Rising Freight Charges and Insurance Premiums Amid Iran-Israel Tensions

Freight charges and insurance premia for shipping vessels on global routes are expected to rise due to increased tensions between Iran and Israel. The threat is particularly high for ships bound for western European countries and the US, prompting sector watchers to estimate a $100 per container increase in freight rates for ships passing through the Red Sea. Furthermore, war risk insurance premiums have spiked from 0.05% to between 0.75% and 1% of the insured value of vessels, reflecting the increased risk in the region.

Sunil Vaswani, executive director at Container Shipping Lines Association, attributes the high premiums to heightened Houthi activity in the region, indicating that further increases may occur. Major shipping company AP Moller-Maersk has already announced peak season surcharges for certain routes due to space constraints on ships, leading to significantly higher fares for shipping containers to Europe and the US. While tensions remain high, costs are expected to escalate further if the situation in the Red Sea worsens.

Arun Kumar Garodia, chairman at Engineering Export Promotion Council of India, warns that ongoing tensions could drive up costs even more. Shipping a standard container to Europe now costs $2,500, five times more than before October 2023, while fares to the US east coast have risen to $4,500 per container, up from $1,500 before the crisis. As the situation in the Red Sea continues to unfold, the global shipping industry is bracing for further disruptions and escalating costs.

Source .