Indian exporters must brace for higher freight and insurance costs as tensions in West Asia escalate following the US and Israel’s strike on Iran. Industry players say the disruption in the Strait of Hormuz, coupled with renewed Houthi threats in the Red Sea, could force vessels to reroute, pushing up freight rates and war-risk premiums on shipments to the US and Europe.
“What we are seeing right now is a very real and immediate reaction from the insurance market to the Israel–Iran tensions,” said Akash Parwal, CEO, Square Insurance Brokers. He added that marine war-risk premiums, which usually stay in the range of 0.2–0.3% of vessel value, have quickly moved up to 0.5% or even higher, with some routes seeing increases of 40–60% in a matter of days.
Financial Toll
For shipping companies, the increase translates into an additional $200,000–$500,000 per voyage, costs that are eventually passed down the value chain.
Freight rates are usually adjusted at the start of the month by major shipping lines. New rates would be published on Monday. At the start of 2026, the rates were contracting.
Iran’s Islamic Revolutionary Guard Corps Navy said vessels would not be permitted to cross the Strait of Hormuz, which connects major Gulf oil producers including Saudi Arabia, Iran, Iraq and the UAE to the Gulf of Oman and the Arabian Sea.
“Air routes are being altered, and maritime trade through the Red Sea and key Gulf straits faces heightened uncertainty. If diversions become prolonged, shipments may increasingly reroute via the Cape of Good Hope, significantly extending transit time to Europe and the United States,” PTI quoted SC Ralhan, President of the Federation of Indian Export Organisations, as saying.
For Indian exporters, the latest escalation has revived concerns similar to the 2024 Red Sea crisis, when Iran-backed Houthi rebels attacked cargo ships and tankers in the Red Sea, disrupting 30% of global container trade routes and pushing up freight rates. Gaurav Agarwal, Vice President–Marine Insurance at Prudent Insurance Brokers, said marine war-risk premiums typically react immediately to hostilities in critical trade corridors such as the Persian Gulf and the Red Sea route via the Suez Canal. “Stakeholders across the shipping and logistics ecosystem are closely monitoring developments. Any sustained escalation could translate into higher freight costs, longer transit routes and increased insurance outgo for exporters and importers,” he said.
Strategic Chokepoints
The earlier episode of attacks on shipping in the Red Sea routes from late 2023 until 2025 led to higher freight rates and increased transit time. Routes through the Red Sea had to be abandoned and ships moved via the Cape of Good Hope on the tip of Africa, increasing travel times by 15-20 days between India and the West. Through the shortest routes, transit times to the US are 45 days and to Europe 30 days and any change in route will add to delays.
“Earlier disruption was limited to one area, so the increase in freight was two to three fold,” said Rajaraman DC, chief operating officer at STEER Engineering. In some special cases the increase in freight was up to 8-fold. Agarwal noted that clarity on the extent of rate hikes, possible restrictions or withdrawal of coverage for certain voyages, and overall market stabilisation would emerge once global insurers and reinsurers resume operations on Monday.
“The Strait of Hormuz has already been placed on the global watchlist and is categorised as a ‘High Risk Area,’ where an additional war-risk premium of around 0.025% is typically levied on ocean-going shipments. We are closely monitoring the evolving geopolitical situation and will take a calibrated view on risk acceptance and pricing,” a senior official at a private general insurance company said.
India’s marine insurance market stands at around ₹5,500 crore in annual premiums, with state-owned New India Assurance accounting for about 17% market share, followed by ICICI Lombard General Insurance at 16%. Hari Radhakrishnan of the Insurance Brokers Association of India said elevated geopolitical risks could also harden aviation insurance premiums, as several airports have shut and airlines have announced flight cancellations. “For aviation insurance, war-risk cover could become more expensive or unavailable in affected countries. Broader economic effects such as inflation and supply-chain disruptions may also increase claims costs,” he said.
The current flareup has seen missile attacks on ports and airports of Dubai, which is the main transit hub for India’s exports to Europe and the East Coast of the US. Big mother ships do not dock at Indian ports so export consignments are first moved to Dubai by smaller ships and aircraft before they are consolidated and sent to the US and Europe by bigger vessels. For shipping to East hubs, Singapore and Colombo are used.