Written by: Deborah Kiameh
Reading time: 10 minutes
What we are witnessing today is not merely a conflict between Iran and the United States, nor is it a contained geopolitical tension that can be quietly managed behind closed doors while the rest of the world moves on as usual.
This is a systemic disruption—one that is already penetrating the very foundations of the global economy through its most vulnerable artery: the sea.
Maritime instability is never a regional issue alone. The moment strategic waterways become uncertain, supply chains begin to fracture, energy markets react, insurance costs rise, trade routes are recalculated, and political risk spreads far beyond the immediate actors involved.
And when the sea becomes unstable, everything becomes unstable.
The Invisible Backbone of Global Trade: Insurance Under Pressure
More than 80 percent of global trade moves by maritime routes. Every single day, over 50,000 merchant vessels carry the lifeblood of the modern world—oil, gas, wheat, medicine, electronics, and industrial components. These are not optional flows. These are necessities. At the center of this system lies one of the most critical chokepoints on Earth: The Strait of Hormuz.
Nearly 20 percent of global oil supply—around 20 million barrels per day—passes through that narrow corridor. Now imagine that corridor operating under constant military threat. Drones, naval escalation, miscalculations, retaliation—not hypothetically, but in real time. This is not risk, this is exposure.
What is even more alarming is not only what is happening on the surface but what is breaking underneath. Because global trade does not run-on ships alone; It runs on trust. And that trust is institutionalized through one critical mechanism: Insurance.
Marine cargo insurance, and more specifically war risk insurance, is not a secondary layer. It is the condition that allows trade to exist in high-risk environments. Without it, ships do not sail, banks do not finance cargo and ports do not accept vessels. It is the invisible guarantee behind every movement at sea. And today that guarantee is collapsing.
Premiums that once stood at less than 0.3 percent of a vessel’s value have surged to between 5 and 7 percent per voyage. For a $100 million tanker, this means up to $7 million in additional cost for a single trip, per voyage. This is not a pricing issue; this is a structural threat to continuity.
But the deeper problem is availability. Insurers are withdrawing, shortening coverage periods, and introducing rapid cancellation clauses. This transforms the system from costly… to unstable… to unreliable.
And when insurance disappears, trade does not adapt it stops. From that moment, the consequences move quickly. Shipping routes expand. Costs rise. Delivery times increase. Oil prices react—often by 10 to 20 percent based on perceived risk alone—feeding directly into global inflation.
A 10 percent increase in oil prices can raise global inflation by up to 0.6 percent, spreading across transport, food, and industry. And when shipping costs rise by 20 to 30 percent, consumer goods follow—often increasing by 8 to 12 percent. But what must be said clearly—without technical language, without economic abstraction is this: This crisis will make everything more expensive, not selectively, not gradually but systematically.
When energy prices rise, transportation becomes more expensive. When transportation becomes more expensive, every product that moves—food, medicine, fuel, electronics—carries that cost. When insurance premiums are embedded into shipping, they are passed directly into the final price of goods.
There is no separation between global trade and daily life. The result is simple and unavoidable: Higher grocery bills, higher fuel costs, higher electricity expenses simply higher costs of living across every sector.
This is not a temporary fluctuation; this is a structural increase in the cost of living driven by instability at the core of global trade.
Europe at the Frontline of Economic Instability
Now let us look closely at Europe, because Europe is not just exposed to this crisis, it is structurally vulnerable to it.
Europe’s economic model depends heavily on stable, affordable energy imports. A significant portion of its oil and liquefied natural gas flows through maritime routes connected to the Gulf. When instability threatens the Strait of Hormuz, European markets react immediately, not because supply has stopped, but because supply has become uncertain.
And in modern markets, uncertainty is enough to trigger price shocks.
Energy prices rise quickly, and when they do, they hit every layer of the European economy. Manufacturing costs increase, transportation becomes more expensive, industrial sectors such as chemicals, steel, and heavy production—already operating under tight margins—face additional strain. But the pressure does not stop at energy.
Europe is deeply integrated into global supply chains, particularly with Asia. From electronics to machinery to raw materials, a significant share of imports arrives via maritime routes that are now affected by rising risk and insurance costs. When shipping becomes more expensive or delayed, European production cycles slow down. Factories wait for components. Businesses operate with uncertainty. Inventories shrink.
This creates a dangerous combination: Higher costs and reduced output.
At the same time, consumers across Europe begin to feel the impact directly. Rising energy bills, increased prices for goods, and reduced purchasing power create internal economic pressure. Governments are then forced into difficult positions: balancing inflation control with economic support.
This is precisely the environment in which stagflation emerges. And Europe, still navigating post-crisis recovery, does not have unlimited resilience. Prolonged instability in maritime trade could push already fragile sectors into contraction, deepen economic inequalities across member states, and place additional strain on public finances. This is not a secondary impact; this is a direct economic threat.
Lebanon: Immediate Impact, Limited Resilience
Now consider Lebanon not as an isolated case, but as a clear example of how global disruption becomes immediate local crisis.
Lebanon’s economy is highly dependent on imports. Fuel, wheat, medicine, and essential goods all arrive by sea. There is no buffer. There is no large-scale domestic production to absorb external shocks. This means that any disruption in maritime trade is transmitted almost instantly into the local economy.
When shipping costs increase, those costs are not absorbed they are passed on. When insurance premiums rise, they are embedded directly into the price of goods. When shipments are delayed, shortages begin to appear. And in a country already facing currency instability, inflation, and financial constraints, these external pressures are magnified.
Fuel prices rise, increasing the cost of electricity and transportation. Food prices increase, placing additional strain on households already struggling with reduced income. Medical supplies become more expensive or harder to access, impacting public health. At the same time, businesses already operating in a fragile environment, face higher import costs, reduced margins, and unpredictable supply timelines. Many cannot adapt. Some will not survive.
This creates a chain reaction:
Economic pressure becomes social pressure, social pressure becomes political pressure, and political pressure, in an already fragile system, can quickly escalate into instability. Lebanon does not have the capacity to absorb prolonged external shocks of this magnitude. And it is not alone.
What we are witnessing, therefore, is not just a conflict, it is a transmission mechanism of economic instability through shipping, through insurance and through supply chains. And it reaches every corner of the global system.
So let us address decision-makers directly. This is not a situation that can be managed reactively. It requires immediate, coordinated, and structural response, because without intervention, the system will not stabilize on its own.
Policy Recommendations: Immediate Actions to Prevent Systemic Breakdown
First, there must be an urgent international effort to secure maritime corridors. This means coordinated naval de-escalation mechanisms and internationally supervised safe transit agreements, particularly in the Strait of Hormuz. The objective is not military dominance, but risk reduction, ensuring that commercial shipping can operate without constant exposure to conflict.
Second, governments and international institutions must step in to stabilize the insurance market. This can be done through temporary public backstop mechanisms—similar to those used during previous global crises—where states or multilateral institutions partially guarantee war risk coverage. Without this intervention, private insurers will continue to withdraw, accelerating system failure.
Third, a coordinated financial response is necessary. Central banks and international financial institutions should prepare contingency frameworks to manage inflationary spillovers caused by energy and shipping disruptions. This includes targeted support for vulnerable economies that are highly dependent on imports and exposed to external shocks.
Fourth, strategic energy reserves must be actively managed and, where necessary, released in a coordinated manner to reduce market panic and price volatility. Energy stability is central to preventing broader economic escalation.
Fifth, global supply chains must be diversified and reinforced. This includes accelerating investment in alternative trade routes, regional production capabilities, and logistical resilience. While this is a medium-term strategy, its urgency has become immediate.
Maritime Instability and the Price of Political Hesitation
Finally, diplomatic channels must be activated at the highest level, not only to address the conflict itself, but to explicitly recognize and mitigate its global economic consequences. De-escalation is no longer only a political objective. It is an economic necessity.
Because once maritime trust collapses, once insurers withdraw at scale, once supply chains reorganize around instability rebuilding will take years. We are already seeing early signals: Rising inflation, slowing growth, increasing financial caution.
The risk of stagflation is no longer theoretical, it’s forming. So, the question is no longer whether action is needed. The question is whether action will come in time.
How many disruptions before trade halts?
How many shocks before systems break?
How many warnings before decisions are made?
Because we are no longer predicting, we are measuring. This is an accountability moment.
The cost is already being paid in higher prices, in reduced purchasing power, and in the daily lives of people across the world and the conclusion is unavoidable: If the sea remains a battlefield, the global economy will not remain stable. If insurance continues to collapse, trade will not continue to flow. If leadership hesitate, the consequences will not remain contained.
We are all part of the same system and today, that system is under pressure.
The time to act is not later, it is now.
Deborah Kiameh raises awareness of the importance of sustainability is one of her main priorities. Future generations should not be deprived of resources and opportunities due to the lack of mismanagement in the world today. She believes CoSE addresses global issues and aids in funding projects towards environmental, ecological and health problems.
References:
- International Energy Agency (IEA)
World Energy Outlook & Oil Market Reports
https://www.iea.org
→ Data on global oil flows, Strait of Hormuz importance, energy price impact - S. Energy Information Administration (EIA)
World Oil Transit Chokepoints
https://www.eia.gov/international/analysis/special-topics/World_Oil_Transit_Chokepoints.php
→ Confirms ~20% of global oil passes through Hormuz - UNCTAD (United Nations Conference on Trade and Development)
Review of Maritime Transport
https://unctad.org/topic/transport-and-trade-logistics/review-of-maritime-transport
→ Global shipping statistics (80%+ trade by sea) - Lloyd’s Market Association / Lloyd’s of London
War Risk Insurance & Maritime Risk Updates
https://www.lmalloyds.com
→ Core source on marine war risk insurance and premium spikes - International Chamber of Shipping (ICS)
https://www.ics-shipping.org
→ Shipping volumes, operational realities, fleet statistics - World Bank
Global Economic Prospects
https://www.worldbank.org/en/publication/global-economic-prospects
→ Inflation transmission, global trade shocks, developing country impact - International Monetary Fund (IMF)
World Economic Outlook
https://www.imf.org
→ Inflation, stagflation risks, macroeconomic transmission - OECD (Organisation for Economic Co-operation and Development)
Economic Outlook Reports
https://www.oecd.org/economic-outlook/
→ Europe’s economic vulnerability, supply chain disruptions - European Central Bank (ECB)
Energy Prices and Inflation Reports
https://www.ecb.europa.eu
→ Impact of energy shocks on European inflation and growth - The Guardian (Business & Global Economy Coverage)
https://www.theguardian.com/business
→ Reporting on shipping risks, insurance premiums, Middle East tensions - Financial Times
https://www.ft.com
→ Analysis of maritime trade disruptions, insurance markets, global economy
12. World Food Programme (WFP)
https://www.wfp.org
