TOKYO -- Additional insurance for tankers sailing through the Strait of Hormuz now costs 10 times what it did before two ships were attacked last week near the vital passageway for Asia-bound energy, according to Japanese shipping industry sources.
Further increases look possible if tensions between the U.S. and Iran remain heightened, threatening to add to the cost of transporting crude oil.
After four tankers were attacked off the coast of the United Arab Emirates in late May, insurers began imposing an additional charge of 0.025% of ship value on tankers traveling through the Strait of Hormuz, said shipping industry sources. This marked a sudden change from the typical annual contracts for war risk insurance.
The extra charge has jumped to 0.25% since the June 13 attacks, which damaged two tankers carrying petrochemicals for Japanese and Taiwanese customers.
About 17 million barrels of crude oil pass through the Strait of Hormuz each day -- the equivalent of roughly 20% of global demand. Japan depends on the Middle East for 88% of its oil imports and would have few easy alternatives if the strait were blockaded.
"We would just have to draw on our roughly 200-day domestic reserves and wait for the situation to settle," said Mitsuyasu Kawaguchi, who heads crude and tanker operations at Japanese refiner Cosmo Oil.
An executive at another oil refiner said the insurance cost increase "is not big enough that we need immediately to reflect it in gasoline prices." But prolonged geopolitical instability in the Middle East could further drive up oil prices during the high-demand summer travel season.
Tensions remained high on Thursday as Iran said it had shot down a U.S. military drone over the strait, which U.S. authorities confirmed.