In a recent analysis from Peak Re, the Hong Kong-based global reinsurer, the company set out its assessment of the economic and re/insurance market implications of the Iran conflict, with analysis led by Vice President, Economist, Kritika Kashyap.
Peak Re frame the situation not simply as a geopolitical crisis, but as a developing energy and supply chain shock with significant consequences for re/insurance markets.
According to Peak Re’s analysis, the conflict, which has escalated since late February, is already transmitting through global markets via disruption in the Strait of Hormuz, a critical artery for energy trade.
The reinsurer notes that roughly a quarter of seaborne oil and a fifth of liquefied natural gas flows pass through the Strait, making it a key pressure point for global supply. Recent shipping suspensions and the repricing or withdrawal of war risk cover have added to volatility, contributing to a sharp rise in oil, gas and freight costs.
Peak Re highlights that Brent crude prices have climbed from around USD 70 per barrel before the conflict to above USD 100, while natural gas prices have risen by 40–50% across major hubs. Freight costs have also increased significantly, with Middle East routes seeing rises of over 40%. The firm warns that damage to energy infrastructure and halted production in key fields could keep prices elevated for months.
From a re/insurance perspective, Peak Re emphasises that the most material risks are indirect. While direct war exposures are typically limited or excluded, the reinsurer identifies three key channels of impact: supply chain disruption, inflationary pressure on claims, and broader macroeconomic deterioration affecting credit risk.
In property lines, Peak Re notes that although most war-related losses would fall under specialised covers, there is potential for complexity where infrastructure damage intersects with standard “all risks” policies and contingent business interruption. More significantly, the reinsurer points to rising energy, freight and input costs as a driver of higher construction and repair expenses, reinforcing the link between inflation and claims severity that has persisted since 2021.
The firm also draws attention to the wider industrial impact of the disruption. Beyond hydrocarbons, the Middle East is a major supplier of inputs such as fertilisers, sulphur and petrochemical feedstocks, meaning that prolonged disruption could ripple through sectors including electronics, food, chemicals and manufacturing. This raises the potential for multi-line accumulation and contingent business interruption losses across global portfolios.
On the macroeconomic side, Peak Re, citing IMF estimates, notes that a sustained 10% increase in energy prices could lift global inflation by around 0.4 percentage points and reduce GDP growth by up to 0.2 percentage points.
However, the reinsurer outlines more severe downside scenarios. In a prolonged disruption with oil prices above USD 120 per barrel, it estimates that global inflation could rise by 2–3 percentage points and growth could fall by 1–2 percentage points. In an extreme case, with oil reaching USD 200, Peak Re warns of a potential stagflationary shock, combining high inflation with a significant slowdown in global output.
These macro pressures feed directly into trade credit risk. Peak Re suggests that in a short-lived scenario, insurers may be able to manage exposures through adjustments to limits and pricing.
However, if disruption persists, slower growth and higher input costs could lead to increased corporate insolvencies, particularly in energy-importing markets and in sectors such as transport, aviation, logistics and manufacturing. The reinsurer also flags the risk of rising claims in trade credit and contract frustration lines, alongside increased stress on sovereign and quasi-sovereign obligors.
A central theme in Peak Re’s analysis is the uneven impact across regions, with Asia identified as particularly exposed due to its reliance on Middle Eastern energy flows. The reinsurer notes that around 84% of crude and 83% of LNG passing through the Strait of Hormuz is destined for Asian markets, with China, India, Japan and South Korea accounting for the majority of flows.
However, Peak Re differentiates between economies. China is seen as relatively resilient due to diversified supply sources and substantial strategic reserves, while Japan and South Korea benefit from large stockpiles and policy measures such as fuel price caps. India faces more moderate exposure but could see pressure on its current account and currency in a prolonged high-price environment.
By contrast, Peak Re identifies economies such as Pakistan and the Philippines as more vulnerable, citing high import dependence, limited reserves and greater sensitivity of domestic inflation to global energy prices. In these markets, the reinsurer warns that sustained price increases could lead to inflation surges, currency pressure and weakening public sector balance sheets, with clear implications for sovereign and credit risk.
For Europe, including the UK, Peak Re expects the impact to be less severe than the 2022 energy shock, though still material, with higher inflation and weaker growth likely under sustained price increases. The US, as a net energy exporter, is seen as less sensitive overall, although higher global prices still affect domestic fuel costs and consumer spending.
Overall, Peak Re’s assessment underscores that the Iran conflict represents a multi-layered risk event for re/insurers, driven less by direct losses and more by its cascading economic effects.
The reinsurer concludes that the situation highlights the need for closer integration of energy and geopolitical risk into underwriting, pricing and capital allocation, alongside enhanced monitoring of supply chains and credit exposures as the global economy adjusts to the shock.
