Intelligence experts believe that the ongoing conflict in the Middle East will be over in weeks not months, but the insurance implications remain opaque.

Increasing numbers of vessels in the Strait of Hormuz have been attacked by Iranian forces as the country’s conflict with the USA and Isreal continues. As the world watched scenes of vessels ablaze with more reported deaths and injuries to seafarers, Iran is seeking to close the waterway through which 20% of the world oil and gas is transited.

It has prompted the world’s oil producers to release reserves amid concerns over global oil supplies.

The International Energy Agency announced its 32 member countries had agreed to make 400 million barrels of oil from their emergency reserves available to the market to address disruptions in oil markets stemming from the war in the Middle East.

“The oil market challenges we are facing are unprecedented in scale, therefore I am very glad that IEA Member countries have responded with an emergency collective action of unprecedented size,” said IEA executive director Fatih Birol. “Oil markets are global so the response to major disruptions needs to be global too. Energy security is the founding mandate of the IEA, and I am pleased that IEA Members are showing strong solidarity in taking decisive action together.”

However, Stuart Ray, senior imagery analyst at Mckenzie Intelligence Services  (MIS) says the aims of the conflict may change, as the desire to see regime change in Iran is looking increasingly unlikely.

Speaking to Emerging Risks he said: “It has been said at a very high  level that there is no real plan for what happens once the USA and Isreal’s objectives are met. The plan was for a shock and awe campaign that would take out the Iranian regime’s leadership, and the people would rise up to overthrow the regime.

“However, regime change from the air does not happen. Any air assault needs to be followed by boots in the ground. You need to seize the terrain and then hold it if you are seeking regime change.”

Ray added: “The campaign has sought to degrade the Iranian missile capabilities but the issues over their aspirations around a nuclear weapon is a sideshow. They may well be keen to have nuclear capabilities but their ability to build one is likely to be less advanced than imagined.

“The hope that the population would rise up will not happen. There is no credible opposition.”

He added the events in Iraq and Libya highlighted that the removal of a dictatorship leads of a period of chaos.

Looking at the current  conflict Ray added: “There is no off ramp at present.

“I suspect the narrative will change given the failure to implement regime change. They will cite some objective which has been met then cease operations.

“I do not think this will be a prolonged conflict. It is likely to be weeks not months.”

Ray said Iran was well aware of its importance and the global implications of  a blockade of the Strait of Hormuz.

“It is the ace up Iran’s sleeve to control the strait and stop the flow of oil through it,” he explained. “The threat of attack or that mines have been deployed will be enough to strike fear in vessel owners and crews.”

The conflict has put insurers on alert, but the message has been that cover remains available, but it may well come at a cost.

Chris Jones, chief executive of the International Underwriting Association, said: “Prior to the commencement of the current hostilities Iran and the wider Middle East was already an area of relative enhanced risk and insurance coverage in place will reflect this. IUA members are, however, continuing to provide cover for clients affected by the current hostilities in Iran across a number of lines of business.

“Most prominent is shipping in the Straits of Hormuz where trade has been halted, not by a lack of available insurance, but by obvious safety concerns. The market for marine war risks is operating in the manner we would expect, given the increase in threats to shipping and insurers are focussed on ensuring client can continue to access the cover they require.

“With the situation rapidly evolving, it is important that in-depth, real time security advice is available. The London Market’s joint marine committees are working with expert consultants to provide underwriters with the latest information. We welcome any initiative to improve the security situation.

“Elsewhere the London company market is also providing aviation cover to support flights transporting people away from the affected areas – both via existing flight routes and new repatriation operations. With airspace opening and closing, based on the assessment of aviation authorities, insurers are working with brokers, clients, and third-party experts to closely monitor changes in risk.”

MIS senior client success analyst, Harry Willis added: “While marine and energy coverage has been the major talking point the conflict is creating concerns for a wide range of classes.

“This is very much a cross-class event, from aviation, property, war and terror and business interruption are all affected, but the size of claims is yet to be determined as the conflict is ongoing.”

“The oil market challenges we are facing are unprecedented in scale, therefore I am very glad that IEA Member countries have responded with an emergency collective action of unprecedented size,”

Fatih Birol, IEA