What Happened
- Indian shipping companies have approached the central government seeking support for ensuring safe passage of their vessels through the Strait of Hormuz, as escalating conflict makes the transit increasingly dangerous.
- Tanker traffic through the Strait of Hormuz dropped by approximately 70% following US-Israel strikes on Iran in late February 2026, with over 150 ships anchored outside the strait awaiting security clarity.
- Major global shipping firms, including Maersk, have suspended vessel transits through the strait, leaving Indian-flag and Indian-operated vessels in a difficult commercial and safety position.
- War-risk insurance premiums for Hormuz-transiting vessels are rising sharply — by as much as 50% — significantly eroding the commercial viability of Gulf voyages.
- Indian crew members constitute a large share of seafarers on Hormuz-transiting vessels globally, raising concerns about crew safety and maritime labour rights.
Static Topic Bridges
India's Maritime Trade Dependence and Shipping Policy
India is among the most trade-dependent maritime economies in the world. According to UNCTAD, approximately 95% of India's international trade by volume is carried by sea. India is the world's third-largest oil importer, relying almost entirely on seaborne imports. Yet India's domestic merchant shipping fleet is relatively modest compared to major maritime nations. The Merchant Shipping Act, 2025 — which replaced the 1958 Act — aims to revitalise the Indian shipping sector, increase tonnage under the Indian flag, and reduce India's dependence on foreign-flag vessels for its own trade.
- India's seaborne trade dependence: ~95% of international trade by volume
- Merchant Shipping Act, 2025: replaces the Merchant Shipping Act, 1958
- Key objective: increase Indian-flag tonnage, reduce foreign-exchange outflows on shipping
- Regulatory authority: Directorate General of Shipping (DG Shipping), under Ministry of Ports, Shipping and Waterways
- India ranks among top nationalities of seafarers globally — Indian crew form a significant share of global merchant navy
Connection to this news: India's heavy reliance on foreign-flag vessels for its own trade means disruptions to global shipping — whether through Hormuz or elsewhere — directly threaten India's supply chains even when the primary dispute does not involve India bilaterally.
Cabotage Policy and Coastal Trade Regulation
Cabotage refers to the exclusive right of a country's own vessels to carry cargo between its domestic ports. India's cabotage rules have historically reserved coastal trade for Indian-flag vessels under the Merchant Shipping Act. In May 2018, India relaxed cabotage restrictions to promote transshipment and allow foreign vessels to participate in coastal trade — aimed at making Indian ports competitive and boosting the Sagarmala project (port-led development). The Merchant Shipping Act, 2025 revisits these provisions, seeking a balance between encouraging Indian-flag vessels and maintaining port competitiveness.
- Cabotage: reserving coastal trade for national-flag vessels
- India's pre-2018 policy: strict cabotage — only Indian-flag vessels in coastal trade
- 2018 relaxation: foreign vessels permitted in India's coastal trade to boost transshipment
- Merchant Shipping Act, 2025: new framework for maritime governance, replaces 1958 Act
- Sagarmala project: port-led development initiative — port modernisation, new ports, coastal economic zones
Connection to this news: The Hormuz crisis underscores India's structural dependence on foreign-flag vessels for its international trade, which is precisely the vulnerability that cabotage policy reforms and the Merchant Shipping Act, 2025 seek to address over the long term.
War-Risk Insurance and Shipping Economics
Marine insurance for international shipping is governed by the Marine Insurance Act and commercial insurance markets centred in London (Lloyd's of London). Standard marine cargo policies exclude war and conflict risk. For vessels transiting conflict zones, separate war-risk insurance must be obtained, typically priced as a daily rate based on hull value and route risk. When war-risk premiums spike — as they do when military conflict affects critical chokepoints — shipping costs rise sharply for all cargoes transiting those routes. This cost increase passes through to the final price of oil, food, and manufactured goods imported or exported via those routes.
- Marine insurance framework: Marine Insurance Act (India, 1963) for Indian vessels
- Lloyd's of London: global hub for war-risk insurance pricing
- War-risk cover: separate from standard hull and cargo policies; rates set daily
- Hormuz war-risk premium spike: shipping costs rising up to 50% for Hormuz-transiting vessels (early March 2026)
- Maersk: suspended Hormuz transits — a signal of severe risk assessment by major operators
- Indian Navy patrols: India has deployed naval assets in the Arabian Sea and Gulf of Aden region for anti-piracy missions since 2008 (Operation Sankalp context)
Connection to this news: Indian shipowners' request for government support reflects the reality that private insurers are withdrawing coverage or pricing it prohibitively — only state-level diplomatic and security measures can reopen viable commercial transit options.
Key Facts & Data
- Hormuz tanker traffic drop: ~70% (early March 2026); ~150+ ships anchored outside
- War-risk insurance premium increase for Hormuz routes: up to 50%
- India's trade dependence on sea: ~95% of international trade by volume
- Indian seafarers: a major nationality in global merchant navy
- Merchant Shipping Act, 2025: replaced Merchant Shipping Act, 1958
- Regulatory authority: DG Shipping under Ministry of Ports, Shipping and Waterways
- Strait of Hormuz width: ~33 km at narrowest; ~20 million bpd transit (2024)
- India's SPR coverage: ~9.5 days of consumption
- Indian Navy Operation Sankalp: deployed in Persian Gulf for tanker escort (prior precedent, 2019)