The unfolding situation in the Middle East is being watched closely by many in the insurance sector, particularly those who understand how quickly geopolitical disruption can translate into property risk, supply chain stress, and rising claims costs.
The numbers already tell a story that should concern brokers handling property and general liability placements across Australia.
Around 200 internationally trading tankers are currently stranded in the Middle East Gulf following the suspension of Strait of Hormuz transits. Major shipping carriers halted operations after US-Israeli strikes on Iran and Tehran’s missile retaliation forced 11 Gulf countries to close their airspace.
For Australian shippers, this represents the most significant freight disruption since the COVID-19 pandemic.
The Strait of Hormuz carries approximately 20 percent of the world’s oil supply. When that flow is interrupted, the ripple effects move quickly through global supply chains — and they do not take long to reach Australian property values, construction costs, and insurance claims.
Immediate Impact on Property Placements
Australian supply chains are already experiencing shipping schedule disruptions and the rapid introduction of conflict-related surcharges.
Members of the Freight & Trade Alliance (FTA) and the Australian Peak Shippers Association (APSA) report increased transit times, schedule unreliability, and substantial unplanned costs. Traders are now being advised to assume container space is unavailable unless confirmed and to prepare for surcharges exceeding AUD 1,000 per TEU.
Major ocean carriers including Maersk, MSC and CMA CGM have rerouted vessels around the Cape of Good Hope. This diversion adds at least two weeks to voyage times and introduces new war-risk or emergency conflict surcharges.
At the same time, Emirates, Etihad and Qatar Airways have suspended commercial passenger and belly-hold freight flights, reducing available cargo capacity on Australia-Europe routes by an estimated 18 percent week-on-week.
For property insurers, the implications are immediate: construction materials are delayed, project timelines are extending, and repair or replacement costs are rising.
Construction Costs Are Rising Again
Supply chain disruption rarely arrives with a formal warning. Instead, it appears through rising builder quotes, delayed projects, and claims that take longer to resolve because materials are unavailable.
Copper prices have already risen 16.5 percent year-on-year, and Altus Group expects further price increases in electrical cable during the year.
Ongoing conflicts in the Middle East and Ukraine continue to drive up fuel and raw material costs. Combined with domestic pressures such as labour shortages, interest rate pressures and regulatory changes, these factors threaten to slow project delivery while increasing construction costs across the country.
Rising prices for fuel, steel, copper and aluminium are already influencing construction costs nationwide.
These pressures compound the existing cost escalation that followed climate-related natural disasters in recent years. Shortages of construction materials and labour have become one of the primary drivers behind rising insurance premiums.
The Growing Underinsurance Gap
The convergence of global supply chain disruptions, labour shortages and rising material costs is pushing rebuilding and replacement costs significantly higher.
However, many insured asset values have not kept pace.
Without professional quantity surveying, replacement costs are often underestimated by business owners and policyholders. Buildings, equipment and infrastructure may therefore be insured for significantly less than their true replacement value.
Industry experience shows that when rebuilding costs outpace insured values, policyholders frequently discover too late that their coverage is inadequate.
The gap between insured value and actual rebuilding cost can be large enough to threaten the viability of a business.
War-Risk Insurance Is Repricing
The geopolitical situation is also reshaping marine insurance.
Major P&I clubs including Gard, Skuld, NorthStandard, the London P&I Club and the American Club recently announced the termination of war-risk cover for ships operating in the Persian Gulf and the Strait of Hormuz.
At the same time, the Joint War Committee expanded its list of designated high-risk areas to include waters around Bahrain, Kuwait, Qatar, Oman and parts of the Arabian Gulf.
As a result, war-risk premiums are recalibrating quickly. Insurance costs for vessels transiting conflict-affected areas have surged from typical voyage premiums of around US$10,000–20,000 to as much as US$150,000–500,000.
These costs do not remain confined to marine insurance. They ultimately flow through freight rates and affect every business that relies on imported materials, equipment or inventory.
Economic Consequences for Australia
Economic modelling suggests that a one-month disruption to oil supply through the Strait of Hormuz could lift Australian CPI by approximately one percentage point while reducing GDP growth by around 0.2 percentage points.
A three-month disruption could push CPI up by around 1.5 percentage points at its peak, with GDP around 0.5 percentage points lower by the end of 2026.
Petrol prices under such scenarios could rise between A$0.25 and A$1.00 per litre.
Meanwhile, insurance inflation continues to accelerate. The CPI for insurance and financial services currently sits at 5.6 percent, and insurers such as Suncorp have indicated premium increases of up to 9 percent this financial year as claims costs rise.
Vulnerabilities Across Key Industries
Certain industries are particularly exposed to supply chain disruption.
Automotive suppliers in Victoria have already warned of potential line-stop risks if parts delays continue. Major retailers are advancing orders and rerouting shipments through trans-Pacific routes via Los Angeles despite higher costs.
Food exporters shipping lamb and citrus to the United Kingdom also face increased spoilage risk due to longer transit times.
The construction sector remains particularly fragile. ASIC statistics show construction recorded 1,894 insolvencies in the financial year to 10 February 2026 — the highest of any industry.
When construction firms collapse, suppliers fail to deliver, or shipments are lost, the insurance consequences follow quickly.
What You Should Be Doing Now
Preparation rather than panic is the appropriate response.
Brokers should review property placements to ensure replacement values remain adequate, as valuations conducted even six months ago may now be outdated.
Clients should also be encouraged to examine supply chain dependencies, identifying critical materials, origin points and operational resilience if shipments are delayed.
Contingent business interruption (CBI) coverage should be reviewed carefully. Many supply chain disruptions — including those caused by geopolitical events — may not trigger coverage unless physical damage occurs to a supplier’s facilities.
Documenting these conversations will also be important should claims arise later due to project delays or cost overruns.
The Bottom Line
The Strait of Hormuz disruption is unlikely to resolve quickly, and its insurance implications will unfold over months rather than weeks.
Construction costs are rising, supply chains remain fragile, and claims costs continue to increase.
Brokers who recognise these trends early and adjust placements accordingly will be better positioned to protect their clients than those who wait for market conditions to force reactive change.
In periods of uncertainty, understanding risk becomes more important than ever.
