Please note: This is a rapidly evolving situation. Content is correct as at the time of publication.
Recent U.S. and Israeli strikes on Iran as part of Operation Epic Fury, alongside the reported death of Supreme Leader Ayatollah Ali Khamenei have materially escalated tensions in the Gulf. Iranian responses and increased activity around the Strait of Hormuz are now shaping market behaviour in real time.
While the situation continues to evolve rapidly, insurers have started to issue cancellation notices. Australian businesses with stock routes through the Middle East are being advised to consider logistical alternatives in terms of suppliers where possible to avoid this conflict.
For Australian businesses looking beyond geopolitics to practical implications the focus is on shipping routes (and related delays), energy costs, and the impact of those factors on profit margins and payment cycles.
The Strait of Hormuz
The Strait of Hormuz (the ‘Strait’) handles roughly 20 per cent of global seaborne oil and a significant portion of LNG trade. There has been no formal international or legal closure, however, in practice it is effectively closed for most commercial traffic.
Reports over recent days include:
- IRGC warnings declaring “no ship is allowed to pass” and senior advisors stating the Strait is closed with explicit threats that any attempting vessel will be targeted.
- Confirmed incidents of vessel damage and attacks in the region with the media also reporting that shipping in the Persian Gulf is also affected with ports and tankers hit by missile strikes leading to vessels being abandoned.
- A sharp rise in war-risk insurance premiums, with major P&I clubs cancelling cover for Gulf/Persian Gulf transits effective March 5, 2026.
Major carriers have suspended transits through the Strait and begun rerouting via South Africa’s Cape of Good Hope (the ‘Cape’).
Shipping data supports what operators are seeing on the water.
Marine Traffic, Kpler and Vortexa figures indicate vessel movements have collapsed, down by around 70 to 80 per cent initially, now near-zero in the main shipping lanes.
Freight and shipping
Rerouting around the Cape adds another 10 to 15 days of voyage time for Gulf/Middle East services (longer for some as they continue to avoid Suez).
Overall, global rates had been easing for seven straight weeks before the major carriers pulled back from Hormuz transits over the weekend. Gulf lanes are now under severe pressure from the extra risk.
Australian exporters and importers are already feeling a direct hit with new “war risk/emergency conflict surcharges” ranging from US$2,000 for a 20ft container to US$4,000 for refrigerated container. Shipping lines have cited heightened security risks across key corridors, including the Strait and the Red Sea, as justification for the charges.
Carriers (Maersk, MSC, CMA CGM, ONE and others) have started to suspend bookings and rerouted vessels due to risk exposure, which may lead to the disruption of Australian supply chains.1
Energy market reactions
This reduced activity has hit energy pricing hard. Crude oil closed around $79 per barrel on March 5, with Brent crude surging to around $85 per barrel as markets adjust pricing to reflect escalation risks.
Rising oil prices mean higher surcharges passed on to manufacturers, consumers, and containerised goods demand worldwide.
In response, the US has stepped in: President Trump ordered the Development Finance Corporation to offer political risk insurance and financial guarantees at a “very reasonable price” especially for energy shipments and stated that the US Navy could escort tankers if needed. This could ease some insurance pressures and encourage limited flows, but details on non-US vessels or container trade are still unclear.
For Australian importers/exporters, this might indirectly help stabilise freight and insurance costs down the line, though it doesn’t lift current carrier suspensions or surcharges.
Marine Cargo Insurance and implications of War and SRCC Cover cancellation
Marine cargo policies typically include (or allow option to include) War and Strike, Riot and Civil Commotion (SRCC) cover because these risks fall outside normal marine cargo insurance.
When Marine Cargo insurers issue a Notice of Cancellation for War/SRCC, it means:
- The insurer will no longer cover losses caused by warlike operations, missile/drone strikes, terrorism, riots, civil commotion, confiscation, or similar perils for shipments involving the specified regions.
- The cancellation becomes effective after the notice period specified by the insurer.
- No buy‑back or reinstatement is available for those routes until such time the conflict is over.
In effect, it is somewhat like an embargo and in this instance, the Notices issued are citing the Iran war as the cause putting cargo currently in Iranian waters, the Persian/Arabian Gulf and the Gulf of Oman at risk given the extreme maritime security deterioration.
This aligns with global insurer actions in the current climate with multiple marine insurers cancelling war-risk cover in the Gulf due to rapid escalation of the 2026 Middle East conflict.2,3
Why insurers are cancelling War Cover
Leading maritime insurers globally (including Gard, Skuld, NorthStandard, London P&I, American Club) have cancelled war‑risk cover for Iran/Gulf waters due to “materially heightened geopolitical risk.”3,4
Reinsurers are rapidly pulling capacity, forcing insurers to issue blanket cancellations with very short notice4 making the provision of War/SRCC cover actuarially unviable.
Implications for Australian Marine Cargo policyholders
In short, there is no war-related protection for affected routes.
Any shipment to, from or through Iran, its waters, or the Persian/Arabian Gulf/Gulf of Oman will not be insured for War/SRCC losses after 17 March 2026 however this date may vary between insurers.
Coverage is excluded for:
- Drone/missile damage
- Vessel seizure or detention
- Blockade or closure of shipping lanes
- Riots/civil unrest damage at ports or transshipment hubs.
This exposes shippers to full financial loss if a vessel or cargo is damaged in those territories.
What does this mean for Australian businesses?
Direct routing exposure for Australia is limited. Iron ore and coal exports to Asia do not rely on the Strait. Liquified natural Gas (LNG) shipments from Australia to Asian buyers travel independently of Gulf transit paths.
If Gulf cargoes face ongoing disruption, Australia’s proximity and reliability could support LNG demand positioning. But Australia’s production capacity and long-term sale agreements limit how quickly volumes can shift.
The broader effect is indirect: higher global insurance costs including war risk surcharges, longer shipping routes elsewhere, and elevated energy inputs all of which can influence landed prices and working capital requirements across multiple sectors.
Given the current suspensions by major carriers (Maersk, Hapag-Lloyd, CMA etc.) and the effective commercial closure of the Strait, business may find that it may be worth holding off on new container shipments to/from Gulf/Middle East ports for now. Cargo could face indefinite delays, additional costs, or rejection at booking stage. Businesses should review any planned or in-transit exposures urgently, as early discipline here can avoid bigger headaches down the line.
In short, Australia sits outside the epicentre, but not outside the ripple effect.
Credit conditions and contractual exposures
Trade disruptions don’t typically trigger immediate defaults. They extend cash cycles.
Longer voyages tie up inventory and lead to delays and defaults. Higher fuel and insurance costs raise landed prices with buyers absorbing the margin pressure.
If COVID has taught us anything, it’s how quickly payment cycles can stretch when costs spike: slower settlements, more credit requests, and selective delays in exposed industries. Early monitoring tends to make the difference between manageable exposure and reactive damage control.
If your business can no longer legally transport their goods due to a lack of war cover, consider whether contractual force majeure provisions may be triggered and whether your Incoterms obligations may be affected (e.g., CFR/CIF responsibilities).
Recommendations
Although factors influencing heightened supply chain risks associated with the conflict are beyond business owners control, the below recommendations will allow for greater understanding of impacts and may highlight opportunities to reduce exposure:
- Reassess all supply chains involving the Gulf Region, in particular your shipping and/or energy exposures. The Gulf, Strait of Hormuz, and Iranian waters are effectively unstable and extremely high risk.
- Map all SKUs and components sourced from or transiting through the region and consider alternative sources or routes.
- Immediately stop placing new POs requiring transit through Iran/Gulf shipping lanes.
- Switch suppliers or modes where possible (e.g., EU or Asia‑based substitutes).
- Review Liquidated Damages (LDs) clauses which become dangerous during high‑risk geopolitical periods.
- If you already have trade credit insurance, check your current credit limits on affected buyers now, delays or cost pressures mean you’ll need to request payment extensions or limit increases.
- Reassess credit terms and documentation where appropriate (stronger clauses, and updated terms and conditions).
- Use real-time monitoring tools to flag buyer deterioration early (overdue alerts, rating changes, news triggers).
- Consider a Trade Credit policy if you don’t already have one, this is an essential risk mitigation tool that protects you from non-payment. For Exporters, the policy also extends to commercial or political risks, including war, riots, and government intervention.
Ultimately, markets adapt. Shipping reroutes. Alternative sourcing develops. But during adjustment phases, volatility in cost and timing can pressure cash flow.
For further advice on the risk exposures highlighted in this article, please reach out to your Bellrock Advisor.
1 Middle East Conflict — Australian Freight Impact Update: 8 March 2026
Middle East Conflict: Carrier Updates
2 Maritime insurers cancel war risk cover in Gulf: Will it hike energy costs?
3 Maritime insurers cancel war risk cover in Gulf as Iran conflict disrupts shipping
4 Ship insurers cancel war risk cover for Iran and Gulf waters
