A PRE-emptive war for regime change in the Middle East, justified by the need to prevent an authoritarian state getting its hands on weapons of mass destruction.

For readers in the 40-something and above demographic, the words above will carry a familiar vibe.

Five days of military clashes between Israel and Iran, have already given us a sharp rise in tanker rates for the Middle East Gulf. Fixtures are much reduced, as both sides strike each other’s oil-related infrastructure. Otherwise, loadings and movements look largely unaffected.

Meanwhile, last night saw a nasty looking shipping casualty in the Strait of Hormuz, which fortunately appears to have nothing to do with the military clashes.

The key waterway remains an obvious pinch point, and the Islamic Revolutionary Guard Corps has previously targeted merchant vessels transiting it to exert political leverage. This was seen most recently with the hijack of Israeli-linked boxship MSC Aries two years ago.

But as Joshua Minchin reports, the collision between Frontline VLCC Front Eagle and shadow fleet aframax Adalynn near Khor Fakkan anchorage looks like nothing more than coincidence.

However, the world’s largest-listed tanker player has publicly said it is not currently accepting fixtures for the gulf, with other operators expected to follow its lead.

For my part, I spent Tuesday asking underwriters and brokers how the marine insurance community is responding to the unfolding situation.

It’s not for nothing the Middle East is frequently described as a rough neighbouring, and hostilities break out with a regularity sufficient to annul the onrush of panic.

Anders Hovelsrud, insurance director of Norwegian war risk mutual Den Norske Krigsforsikring for Skib, told me: “We currently consider the threat to the maritime domain to be unchanged but with a negative outlook… Consequently, we are not adjusting our rates upward at this time, though we are continuously monitoring the situation.”

The ballpark for additional war risk premiums ranges from about 0.75% of hull value to about 2% for ships with even tenuous UK or US links and is unchanged in recent months.

However, several sources warned that regional politics are prone to dramatic shifts at short notice.

There were also fears in some quarters that Houthi faction in Yemen — pretty accurately perceived as Iranian proxies — could resume attacks on vessels in the Red Sea, which have been in abeyance in the year to date.

The best option right now would be for both sides to calm down and a rapid return to what passes for normality in the region. But given that the leaders involved are Benjamin Netanyahu and Ayatollah Ali Khamenei, nobody should bet on that outcome.

And the worst-case scenario? That’s probably the Battle of Armageddon, which is prophesied in the Book of Revelation as a harbinger of the end of the world. This time round, the nuclear option is quite literally the nuclear option.

David Osler
Law and marine insurance editor, Lloyd’s List

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