Middle East supertanker costs climb to highest level on record Conflict between the United States and Iran disrupting strategically important shipping Strait of Hormuz.

Major maritime war risk providers have begun withdrawing insurance for ships operating in the Persian Gulf due to sudden security shock blocking major routes in the area.

Benchmark freight rates for very large crude carriers (VLCCs) used to transport 2 million barrels of oil from the Middle East to China hit a record daily high of $423,736 on Monday, London Stock Exchange Group data showed. That’s an increase of more than 94% from Friday’s closing price.

With a huge jump Oil and gas Cost of transporting crude oil rises sharply as prices rise US and Israeli attacks on Iran weekend. The widening conflict has brought shipping traffic to a virtual halt in the Strait of Hormuz. The Strait of Hormuz is one of the world’s most important oil chokepoints, located in the gulf between Oman and Iran.

A senior Iranian Revolutionary Guard official said on Monday that the Strait of Hormuz had been closed and warned that any ship trying to pass through the waterway would be attacked, state media reported. According to Fox News, this statement has since been questioned by the US Central Command (CENTCOM).

Sheel Bhattacharjee, head of European freight pricing at Argus Media, told CNBC via email: “While the Strait of Hormuz has not yet been officially closed, multiple incidents have led to increased threat levels around the Strait of Hormuz, and charterers in the VLCC space have withdrawn from the market and avoided protecting vessels.”

Citing market sources, Bhattacharjee said Middle Eastern oil producers had not announced any halts in production or loading and ports in the United Arab Emirates, Oman and Kuwait were still operating.

“But most shipowners are avoiding transit through the Strait of Hormuz after insurance companies canceled war risk insurance for ships in some parts of the region,” Bhattacharji said.

It is estimated that approximately one-third of seaborne crude oil trade passes through the strategically important waterway, along with 19% of global liquefied natural gas (LNG) flows and 14% of global refined product trade, Argus Media reported.

In recent days, major maritime insurers have withdrawn war risk coverage for ships operating in the Middle East. Report Several ships transiting the Strait of Hormuz were attacked.

In addition to being headquartered in New York american clubincluding Norwegian Marine Insurance Company Gal and SkuldBritish northern standard and London P&I Club said they were removing war risk cover for ships in the area.

Adrian Beciri, chief executive of DUCAT Maritime, a Cyprus-based logistics company specializing in dry bulk shipping, said the knock-on effects of the unfolding conflict in the Middle East were being felt around the world.

“We’re trying to charter a dry bulk ship to ship our typical rice food supply to West Africa, which is around the Cape of Good Hope. You might think that’s a million miles away from a conflict zone,” Besiri told CNBC.European Squawk Box” Tuesday.

“We effectively lost this ship. Someone paid 50% more than usual to transport coal from Indonesia to the west coast of India. Why did this ship attract such a high price? The answer is because the owner was not sure whether the cargo could be obtained from the Persian Gulf region,” he continued.

“So the consequences are far-reaching and widespread, it could be a double whammy. If we see the closure of the Strait of Hormuz and the Suez Canal being effectively tampered with by the Houthis, that could be quite significant – just like we’ve seen in the COVID-19 era and the attacks that happened there.”

Shipping giants including MSC Maersk, lloyd table and CMA CGM also Issue new guidanceseeking to prioritize security amid a deteriorating security situation.

Maersk, widely considered a barometer of global trade, said on Monday it would suspend receipt of special cargo to and from the United Arab Emirates, Oman, Iraq, Kuwait, Qatar, Jordan, Bahrain and Saudi Arabia until further notice.

The company has previously said that all flights on the Middle East-India to Mediterranean and Middle East-India to US East Coast routes will bypass the Cape of Good Hope.