ADAPTING to geopolitical disruption has become part of the industry’s inner monologue. It is the story we tell ourselves and our customers: ships reroute, cargoes find alternative pathways, insurers adjust premiums and trade continues to flow. Resilience, in other words, has become the market’s preferred explanation for why conflict has not broken global shipping.

But resilience is increasingly being mistaken for a solution.

Marine insurers have already set aside an estimated $1.5bn-$2bn for roughly 70 casualties linked to the Middle East Gulf conflict since late February, according to the International Union of Marine Insurance. That’s just the beginning — the final bill will be many multiples higher. And those figures capture only insured losses. They do not account for delayed cargoes, disrupted supply chains, damaged infrastructure, higher financing costs and the growing inefficiencies embedded across global trade.

The problem is that the conflicts driving these losses show no sign of resolution. Instead, markets are investing in workarounds.

In the Middle East, billions of dollars are being committed to pipelines and export infrastructure designed to reduce reliance on the Strait of Hormuz. Yet recent attacks have demonstrated that fixed infrastructure is no less vulnerable to drones and missiles than ships at sea. Diversification may reduce dependence on a single chokepoint, but it does not eliminate the underlying security risk.

The Black Sea tells a similar story, albeit in a more acute form. There, adaptation is giving way to outright substitution. Ukraine’s maritime export corridor, which had moved tens of millions of tonnes of cargo since reopening, effectively fell silent after renewed attacks on shipping and port infrastructure. Grain traders are increasingly looking to rail routes through Moldova and the Danube as alternatives, even though these options are slower, more expensive and incapable of replacing lost maritime capacity.

Russia faces similar pressures. Attacks affecting traffic through the Sea of Azov are forcing grain flows towards alternative ports linked by subsidised rail networks. Kazakhstan’s CPC oil exports have also suffered disruption after drone attacks took out a fifth of Black Sea loadings last month as the Russia-Ukraine war spilled over to hit Kazakhstan’s and Western oil ‌majors’ sales.

These are not examples of a smoothly adjusting market. They are symptoms of a trading system being forced into increasingly inefficient routes to avoid persistent insecurity.

In the Red Sea, more than two years after Houthi attacks first pushed vessels around the Cape of Good Hope, four more seafarers were killed on Tuesday. The once temporary rerouting has become a semi-permanent feature of international trade.

Markets will continue to adapt. They always do. But the growing cost of adaptation and resilience is not about preserving any of the efficiencies of the old order. It is becoming a measure of how much inefficiency the system can absorb before the economic consequences become impossible to ignore.

Richard Meade
Editor-in-chief, Lloyd’s List

Click here to view the latest Lloyd’s List Daily Briefing