The conflict over the past few months has increased war risk insurance costs for both maritime and aviation sectors, with insurers reassessing exposure due to missile threats, airspace closure, and other disruptions.
“This is a geopolitically-induced shock to energy prices, and that’s what’s really going to have more of a lasting effect,” adds Hodge.
Even if the reopening of the Strait continues largely uninterrupted, it could still take weeks or months for lagging shipping flows, damaged energy infrastructure, and unstable insurance markets to return to their pre-war states.
The price of U.S. airlines no longer hedging fuel costs
The cost of airline fuel and oil typically makes up around a third of an airline’s operating expenses, according to World Air Transport Statistics.
Fuel hedging––buying jet fuel at a fixed price for delivery later on—can help airlines stabilize costs and protect against price hikes, but it can also be a costly practice if jet fuel prices drop suddenly.
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