Insurance premiums for oil tankers, passing through the Strait of Hormuz, have doubled between 8 and 10 times, the head of transportation department for law firm DWF said in a report to the British Financial Times.
This comes in light of the geopolitical tensions in the region, the latest of which is Iran’s detention of a Swedish ship carrying the British flag. Across the Strait of Hormuz, a third of the sea-transported oil supplies pass. This makes it the most vital sea route for the oil transport sector around the world.
The series of attacks on oil tankers in the Gulf of Oman highlighted the importance of the Strait of Hormuz as an international corridor for the transfer of oil to the world.
The Strait of Hormuz separates between Iran and Oman and links the Gulf to the Gulf of Oman and the Arabian Sea. The width of the strait is 33 km in its smallest part, but the navigational path is only 3 km in both directions.
About one-fifth of the world’s oil output passes through the strait, about 17.4 million barrels per day, while consumption is about 100 million barrels per day in 2018, according to Fortexa Co. for oil analysis.
Most of the crude exports from Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq, all of which are members of the Organization of the Petroleum Exporting Countries (OPEC), go through the Strait.
With this tension, global claims to provide international protection for the free navigation in the Gulf of Oman are rising as Iran continues to threaten the most important maritime artery in the world.
In an attempt to secure their cargo, shipping companies employ security guards on board of ships, but this does not guarantee the safety of these ships, not to mention the high cost.
While the options available to shipping companies to secure their vessels appear to be few, it seems that the cost of Iran’s shipping threats in the Strait of Hormuz will fall on these companies.
British Secretary of State for Foreign and Commonwealth Affairs, Jeremy Hunt’s claims to British shipping companies to avoid the Strait of Hormuz may not solve the crisis, especially as shipping companies steer clear of English seaports.
The risks come on the British tankers after Iranian promises to respond to the detention of its oil tanker in the Mediterranean, which was accused of smuggling fuel to Syria.