Geopolitical Tensions Drive Surge In Freight Rates & Marine Insurance Costs

Recently, the global maritime industry has been heavily affected by escalating geopolitical tensions—particularly in the Middle East—resulting in an unprecedented spike in logistics costs.

What’s happening?

• Rising tensions between Iran, Israel, and the U.S. in the Gulf and Strait of Hormuz are raising serious security concerns for shipping lines operating through these areas.

• Marine insurance companies have increased war risk premiums for vessels navigating the area.

• As a result: Insurance costs have nearly doubled, rising from 0.2–0.3% of a ship’s value to 0.5–1%—a significant burden for vessels worth hundreds of millions of USD.

The Surge in Freight Rates

• Many oil tankers and container ships are rerouting to avoid high-risk zones, which extends voyage times and raises fuel costs.

• On certain shipping routes, freight rates have soared by over 50% within just a few weeks, particularly on routes to and from Europe and the Middle East.

The hardest blow to oil tankers

• Freight rates for VLCCs (Very Large Crude Carriers) transporting oil from the Middle East to China have soared to over 60,000 USD/day, nearly double the rate in early June.

What should businesses do now?

Under the current circumstances, import-export and logistics businesses in Vietnam should:

Review insurance clauses in contracts (FOB/CFR/CIF)

Adjust lead times and freight quotes accordingly.

Update market news to react promptly to changes in surcharges and routing.