U.S.-Iran war ‘tax’ begins to hit American businesses and consumers

Iran war risk: U.S. businesses pay 30% surcharge on shipping as Trump keeps navy in Gulf

Muhammad Asghar | GlobalBeat

American companies are shelling out a 30% premium to move freight through the Persian Gulf as insurers price in the odds of U.S. strikes on Iran.

The surcharge, quietly added to invoices this week, covers war risk insurance that underwriters raised after President Donald Trump ordered the USS Abraham Lincoln carrier group to stay in waters south of Tehran indefinitely and sent four B-2 bombers to Diego Garcia, according to executives and commodity traders contacted by GlobalBeat.

Shipping firms pass the extra cost – roughly $550 on every 40-foot container that leaves U.S. ports for Gulf destinations – straight to importers of everything from Saudi crude to Qatari plastics. Retailers warn the levy will reach store shelves within a month, pushing inflation back above 3% at a moment when Federal Reserve chair Jerome Powell has signaled he wants to cut rates.

“It’s a war tax without a war,” said Doug McMillon, CEO of Walmart, America’s largest importer by container volume, on an earnings call Tuesday. He told analysts the chain has already paid $12 million in surcharges since March 28 and will raise prices on electronics, toys and clothing if the premiums hold.

The numbers are starker for energy. Brent crude jumped $4.60 to $82.40 a barrel after Trump posted on Truth Social that Iran “will pay a big price” for accelerating uranium enrichment to 84%, close to weapons grade. Each $1 increase at the pump costs U.S. drivers $1.2 billion a year, according to AAA.

Insurance markets moved first. The London-based International Group of P&I Clubs, which covers 90% of global tanker fleets, raised its additional war risk premium for Gulf transits to 0.25% of cargo value from 0.05% last week. On a single $50 million cargo of gasoline, that equals $125,000.

Maersk, the world’s second-largest container line, informed customers overnight that it will apply an “Iran risk contingency fee” of $275 per twenty-foot equivalent unit on all Gulf routes effective April 7. Mediterranean Shipping Co. matched the increase within hours. Together the two firms control one in three containers that enter or leave the United States.

Small importers feel the squeeze first. Cindy Li, who ships dates from Bahrain to organic stores in California, said her freight forwarder demanded an extra $4,400 before her container would be loaded Sunday. “That wipes out my margin,” Li said by phone from Manama. “Either I cancel the order or I raise shelf prices 18%.”

White House officials reject the label “war tax.” National security spokesman Brian Hughes told reporters Tuesday that insurers are reacting to “market speculation, not policy.” He added: “The president’s priority is preventing a nuclear Iran, not imposing costs on Americans.”

Yet Pentagon planners briefed Congress on Monday that military options ranging from strikes on Iranian navy bases to cyber attacks on nuclear facilities have been updated since Trump returned to office. Senator Jack Reed, the Democrat who chairs the armed services committee, said after the closed session that “every scenario ends with higher fuel prices.”

European allies, still parties to the 2015 nuclear accord that Trump quit in 2018, urged restraint. “We are talking about an economic chain reaction,” EU foreign policy chief Kaja Kallas said in Brussels. European ships account for 40% of Gulf traffic and insurers based in London, Paris and Hamburg set global rates.

Inside Iran, the rial plunged to 690,000 against the dollar on the blackboard market in Tehran, a record low that makes imported food and medicine even scarcer. Importers of Iranian pistachios and carpets to the United States face the mirror-image problem: U.S. banks now demand a 20% cash deposit to process letters of credit for any Iranian-origin cargo allowed under existing sanctions.

Consumer-facing brands are starting to warn investors. Best Buy told shareholders Tuesday that “geopolitical premiums in the electronics supply chain” could trim first-quarter gross margin by 80 basis points. Apple, which flies iPhones from Indian factories through Dubai to the United States, has rerouted some cargo to longer European corridors, adding 18 hours of flight time and roughly $1 million per charter.

Farm states that backed Trump in November are not immune. The U.S. Agriculture Department calculates that 62% of American wheat exports transit the Strait of Hormuz on their way to Asian buyers. A 30-day closure – the Pentagon’s worst-case scenario studied in 2019 – would drop farm-gate prices by $1.40 a bushel, wiping $3.4 billion off farmer income, according to USDA modeling shared with GlobalBeat.

Some executives want clarity. Jay Timmons, CEO of the National Association of Manufacturers, met Trump at Mar-a-Lago last weekend and asked for a public statement that naval escorts will keep commercial lanes open. He left without reassurance. “The uncertainty is as costly as any tariff,” Timmons told members in an email seen by GlobalBeat.

Congressional sources say the administration is considering a rarely-used program that reimburses U.S.-flagged ships for war risk premiums during declared national emergencies. But that would require legislation and cover only 80 vessels, a sliver of the 2,800 that called at Gulf ports last year.

Shipping analysts predict premiums will rise further if Iran follows through on threats to install advanced centrifuges at the Fordow bunker. “Every escalation adds basis points,” said Rahul Kapoor of maritime consultancy Drewry. “By summer we could be looking at 1% of cargo value, levels last seen during the 2003 Iraq invasion.”

Sectors that thrived on prior Gulf tensions are gearing up. U.S. defense shares outperformed the S&P 500 by 9% in March. Raytheon, which builds Tomahawk cruise missiles used in 2020 strikes on Iraq, told analysts last week it has accelerated production at its Tucson plant but needs fresh orders to keep lines hot.

Trump faces a timing crunch. The Treasury Department’s Office of Foreign Assets Control has 60 days to decide whether to tighten the embargo on Iranian oil sales to China, a move traders say could send crude toward $100. At that price, Goldman Sachs estimates U.S. gasoline averages $4 a gallon nationwide, the inflationary shock that helped push the 2022 midterms against the party in power.

Background

The United States and Iran have edged close to open conflict before. In June 2019 Trump approved then canceled air strikes after Iran shot down a $130 million Global Hawk drone over the Strait of Hormuz. Months later, a missile barrage Tehran launched against Saudi Aramco facilities briefly knocked out 5% of global oil supply but triggered no direct U.S. retaliation. The two nations settled into a shadow war of sanctions and proxy attacks until the January 2020 drone strike that killed Iranian general Qasem Soleimani in Baghdad. Iran responded by firing ballistic missiles at U.S. troops in Iraq, injuring 110. Since then, diplomacy has stalled and Iran has expanded its nuclear program, shrinking the so-called breakout time to produce enough fissile material for a bomb to weeks, according to the UN atomic watchdog.

Insurance markets treat the Persian Gulf as a perennial high-risk zone, but premiums have see-sawed with diplomacy. After the 2015 nuclear deal took effect, rates fell to near zero. When Trump reimposed sanctions in 2018, they jumped back to 0.1% of cargo value, then slipped again as tensions cooled. The current 0.25% level is the highest since the 2008-09 tanker wars between Iran and the West, when Lloyd’s of London listed the Strait of Hormuz as a listed war zone and U.S. naval escorts shepherded Kuwaiti tankers reflagged under the Stars and Stripes.

What’s Next

Iran’s parliament is set to vote Sunday on a bill that would bar UN inspectors from surprise visits to nuclear sites if European powers trigger a sanctions snapback mechanism. U.S. officials say passage would cross a “red line” and prompt an accelerated military buildup. Meanwhile, the Lincoln carrier group is scheduled to rotate out in May; defense sources say Trump may extend its deployment rather than send a replacement, keeping roughly 5,000 sailors within strike range of Iran for an unprecedented 10-month stretch and likely prolonging the shipping surcharge until at least the third quarter.