A 1,900% spike may be a bigger warning than oil prices

The 1,900% move overshadows the oil rally

Oil prices jumped on July 22 after the US Central Command launched an 11th straight night of strikes on Iran, sending Brent crude above $94 a barrel. But while crude rose about 4%, war risk insurance premiums for tankers crossing the Strait of Hormuz rose nearly 1,900%, according to analysis by the Devere Group, a global financial advisory and asset management firm.

Escalation happens in the middle traffic disruptions through the Strait of Hormuz as US forces continued military operations and tensions around the strategic waterway remained high.

According to Lloyd’s Market Association figures cited by the Devere Group, the cost of insuring a large cargo ship has risen from about 0.25% of the ship’s hull value before the conflict to about 5%. For a tanker valued at $100 million, the increase increases the insurance bill from about $250,000 to about $5 million per voyage on the waterway.

Devere Group CEO Nigel Green said:

“When that premium goes up almost 1,900%, it tells you that the people closest to the physical risk think the danger is real and present, not a hope.”

As of July 22, Brent crude was up nearly 4%, while West Texas Intermediate was up about 3.8%. Markets remained highly volatile as traders assessed the risk of continued shipping disruptions through the Strait of Hormuz.

The world’s energy artery is facing increasing pressure

According to estimates by the US Energy Information Administration (EIA) of the world’s major oil transit points, approx. 20.9 million barrels of oil per day moved through the Strait of Hormuz during the first half of 2025, approximately 20% of global oil consumption and one quarter of all seaborne oil trade. While Saudi Arabia, the United Arab Emirates and Iran have limited pipeline alternatives, these routes can bypass only a fraction of the volumes that normally pass through the strait.

The International Energy Agency (IEA) said approx 80% of Hormuz’s oil supplies are destined for Asiamaking countries including China, India, Japan and South Korea particularly vulnerable to any prolonged disruption. The agency also noted that available pipeline alternatives could divert only a limited share of these exports.

Oil prices have fluctuated repeatedly due to events related to the waterway. Brent crude earlier fell as traders reacted to the US-Iran deal to reopen the Strait of Hormuz, underscoring how quickly market expectations can change.

Higher costs may spill over into energy markets

Oil prices reflect expectations about future supplies, while war risk premiums reflect the immediate costs of operating in a conflict zone. The widening gap between crude oil prices and the cost of insurance shows how sharply underwriters assess the threat to ships.

Green also drew attention to the difference between oil prices and insurance costs, stressing:

“Oil went up by 4%. Insurance through Hormuz has grown to almost 1,900%.”

Higher insurance premiums ultimately become part of the cost of transporting oil, increasing transportation costs that can be passed on to refiners, fuel distributors, airlines, producers and ultimately consumers. They also encountered transport operators multi-million dollar transit fees for tankersadding another layer of cost to travel around the region.

Sustained growth could reduce the number of tankers willing to use the route, reducing shipping capacity even without an official closure. Higher transport costs could put new pressure on fuel prices, inflation, government bond yields and equity markets.