Strait of Hormuz update – heightened war risks and implications for shipping

The Strait of Hormuz, the narrow maritime passage linking the Persian Gulf to the Gulf of Oman and the Indian Ocean, is a key trade route through which approximately 25% of all seaborne oil and liquified gas must transit.

Recent hostilities in the Gulf region have materially increased risk in the Strait of Hormuz. While the Strait has not been lawfully closed under international law, the current conflict raises several important issues for the maritime industry engaged in Gulf trade.
 

LEGAL STATUS OF THE STRAIT

On the morning of 28 February 2026, the US and Israel carried out significant strikes against Iran. In the wake of the strikes, Iran has responded with retaliatory missile and drone strikes against targets across the Gulf region. In addition, Iranian naval forces have warned that the Straits of Hormuz have been “closed” to commercial navigation. Following the “closure”, Iranian forces have been enforcing their blockade, with number of vessels that seemingly attempted to transit the straits coming under attack.  

The Strait of Hormuz constitutes an international strait within the meaning of Part III of the United Nations Convention on the Law of the Sea (UNCLOS). Accordingly, vessels of all States enjoy the right of transit passage through the Straits, which may not be suspended or blocked by the local coastal States – even in time of conflict. The unilateral declaration purporting to “close” the Strait by the Iranian navy therefore has no legal effect under UNCLOS.

However, while the Straits may not have been legally closed, the high risk of attack by Iranian forces has materially impacted the ability of vessels to safely exercise their right to transit leading to a de facto closure which will likely trigger contractual clauses and impact insurance cover.
 

SHIPPING INDUSTRY REACTION

The immediate commercial reaction to the conflict and the Iranian strikes on vessels has been for major oil companies, trading houses and tanker operators to suspend all shipments through the Strait. AIS tracking services indicate that marine traffic in the surrounding area (250+ vessels) are idling or turning back rather than risking an attempt to transit the Strait. 
 

CHARTERPARTY IMPLICATIONS

From a contractual perspective, the heightened risk in the Straits will likely engage the following:

War Risk Clauses

Commonly used Charterparty clauses such as CONWARTIME, VOYWAR and BIMCO War Risks Clauses, generally entitle vessel owners to refuse or deviate from charterers’ orders where, in the owners’ reasonable judgement, the vessel may be exposed to war risks.

Safe Port and Safe Route Warranties

Charterers’ orders to transit the Strait can be refused by an owner if the route or nominated port cannot be reached without exposing the vessel to abnormal danger.

Force Majeure

Where performance under a charterparty is prevented or delayed due to hostilities or military action, this will likely trigger any force majeure clause incorporated into a charterparty.

Off-hire

Any delays that are caused by military incidents, naval restrictions or insurers’ restrictions may trigger off-hire or laytime/demurrage clauses depending on the contractual allocation of risk.

Insurance Considerations

Even prior to the recent conflict escalation, the Strait of Hormuz was treated as a Joint War Committee listed area to reflect the exposure to geopolitical tension and non-state threats.  However, the current hostilities represent a material escalation.

Prior to the conflict, transit was generally insurable as a matter of course subject to additional war risk premiums (AWRP). Following the escalation, underwriters are re-assessing the risks leading to:

• Significant premium uplifts, AWRP for transit through the Strait prior to the escalation were typically in the region of 0.05-0.15% of hull value per transit. Indicative market reports suggest that AWRP have materially shot up to 0.30.7+% of hull value per transit.
• Prior-approval requirements, such that cover is no longer automatic and may be conditional on security measures, voyage details or navigational undertakings.
• Tighter underwriting scrutiny, such as enhanced due diligence on the risk profile of the vessel, her ownership and trading patterns.
• We are also seeing the issuance of notices of cancellation or amendments to existing cover. Where war risk insurance is cancelled or restricted, vessel owners may be entitled to decline or delay transit.
   

CONCLUSION

While the Strait remains legally open to international navigation, the sudden escalation in the conflict has materially altered the risk landscape for commercial shipping. As a result, the high-risk environment may well justify a vessel’s refusal to transit. Additionally, the reassessment of war risks by underwriters will lead to significant war premium uplifts and potentially loss of cover.

Owners and charterers should closely monitor the situation and review their risk assessments based on contemporaneous updates and engage early on with their insurers and obtain legal advice before considering transit through the Strait.
 

CONTACT US

Should you have any queries or require specific advice in respect of the above, please do not hesitate to contact Menelaus or your usual contact at Stephenson Harwood.