Middle East Tensions Strain Insurers’ Risk and Portfolios

The recent escalation of conflict in the Middle East is placing significant strain on energy, marine, and credit insurers, according to a report by Allianz Trade. The German insurer warns that disruption to shipping routes and persistently high oil prices could directly increase claims costs, affect balance sheets, and influence investment portfolios.

Titled Conflict in the Middle East: Implications for Markets and Macro, the report assesses the economic fallout of US-Israeli strikes on Iran and subsequent Iranian retaliatory attacks targeting energy infrastructure and shipping. While Allianz economists anticipate a relatively short-lived shock in their central scenario, they caution that the conflict’s trajectory and duration will determine whether the world faces a repeat of the inflation surge observed in 2022–2023, necessitating potential recalibration of insurance market strategies.

Energy and Shipping at the Epicentre

Allianz Trade describes the crisis as a “non-linear geopolitical shock,” with the primary transmission channel through the Strait of Hormuz—a critical passage for roughly 30% of global seaborne oil and a substantial share of LNG exports. Spot oil prices surged to approximately US$82 per barrel immediately following the attacks, a rise of nearly 13% on the previous close, while more than 200 oil and LNG vessels were reported anchored outside the strait amid elevated war‑risk insurance premiums and operational precautions.

In the baseline scenario, where conflict is contained within weeks, Allianz projects 2026 oil prices averaging US$85/bbl, with temporary peaks at US$90/bbl before easing to US$70–75/bbl. However, in a severe, prolonged conflict, Brent crude could exceed US$100/bbl, potentially reaching US$120–130/bbl, risking a second supply-driven inflation shock.

Implications for Insurers

Marine and energy underwriters face heightened exposure to physical damage, operational delays, and business interruption. War-risk insurers are seeing surging demand and tighter policy terms. Property and business-interruption claims could spike if temporary disruption escalates into sustained infrastructure damage.

From an inflation perspective, baseline oil prices would modestly increase headline inflation in the euro area and US by 0.1–0.2 percentage points. Sustained high oil prices near US$100/bbl could add 0.5 percentage points, delaying interest-rate cuts and pressuring insurers’ investment returns and solvency.

Allianz highlights that energy producers outside the Gulf, integrated oil majors, and LNG exporters may benefit from stronger margins, while energy-intensive sectors—including airlines, petrochemicals, and heavy manufacturing—face cost pressures. Marine insurers must also account for higher freight rates and potential under-insurance as cargo values rise.

On the investment side, Allianz expects short-term market volatility, particularly affecting equities and unit-linked portfolios, while infrastructure and private-market allocations may provide relative resilience.

The report concludes that although the conflict is likely manageable if contained, insurers must closely monitor claims inflation, energy-exposed portfolios, and investment risks, with the ultimate impact depending on the conflict’s duration, spread, and the speed of policy responses.