Red Sea (Bab al-Mandeb) — War-risk premiums for southern Red Sea voyages doubled on July 23 alone after Houthis attacked at least one tanker overnight . The Houthis declared a naval blockade on Saudi Arabian ports on July 20, causing rates to climb further . Insurance industry sources described premiums as "creeping higher" across both waterways, with both chokepoints now effectively theatres of war .

LMA5708 — The New Model Clause That Creates a Binary Choice

On July 23–24, 2026, the Lloyd's Market Association (LMA) published model clause LMA5708 — Strait of Hormuz Transit Fee Condition, designed for use in marine hull and hull war policies .

• LMA5708 voids hull insurance for any vessel whose owner pays a transit fee, toll, or other payment to Iran (or its proxies) to pass through the Strait of Hormuz .
• The clause closes a gap under the UK Insurance Act: without it, insurers could face challenges denying claims for losses arising from sanctionable payments .
• The explanatory notes explicitly state that payments for transiting an international waterway are not legitimate and may breach sanctions regimes .

The binary choice for shipowners: either pay Iran's demanded transit toll and lose all hull war insurance coverage (LMA5708 makes this a policy condition), or refuse to pay and risk being attacked or detained by Iranian forces while transiting without safe passage .

Iran has been directing vessels to use an Iran-approved northern route near its territorial waters, collecting fees for passage — a practice the LMA's guidance treats as sanctionable and thus a basis for voiding cover .

Sharp Drop in Tanker Transits Through Hormuz

Hormuz traffic has fallen to a near standstill:

• On July 9, oil tanker traffic was at a "near standstill," with data showing only two tankers transiting early that day .
• On July 13, the number of tanker transits fell to the lowest level in two months, with just six vessels crossing on some days .
• By July 21, total commodity vessel crossings dropped to just four in a single day, mostly on the Iranian-controlled northern route .
• Total traffic through the strait fell sharply across all vessel types, with shipowners increasingly unwilling to risk the passage .

The LMA itself has stated that the primary reason for reduced traffic is not a lack of available insurance, but rather that ship masters and owners assess the safety risk to crew and vessel as too high .

Broader Implications for Global Food Security and Shipping Costs

Both the Strait of Hormuz (through which about 20 million barrels of oil and LNG pass daily) and the Bab al-Mandeb (a key corridor for containerized goods and grain) are simultaneously disrupted .

• Energy costs: Oil prices have been highly volatile, with war-risk premiums mirroring the price of oil on a "roller coaster," according to Marcus Baker, global head of marine at Marsh . The effective closure of Hormuz to most commercial traffic is cutting off a fifth of global oil supply.
• Food security: The Red Sea route is critical for grain shipments from the Black Sea and Europe to East Africa, the Middle East, and Asia. The Houthi blockade of Saudi Arabian ports and the general rerouting of vessels around the Cape of Good Hope add weeks to voyages and sharply raise freight costs .
• Shipping costs: Insurance costs are only one component — diversion around southern Africa, higher fuel consumption, and extended charter hire are compounding expenses. DBRS Morningstar warned these disruptions are straining global supply chains and adding upward pressure on war insurance premiums across multiple sectors .

In short, late July 2026 presents a dual-chokepoint crisis: Hormuz transits are at near-zero due to missile attacks and the LMA5708 insurance trap, Red Sea war premiums doubled in a single day, and the combined effect threatens global energy supplies, grain trade routes, and a sustained increase in shipping costs across the board.

Red Sea (Bab al-Mandeb) — War-risk premiums for southern Red Sea voyages doubled on July 23 alone after Houthis attacked at least one tanker overnight . The Houthis declared a naval blockade on Saudi Arabian ports on July 20, causing rates to climb further . Insurance industry sources described premiums as "creeping higher" across both waterways, with both chokepoints now effectively theatres of war .

LMA5708 — The New Model Clause That Creates a Binary Choice

On July 23–24, 2026, the Lloyd's Market Association (LMA) published model clause LMA5708 — Strait of Hormuz Transit Fee Condition, designed for use in marine hull and hull war policies .

• LMA5708 voids hull insurance for any vessel whose owner pays a transit fee, toll, or other payment to Iran (or its proxies) to pass through the Strait of Hormuz .
• The clause closes a gap under the UK Insurance Act: without it, insurers could face challenges denying claims for losses arising from sanctionable payments .
• The explanatory notes explicitly state that payments for transiting an international waterway are not legitimate and may breach sanctions regimes .

The binary choice for shipowners: either pay Iran's demanded transit toll and lose all hull war insurance coverage (LMA5708 makes this a policy condition), or refuse to pay and risk being attacked or detained by Iranian forces while transiting without safe passage .

Iran has been directing vessels to use an Iran-approved northern route near its territorial waters, collecting fees for passage — a practice the LMA's guidance treats as sanctionable and thus a basis for voiding cover .

Sharp Drop in Tanker Transits Through Hormuz

Hormuz traffic has fallen to a near standstill:

• On July 9, oil tanker traffic was at a "near standstill," with data showing only two tankers transiting early that day .
• On July 13, the number of tanker transits fell to the lowest level in two months, with just six vessels crossing on some days .
• By July 21, total commodity vessel crossings dropped to just four in a single day, mostly on the Iranian-controlled northern route .
• Total traffic through the strait fell sharply across all vessel types, with shipowners increasingly unwilling to risk the passage .

The LMA itself has stated that the primary reason for reduced traffic is not a lack of available insurance, but rather that ship masters and owners assess the safety risk to crew and vessel as too high .

Broader Implications for Global Food Security and Shipping Costs

Both the Strait of Hormuz (through which about 20 million barrels of oil and LNG pass daily) and the Bab al-Mandeb (a key corridor for containerized goods and grain) are simultaneously disrupted .

• Energy costs: Oil prices have been highly volatile, with war-risk premiums mirroring the price of oil on a "roller coaster," according to Marcus Baker, global head of marine at Marsh . The effective closure of Hormuz to most commercial traffic is cutting off a fifth of global oil supply.
• Food security: The Red Sea route is critical for grain shipments from the Black Sea and Europe to East Africa, the Middle East, and Asia. The Houthi blockade of Saudi Arabian ports and the general rerouting of vessels around the Cape of Good Hope add weeks to voyages and sharply raise freight costs .
• Shipping costs: Insurance costs are only one component — diversion around southern Africa, higher fuel consumption, and extended charter hire are compounding expenses. DBRS Morningstar warned these disruptions are straining global supply chains and adding upward pressure on war insurance premiums across multiple sectors .

In short, late July 2026 presents a dual-chokepoint crisis: Hormuz transits are at near-zero due to missile attacks and the LMA5708 insurance trap, Red Sea war premiums doubled in a single day, and the combined effect threatens global energy supplies, grain trade routes, and a sustained increase in shipping costs across the board.