Hormuz crisis drives tanker crew pay, freight and insurance costs higher

The security crisis in the Strait of Hormuz has sharply increased the cost of transporting Gulf crude to global markets, pushing up tanker crew compensation, freight rates, war-risk insurance and fuel costs as missile and drone attacks reduce shipping traffic through the key energy chokepoint.

Shipowners are offering tanker captains as much as $100,000 a month, along with a $50,000 bonus for each crossing, compared with normal monthly pay of about $15,000.

Ordinary sailors, who typically earn around $1,500 a month, are receiving double pay in waters adjacent to the strait and four to six times their normal wages during actual Hormuz transits, says First Post.

Many crews are operating dedicated shuttle runs and receiving elevated rates for months while facing continued exposure to missile and drone threats. Representatives from the Forward Seamen's Union of India said that despite the higher pay, some shipowners are pressuring crew members who do not want to sail into the danger zone.

Freight and insurance costs rise

Daily charter rates for tankers passing through the strait have risen to about $1.3 million a day, from between $20,000 and $50,000 before the crisis.

War-risk insurance premiums have also climbed to between 6% and 10% of a vessel's hull value, adding as much as $20 million in insurance costs for a single supertanker voyage into the Gulf.

Supertanker fuel prices in Fujairah have reached $686 per tonne, a 67% increase from a year earlier, adding further to the cost of transporting crude.

Some operators are seeking to reduce exposure to the strait by shipping crude to waters off Fujairah in the Gulf of Oman, where cargo can be transferred to other vessels for onward delivery.

Shipping traffic falls

The conflict has also led to a sharp decline in vessel movements through the strait. Since February 28, at least 93 ships have been hit and 24 seafarers killed, while at least 14 attacks have been recorded in the Hormuz area in recent weeks.

Most vessels now transit the strait at night, with GPS signalling equipment switched off to reduce the risk of being targeted. The US Navy has deployed defensive air capabilities along the Omani coast to protect shipping corridors.

Daily ship transits through the strait fell to 13 vessels on October 4, from 24 a week earlier and about 135 vessels a day before the conflict. The strait historically carried roughly one-fifth of global oil and LNG shipments.

Direct crude flows through the strait remain about one-third below pre-war levels, although total Gulf exports have partly recovered through alternative pipelines and shuttle transfers.

The disruption has increased the cost of moving crude even without a decline in oil production. Higher wages, insurance premiums, freight rates and fuel costs have added to the overall expense of transporting Gulf crude, making security conditions in the Strait of Hormuz an increasingly important factor for global oil prices.