Avi Salzman
Oil is front and center as the war between Iran and Israel escalates, with prices rising nearly 20% since the start of the month. But it's not the only market that could be rocked by the fighting. Shipping, natural gas, and insurance markets are at the center of the storm too, and changes in those markets could impact dozens of companies.
Rates to transport oil on the largest kind of tanker spiked 12% in just one day, and 38% in a week, according to Jefferies analyst Omar Nokta. The cost to ship petroleum products has risen 52% in the past week. Companies such as Frontline, Teekay, and Scorpio Tankers that transport crude and petroleum products should benefit, though the stocks have only gained modestly in recent days. The shipping business is volatile, and the premiums could disappear as quickly as they've materialized.
Shipping other kinds of goods could also become more expensive because of the war, impacting global inflation. Iran's parliament voted over the weekend to authorize a blockade of the Strait of Hormuz, a waterway that's central to trade between the Middle East and Asia. About 20% of the world's oil and liquefied natural gas moves through the Strait.
Shipping companies take out war risk insurance to cover them in the event their ships are attacked. Nokta says that "war risk insurance premiums are on the rise," with early signs that large tankers are having to pay about $4,000 a day extra for a round trip voyage to Asia. That's about one-quarter of the increase in tanker shipping rates over the past week. "The direction in freight rates is likely to be dictated to an extent by insurance premiums going forward," he wrote.
Among the companies that offer shipping insurance are French firm AXA and American insurer Chubb. Reinsurers in the industry include Swiss RE.
Insurance premiums are passed directly to customers, said Stamatis Tsantanis, chairman and CEO of shipping companies Seanergy Maritime and United Maritime. Tsantanis' companies are focused on dry bulk goods, such as iron ore and coal. Activity has "picked up quite a lot recently" for those kinds of building-block materials because of a building boom in the Middle East. Saudi Arabia and the United Arab Emirates are building futuristic cities, tourist destinations and soccer stadiums that need raw materials.
"It's not only about the price of oil," he said.
He said that his insurance carriers are still okay with his ships traversing the Strait, though he may change course if he believes there is a risk to the ships' crews.
Costs and logistical headaches have been rising for these companies. Shipping routes through the Middle East have been disrupted since early in the Israel-Iran war because of attacks in the Red Sea by the Houthis in Yemen. Tsantanis said the Red Sea is still a no-go zone for many ships. "No one passes through the Red Sea with American interests or anything close to American interests," he said.
The other industry that is being impacted is natural gas, given how much liquefied natural gas goes through the Strait. U.S. natural-gas prices have been rising in recent weeks, but the larger impact has been on European and Asian markets. Prices for both European and Asian LNG cargoes have risen about 20% this month. Venture Global, a U.S. LNG exporter that profits off the spread between U.S. and overseas gas prices, appear to be benefiting. The stock is up 50% in the past month.
Prices could go much higher. European LNG is trading at about $14 per million British Thermal Units, but Goldman Sachs thinks it could spike to $25 in the event that the Strait is closed. Natural gas is used for electricity, so that would cause a severe price spike in electricity, similar to what happened in 2022 after Russia invaded Ukraine.
Write to Avi Salzman at avi.salzman@barrons.com
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June 23, 2025 14:43 ET (18:43 GMT)
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