Regional instability in the Middle East is already affecting aviation, shipping and energy markets. Here’s what businesses and policyholders should understand about the possible knock-on effects for insurance risk and pricing.
The ongoing conflict involving the United States, Israel and Iran has created significant disruption across parts of the Middle East, with missile and drone activity reported across several countries including Kuwait, Bahrain, Israel, Lebanon, Iran and parts of the Gulf region. The human and economic consequences of the situation continue to unfold, with infrastructure, transport networks and commercial assets among those affected.
While the geopolitical context of the conflict continues to develop, events of this scale are closely monitored by the global insurance market. Large-scale regional instability can have ripple effects that extend well beyond the immediate area of conflict, particularly where global supply chains, aviation routes, shipping lanes and energy infrastructure are involved.
Although acts of war are typically excluded from most insurance policies, conflicts of this nature can still have a significant indirect impact on insurers and policyholders worldwide. Disruption to international transport, trade and energy supply can increase risk exposure across multiple sectors, which in turn influences underwriting decisions, market capacity and ultimately insurance pricing. For businesses, understanding these potential knock-on effects can help them anticipate how developments in the region may affect the insurance market in the months ahead.
Implications of the War with Iran on insurance
1. Airline Disruption
Airspace above Iran Iraq and much of the gulf region remained closed. Attacks to the airports of Cyprus and Dubai also forced major cancellations. 1,239 flights were cancelled on March 2nd, and over 6,000 across the previous weekend. Many long-haul flights have been cancelled; Emirates, Qatar and Etihad Airways have all been seriously affected.
Any air access to conflict zones is limited. The air over Iran, Iraq and the Gulf regions is restricted, which will affect travelers and communications. Many long distance flights move through these areas and therefore will be redirected. Any aircraft situated within the peril of war will be remain insured, unless their policy refutes war-related risk, which could yet result in millions of pounds of damages to be shouldered by the industry.
2. Shipping disruption
Maritime shipping lanes have been majorly disrupted, including the Strait of Hormuz. Even without action, the risk of Iran will cause insurers to revoke cover. Many vessels will be stood down, causing prices to increase.
Much of the affected areas such as Persian Gulf or the Red sea are already excluded by insurers. Marine liability insurers are already in the process of giving cancellation notices to wider regions. Tanker attacks will increase and there is expected to be pollution spillage. Vessels are being detained by US forces and the Gulf states as security increases. Ultimately, the war will impact premiums and create delays, with businesses needing to negotiate on contracts with insurers.
Shipping disruption will affect the energy industry, importing raw materials, and a range of export routes. Supply chains may struggle causing delays and increased prices. Business may need to review alternative suppliers or increase stock as a buffer.
3. Gas and Oli price increase
Approximately 20% of global oil supply moves through the Strait of Hormuz. Energy prices have already started to soar. Gas and oil distribution networks will likely be targeted in the attacks, and increased panic and volatility will cause price surges. Oil tankers in the Strait of Hormuz will begin to be escorted by the US Navy.
Energy prices have a knock on effect on a range of essential products and services. As supply chain and production costs increase, so too will the value of items and service, and with it follows insurance premiums.
4. Security and Terror Attacks
All countries associated with the war should be expected to raise their terror level. The security environment is unpredictable, and foreign agents or sympathisers may want to provoke action and entice fear by committing acts of terror. As a response property and BI covers may see a rise.
The war zones are continually expanding. Areas are being reassessed due to the change in security risk and exposure. Operational costs are rising due to the increased risk, and closures are causing trapped tonnage. Ultimately, insurers will take time to distinguish between terrorism and political violence, particularly for cargo claims and exposure.
5. Protests
Civil unrest as the war progresses is likely. Depending on the actions of world leaders, protects are expected, on both sides. As a consequence, expect travel disruption, business interruption, a strain on emergency services and strikes.
Is the Global insurance market headed for a crisis?
Lloyds of London underwrites 40% of the worlds’ maritime cargo. If a ship is sunk, a port closed or a canal blocked – then London pays the claim. A major pollution spill in the Strait of Hormuz or the Gulf could cost between $860million to $1.6billion, says reports. But London can’t cancel policies as this would signal even more uncertainty; the only way to overcome war risk is through repricing.
The issue is intelligence. How far the war zones expand, which regions are at credible risk, the scale of the war, and future targets. But as Iran and the Middle East are currently without reliable sources, gathering accurate intelligence is nearly impossible. Indeed, most large insurers worldwide don’t performer their own intelligence – they rely on Lloyd’s judgement. If Lloyds can’t confidently price war risk, then uncertainty will grow, causing a ripple-effect which will disrupt confidence of insurers to place cover and significantly harden the market. Furthermore, if an environmental catastrophe happens, or possibly multiple catastrophes, billions will need to be covered, and the insurance industry could be in crisis.
Sources:
Another Day, Regional Situation Report – https://www.romeroinsurance.co.uk/wp-content/uploads/2026/03/0930260302-AnotherDay-Situation-Report-5-Op-Epic-Fury-General-distribution.pdf
War with Iran: implications – https://www.kennedyslaw.com/en/thought-leadership/article/war-with-iran-implications-for-the-insurance-market/
Guardian – https://www.theguardian.com/business/2026/mar/02/maritime-insurers-war-risk-cover-gulf-iran-shipping-strait-of-hormuz