Escalating Hormuz Tensions Drive up Middle East war Risk Insurance Costs, Sources say

Commodity

Middle East Situation

Summary:

London's marine insurance market opted on June 18 not to widen waters around the Gulf deemed high risk, which is closely watched by underwriters.

U.S. and Israeli attacks on Iran and Tehran's reprisals have doubled the price of insuring shipments to the Middle East and the Gulf in the last week, insurance sources said on Monday.

War risk insurance premiums for shipments to the Middle East Gulf have jumped to 0.5% from around 0.2-0.3% a week ago, as risks grow to the critical Strait of Hormuz, the sources said.

The cost of a seven-day voyage is based on the value of the ship and the increase will add tens of thousands of dollars each day in additional costs.

While underwriters typically price risk and rates individually, the current 0.5% level reflected rates on Monday, the sources told Reuters and The Insurer, a Reuters publication.

"The position (on rates) is subject to constant change," said David Smith, head of marine with insurance broker McGill and Partners.

Iran carried out a missile attack on a U.S. airbase in Qatar on Monday after the U.S. bombed Iranian nuclear sites at the weekend. The conflict has raised concerns Iran could close Hormuz, the strait between Iran and Oman through which around 20% of global oil and gas demand flows.

That has spurred forecasts of oil surging to $100 a barrel. Shipping rates for supertankers, which can carry 2 million barrels of oil, have also soared, more than doubling in a week to over $60,000 a day, freight data shows.

War risk rates have hovered around the 0.3% level in the Gulf for many months. Rates in the Red Sea area spiked to 1% in 2024 after Iran-backed Houthis launched attacks on commercial ships which they said were in solidarity with Palestinians fighting Israel in Gaza.

War risk rates for Israeli ports have soared in recent days, quoted as much as 1%.

London's marine insurance market opted on June 18 not to widen waters around the Gulf deemed high risk, which is closely watched by underwriters.

"The listed areas have been left unchanged as ships calling or transiting most of the Middle East already have to notify underwriters, who can then assess such voyages on their merits," said Neil Roberts, secretary of the Joint War Committee, which comprises syndicate members from the Lloyd's Market Association and representatives from the London insurance company market.

Source: Reuters

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Add to Favorites

Adam

Stocks

Middle East Situation

Defense contractor stocks may help protect your portfolio from a summer of geopolitical risks.

"I think using an ETF like an Invesco Aerospace & Defense (PPA) that gets you broad exposure probably makes a lot of sense here, especially when you think about this reconciliation bill that's coming out," Innovator ETFs chief investment strategist Tim Urbanowicz said on Yahoo Finance's Opening Bid (video above). "You're looking at an additional $150 billion in defense spending. You pair that with looking at this conflict. What's going on in Russia and Ukraine defense spending is not going down. It's not going down in the US. It's not going down globally."

Top holdings in the Invesco Aerospace & Defense ETF include GE Aerospace (GE), Boeing (BA), Lockheed Martin (LMT), RTX Corporation (RTX), and Northrop Grumman (NOC).

Investors are paying careful attention to escalating tensions in the Middle East after President Trump confirmed the US launched a surprise strike on Iran's nuclear sites late Saturday.

The situation remained contentious on Monday, with Iran promising retaliation for the US strikes. Israel and Iran continued to exchange fire. Oil prices sustained their upward march amid fear of supply disruption from the Strait of Hormuz. The price of oil is up 14% since Israel's June 12 attack on Iran.

Markets, surprisingly, have taken the news in stride. The Dow Jones Industrial (^DJI), S&P 500 (^GSPC), and Nasdaq Composite (^IXIC) all clung onto gains through midmorning.

But some of the strongest gains in markets today have come from defense stocks such as Lockheed Martin and Northrop Grumman. Shares of Lockheed Martin and Northrop Grumman advanced nearly 2% each — the companies' ticker pages were among the most active on Yahoo Finance.

Northrop Grumman is gathering extra attention as it makes the B-2 stealth bomber used in the US attack on Iran's nuclear facilities.

The B-2 program accounts for about $500 million in annual revenue for Northrop Grumman, or 2% of its business, estimated Jefferies analyst Sheila Kahyaoglu.

"Escalating global conflict translates to defense stock out-performance," Kahyaoglu said.

Washington Crossing Advisors senior portfolio manager Chad Morganlander said on Opening Bid that the new conflict only emboldens his longtime bullish call on Lockheed Martin. Morganlander says he has owned the stock for close to three years and expects strong revenue growth over the next five years.

"Although Northrop is a wonderful company, and it's growing profitably and is well capitalized, we thought from the valuation perspective that Lockheed was more attractive," Morganlander explained. "It's sitting at a 2026 PE multiple of roughly 15 times. It has not had the big multiple expansion like their competitors. And we believe that there's a stream of opportunity as there's been an overhang of uncertainty regarding the F-16 or the F-22 fighter jets."

Source: finance.yahoo

Risk Warnings and Disclaimers

Add to Favorites

Adam

Commodity

Economic

President Donald Trump on Monday demanded that “everyone” keep oil prices down or they would play “into the hands of the enemy,” as the conflict in the Middle East escalates following U.S. strikes on Iran.

“EVERYONE, KEEP OIL PRICES DOWN. I’M WATCHING! YOU’RE PLAYING RIGHT INTO THE HANDS OF THE ENEMY. DON’T DO IT!,” the president said in a post on his social media platform Truth Social.

U.S. crude oil was down 75 cents, or 1.02%, to $73.09 per barrel in the wake of Trump’s post. Global benchmark Brent fell 73 cents, or 0.95%, to $76.28 per barrel.

Trump’s message comes after the U.S. bombed Iran’s key nuclear sites over the weekend, putting the world on edge that the Islamic Republic might target energy supplies in the Middle East and cause a spike in global oil prices.

It wasn’t clear who specifically Trump was speaking to in his post, though he seemed to addressing the U.S. oil industry. Some oil companies had warned earlier in the year that they might have to cut production after prices tumbled to multiyear lows on Trump’s tariffs and OPEC+ boosting supply.

“To The Department of Energy: DRILL, BABY, DRILL!!! And I mean NOW!!!,” Trump said in a subsequent post on Monday. Oil production decisions in the U.S. are made by private companies in response to market dynamics. The Energy Department does not drill for oil.

“As the President said, producers must keep oil prices down or risk playing into the hands of the enemy,” White House spokesperson Harrison Fields said when asked who Trump was addressing.

The oil market has been largely unfazed by the U.S. attacks on Iran’s nuclear facilities, with futures trading largely flat through much of Monday morning. Brent had jumped more than 5% on Sunday evening to crack $81 before easing. WTI also reached its highest levels since January before pulling back.

source :cnbc

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Adam

Commodity

The natural gas market initially gapped higher on Monday, in reaction to the Americans bombing the Iranian nuclear sites. However, the market fell almost immediately, as we are still looking at the $4 level as a ceiling.

Natural Gas Technical Analysis

The natural gas market gapped higher to kick off the trading session, which makes a certain amount of sense considering that the Americans bombed three nuclear sites in Iran over the weekend. And of course, people, the first instinct with them is going to be to start buying oil and gas. That being said, the market didn’t even bother going higher. It just fell from there and this to me signifies that the area right around the $4 level will be a massive barrier still.

If that’s the case, you pay attention to the massive shooting star on Friday, this tells me that we are now looking at this $3.85 region to see whether or not we can break below it. If we do, then the 50 day EMA is followed by the $3.50 level. Underneath there, then you have the 200 day EMA. Ultimately though, we could bounce on some type of negative headline as far as risk is concerned, whatever, but I still think that a lack of demand is going to be an issue sooner or later.

We’re in the midst of a heat wave here in the eastern part of the United States. And that of course has a certain amount of demand being shown in the market, but we’ve already seen that play out a bit. In fact, by the beginning of next week, temperatures should be closer to the norm. So, I still think the market is trying to get ahead of the next plunge and start selling.

Source:fxempire

Risk Warnings and Disclaimers

Add to Favorites

Devin

Political

Iran fired six missiles at US military bases in Qatar, an Israeli official told Axios. The same source previously told Axios that Iran was preparing for the attack.

A succession of explosions were heard over Doha, according to Reuters reporters on the ground.

Qatar is home to Al Udeid Air Base, the largest U.S. base in the Middle East. The base, which houses about 10,000 American troops, serves as the forward headquarters of U.S. Central Command (CENTCOM). The base directs U.S. military operations in a vast area stretching from Egypt to Kazakhstan.

Last week, Reuters reported that the US Department of Defense had withdrawn some of its aircraft from the base due to the risk of a possible attack from Iran.

Following the developments, Bitcoin experienced a sudden drop in price and was briefly seen below $100,000.

Chart showing the decline in BTC price.

Source: CryptoSlate

Risk Warnings and Disclaimers

Add to Favorites

Adam

Economic

Middle East Situation

As the U.S. rained bombs and missiles on Iran’s nuclear sites on Saturday — entering the war between Israel and Iran — Beijing appears to be standing firm in its support of its long-standing ally in Tehran.

However, its support will likely be tempered by its limited heft as a peace broker in the region, and the perceived upside if oil chokepoints squeeze the U.S. more than it hurts Beijing, experts said.

Beijing has drawn closer to Iran in recent years, with the two countries cooperating regularly on military exercises and signing a 25-year strategic partnership in economic, military and security cooperation in 2021.

Iran’s population of nearly 91 million, far more than Israel’s 9.8 million people, coupled with its abundant crude oil reserves, made it a natural partner in China’s Belt and Road initiative, which the Global Times, a Beijing government mouthpiece, described as a way to “counter U.S. hegemony.”

China’s primary economic interest, however, lies in its access to Iranian oil and the Strait of Hormuz, one of the most pivotal routes for global crude oil flows.

Some 20 million barrels per day of crude oil, or a fifth of global consumption, flowed through the strait in 2024, according to the U.S. Energy Information Administration. About half of Beijing’s oil imports moved through the key route — using a system of workarounds to bypass Western banks, shipping services and yuan-denominated transactions to avoid triggering sanctions.

That said, China will likely keep its “hands off Iran in any case,” said Neo Wang, lead China economist and strategist at Evercore ISI, due to its limited influence over Israel and its strategic calculus on Washington’s involvement in the conflict.

Beijing, embroiled in a trade war with the U.S., may find value in any chaos in the Middle East, as they would pose “a bigger distraction to Washington,” Wang added.

China had pledged to support Iran shortly after Israel’s attack on June 12, which Beijing condemned as a “violation of Iran’s sovereignty, security and territorial integrity.”

But despite that initial show of support for Iran, Beijing’s rhetoric has shifted to become more measured, short of denouncing Israel’s military actions but focused on brokering dialogue and a ceasefire.

Chinese foreign minister Wang Yi told his Israeli counterpart in a phone call that Israel’s strikes were “unacceptable,” but refrained from remarks of “condemning” them in the call.

Beijing has largely avoided “direct condemnation of Israel while remaining diplomatically aligned with Iran,” analysts at political risk consultancy firm Eurasia Group said, as it seeks to “contain the tensions and prevent spillover of the conflict to the wider region — which could affect its economic and strategic interests.”

The U.S. strikes on Iran “handed China an important talking point: It’s America, not China, that threatens the global order and peace,” said Shehzad Qazi, managing director of China Beige Book.

A battle of endurance?

U.S. Secretary of State Marco Rubio on Sunday called for China to dissuade Iran from closing the Strait of Hormuz.

While many expect Beijing to do just that, some suggested a blockade of the chokepoint could be favorable for China, as it stands better prepared to absorb the blow than the U.S. and European Union, and that China could easily turn to other alternative oil sources.

According to the Energy Information Administration, China’s primary oil sources are Russia, Saudi Arabia, Malaysia, Iraq and Oman, although a sizable portion of Malaysia’s exports are actually relabeled or transferred from Iran.

Robin Brooks, senior fellow at the Brookings Institution, said “China will be happy to see a big spike in oil prices if that destabilizes the U.S. and Europe.”

Echoing that view, Andrew Bishop, global head of policy research at Signum Global Advisors, said: “China may not be that irate at paying more for oil from other sources, if it means the U.S. suffers even more.”

Answering a question on Iran’s potential closure of the strait, a Chinese Foreign Ministry spokesperson told reporters at a regular briefing Monday that it is in the international community’s shared interest to maintain stability in the Persian Gulf and surrounding waterways.

Iran’s parliament Sunday backed the decision to close the strait, pending the final approval by its national security council.

Opportunity in crisis

China may have hopes of acting as a peacemaker, building on its mediation of a peace deal between Iran and Saudi Arabia in 2023. But Israel will likely be skeptical of China’s neutrality as a mediator, analysts said, citing Beijing’s close ties with Iran and concerns about of provoking the Trump administration.

China’s U.N. Ambassador Cong Fu took aim at the U.S. at a U.N. Security Council meeting on Sunday, saying that the country “strongly condemns” the U.S. attacks on Iran and the bombing of nuclear facilities.

Fu also singled out Israel and called for efforts to bring an end to the hostilities. “The parties to the conflict, Israel in particular, should reach an immediate ceasefire to prevent a spiraling escalation,” Fu said, according to the readout.

Andy Rothman, founder of advisory firm Sinology LLC, said he doubted that Beijing would attempt to broker a peace deal between the U.S. and Iran, but it may still be “discouraging Iran from retaliating militarily against the U.S.”

“Because that would destabilize the region and weaken the global economy, neither of which are in China’s interest,” he added.

Source: cnbc

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Adam

Economic

Middle East Situation

Iran's parliament has pushed the nation to close the Strait of Hormuz, according to state media, but left the final decision to choke off the key waterway to Iran’s Supreme National Security Council.

Vice President JD Vance shot back Sunday that such an action "would be suicidal" for Iran as "their entire economy runs through the Strait of Hormuz."

Yet the Islamic Republic appears to be a step closer to the unprecedented action that could spike prices around the world, with about 20% of global oil and gas flowing through the narrow passageway connecting the Persian Gulf to the rest of the globe.

It was just one front — but perhaps one with the greatest economic consequences — after President Trump ordered an attack on three of Iran's nuclear sites and drew the US into the ongoing war.

Some experts are skeptical Iran will ever follow through, as the country has threatened the strait multiple times over the years but has historically opted for less disruptive measures.

Trump described the move as a means to bring Iran to the negotiating table in comments Saturday night. But it immediately set off fears of additional violence and retaliation in the days ahead, with Trump's hint at the possibility of "regime change" a further spur.

For their part, Iranian leaders say any talks are on hold but haven't outlined exactly how they are going to respond.

"The US is not diplomatic and only understands the language of force and threats," said Iranian Foreign Minister Abbas Araghchi, according to Mehr News, the country's semi-official news agency.

Araghchi also reportedly avoided directly commenting on the strait, saying "a variety of options are available to Iran."

The action also comes after Iranian General Mohsen Rezaei, an Iranian leader who has a seat on the decision-making Supreme National Security Council, reportedly said on state television hours before the attack that the country would move to close the strait if Trump entered the war.

Watching for a ‘worst-case scenario’

Economists will be closely watching the strait because of global economic repercussions that would almost surely follow any disruptions there.

Analysts at JPMorgan Chase (JPM) have called a blockage there a "worst-case scenario" and suggested the result could be global oil prices reaching $120 a barrel and pushing inflation in the US to 5%.

But as Bloomberg energy columnist Javier Blas reemphasized over the weekend, it benefits Iran to "use low-ranking officials to talk about closing Hormuz" because it sows instability. But it would actually damage Iran to follow through.

Indeed, closing the strait would be felt in Iran's own oil sector and cut off a key revenue source for the country's leaders.

Iran uses the waterway for its own energy exports, which totaled over 1.3 million barrels of oil a day in 2023, according to CEIC.

As Noam Raydan, who studies energy and maritime risks at the Washington Institute for Near East Policy, told Yahoo Finance last week before the attacks: "If its oil production and terminals are badly damaged, we can then seriously consider the possibility of Tehran shutting the strait."

So far, that doesn't appear to be the case, with Israel striking one oil refinery in Tehran but so far apparently leaving the country's oil infrastructure largely in place.

Most Iranian oil flows to China, but closing the Strait of Hormuz would jeopardize a wider array of oil and natural gas sources, with Saudi Arabia, Kuwait, Iraq, and others using that waterway.

That said, the tensions could prompt oil tankers to decide not to transit Hormuz themselves without direct intervention from Iran. But there were signs of a cautious willingness to enter the waterway on Monday, as two supertankers that had U-turned resumed their crossing.

The overall landscape has led Trump administration to express tempered confidence that the Strait of Hormuz option is one that won't be taken.

"That would be suicidal," Vance said on Sunday on NBC of Iran taking that step.

"If they want to destroy their own economy and cause disruptions in the world, I think that would be their decision," he acknowledged, "but why would they do that? I don't think it makes any sense."

Secretary of State Marco Rubio added on Fox News that Iran closing the strait would be "another terrible mistake, ... and we retain options to deal with that."