing in the region has surged from 0.125% to 0.2% of a ship’s value—a more than 60% jump. This means insuring a $100 million ship now costs around $200,000, up from $125,000. Rates for cargo insurance, including oil shipments, are also expected to rise further, though they’ve been slower to react so far.

The spike in war-risk premiums reflects growing fears of military escalation in the region. “We’ve not yet seen a missile fired at a ship in the Arabian Gulf, but the market clearly sees elevated risk,” said Marcus Baker, global head of marine and cargo insurance at Marsh McLennan. Insurance quotes are now only valid for 24 hours, down from 48, indicating increasing volatility.

The situation has become even more fragile after Iran’s Supreme Leader, Ayatollah Ali Khamenei, issued a stark warning to the United States on Wednesday. He declared that any U.S. military action would be met with “irreparable damage” and insisted that American involvement in Iran would “100% backfire.” “If they enter militarily, they will face harm that they cannot recover from,” he said, underscoring Tehran’s defiance amid growing international tension

The war-risk premium for ships docking at Israeli ports has more than tripled, jumping from 0.2% to 0.7% of a vessel’s value. And although some underwriters continue to offer relatively stable terms to shipowners with no-claims bonuses, insurers are growing wary of mounting risks, including possible electronic interference and expanded Houthi rebel attacks on non-Israeli, U.S., or U.K.-flagged vessels.

A recent collision between two oil tankers near the Strait of Hormuz has further raised alarms, especially as one of the ships was emitting abnormal positional signals—fueling concerns over potential cyber or electronic warfare.

President Donald Trump also entered the fray, writing on Truth Social that Iran’s supreme leader is an “easy target,” though he emphasized that Washington is not currently seeking direct military engagement. Still, he made clear the White House’s demand for Iran’s “UNCONDITIONAL SURRENDER”—a statement that likely escalated tensions even further.

With the Strait of Hormuz—a critical chokepoint for global crude oil—now under intense scrutiny and threat, insurers are reassessing their exposure. Some may withdraw entirely from the region, while others could see opportunity in the elevated risk. As Baker put it, “War itself, as an insurance product, tends to be... either you lose everything or make a fortune.”

As the Israel-Iran conflict shows no signs of abating, and with U.S. rhetoric hardening, maritime insurers and global shipping operators are bracing for what could become one of the most dangerous and expensive stretches of water in decades.