Odd Lots - Lots More on the Seaborne Chaos Around the Strait of Hormuz

Episode Date: March 6, 2026

With war breaking out in Iran, the price of oil is surging, in part due to the destruction of oil energy infrastructure, but also the ability of anything to get through the Strait of Hormuz. But it’s not just oil that moves through this key waterway — there are plenty of other goods, including metals and ingredients for fertilizer getting potentially constrained. It’s also not just the risk of violence itself that’s an issue for shipping companies, there’s also the question of how cargoes get insured. On this episode of the podcast, we speak with return guests Anton Posner and Margo Brock, co-founders of the Mercury Group, which helps dry bunk clients solve issues related to logistics, transportation and insurance. They discuss what’s actually happening on the ground, surging insurance rates, and how shippers and carriers are dealing with the chaos. Subscribe to the Odd Lots NewsletterJoin the conversation: discord.gg/oddlotsSee omnystudio.com/listener for privacy information.

Thanks for listening to OddLots. Follow the show on Amazon Music for more future episodes or just ask Alexa, play the podcast, All Thoughts on Amazon Music. There's a little bit of debate over Anton's own naval experience, but we can get into that. Anton, you have some naval experience sort of. Are you teeing it up for Margo to make fun of me now because I was just a reservist? So I fully embrace the fact that I do not have grand military experience. Okay. I served. I was in the reserves. I put on the uniform. I wish you could still fit.

I heard you played a lot of tennis. I played tennis and rode to Spain, you know, on a NATO exercise. I'll have, you know, Tracy. It was a NATO military exercise, and I don't think I was that. Your exercise was tennis. For your exercise, today, you play tennis. By the way, I'd like to say that, Harz de la Frontera was fantastic for wine and sherry. So, you know.

Joe, I want a T-shirt that says ruthless utility. maximizer. Black gold. Let's talk about losers. Who care? I've decided I'm going to base my entire personality going forward on campaigning for a strategic pork reserve in the U.S. Skulls Unlimited.

Ooh, what's the ticker for that? No, I think that like in a couple of years, the AI will do a really good job of making the Outlots podcast. How do I get more popular and successful? One day that person will have the mandate of heaven. We do have the perfect guest. You're listening to Lots More, where we catch up with friends. about what's going on right now.

Because even when the odd lots is over, there's always lots more. And we really do have the perfect guest. I feel a little bit stupid. Go on. But on Monday, obviously the war... Wait, you're just now for the first time? No, I'm just kidding. Thanks, Joe. Thank you.

Obviously, the war with Iran happened on the weekend and is still happening. And on Monday, I woke up and I was thinking about energy markets and, you know, geopolitics in the Middle East. And I was trying to think of someone who would be really good to talk about shipping. And I'm embarrassed to say it took me a full 24 hours to remember that we actually have marine chaos experts basically on speed dial at the moment. Well, it's perfect because we are experiencing marine chaos, obviously. We're recording this March 4th. Yesterday, Trump posted on Truth Social talking about the U.S. actually playing a role as sort of an insurer of last resort.

Because one of the things that we've been seeing is like setting aside the sort of logistical ability to get goods out of the region, get whatever out of the region. There's obviously the question of can you get insurance and we know that, you know, prices are soaring, etc. You know, insurance costs getting too high could end trade flows regardless of the actual logistics on the ground and sort. Well, not just insurance premium is getting too high, but insurance being pulled all together. Just getting pulled all together. That's right. So they, you know, they are their own entity. that's sort of like separate from national, you know, there's nations and then there's insurers and they have quite a bit of say over what moves and when and where. Well, all of this just confirms my long-running suspicion, as you know, that insurers actually control the world in a very underappreciated way.

We should talk to, we need to insert like a sound effect here. Speed dial are marine chaos experts. They are, of course, Margot Brock and Anton Posner. They're the founders of Mercury Group, which specializes in dry cargo. and global freight logistics. So really the perfect people to talk to about this moment. Let's just talk about what you're seeing right now with the straight of Hormuz. You have a lot of clients who I assume have some presence there.

Again, you guys sort of specialize in dry bulk, dry cargo, but you have a good handle on what's going on. What are you seeing and witnessing and living through at the moment? Sure. Yeah, it's always great for us to be on during Marine Chaos time. As I mentioned to Tracy yesterday, I think that's going to be new business cards from Margo and I was a green chaos expert. So in addition, certainly they kick things off, right, in addition to everyone knows, oil and gas are flowing through Strait of Hormuz in Persian Gulf, which is the, always the headline commodity sector that everyone talks about in the region. You also have things like outbound fertilizers coming out of the region. You have outbound aluminum being produced by Emirates Global Aluminum and Qatalum and Alba, aluminum of Bahrain. You have inbound raw materials for the aluminum production. Luminah that goes into aluminum production, you know, that needs to flow in. You have containerized goods, right? You have inbound grains going into the Persian Gulf. So there's a lot more

than just oil and gas that's affected when there's a problem in the region. Right now, we're seeing our world that's heavy on metals, of course, is being affected by the inability for Gulf aluminum producers to be able to ship aluminum out and moving out of the Gulf. So that's already created a spike in global aluminum. markets and there's a shift at the moment going on. I think Everett's Global Aluminum was the one that said they're going to start fulfilling orders with aluminum stockpiles that they have in other parts of the world. So we're starting to see an effect on the markets that we're involved. And of course, overall, diesel in the United States jumped significantly over the past couple of days. So we're going to see

that trickle-down effect coming into the world of our inland logistics in North America, barge freight on the river system, truck freight, rail freight, where we're going to start seeing potentially start seeing fuel surcharge clauses kick into effect as diesel starts to move up. And then so talk to us about the insurance components because there's the obvious, yeah, there's the sort of reality of moving goods. And then there's the question of can you get these shipments insured? Well, can I just say, I don't understand insurance where like you have a war risk insurance policy. And then something happens. And the insurers are like, actually, we're going cancel all the war risk insurance. Yeah, explain how this market works. Yeah. Well, war risk is an

interesting component of your policy because depending upon where the policy is written and what the custom is, if it's a London policy, a U.S. policy, you'll have different terms within your policy, but they all come with a short cancellation notice period on specifically the war risk component. And that cancellation term can be anywhere from, say, two to seven days. I've heard depending upon whether it's written on London or a U.S. policy or so forth. And that's what's happened. Everyone put out the notice immediately upon the war. And now this week is when all those cancellation dates are hitting.

So after that cancellation date, you can re-buy war risk. But now you're going to buy at a significantly increased date. premium. So what I'm being told is the current market is that where traditionally your premium, which is assessed on the value, the declared value of your goods, that's what we're insuring against. So your policy in total, inclusive of your war risk, may be, might be something around 0.0055% of value. Now to carve out just the add-on for war risk, they're seeing offers coming anywhere from 0.5 to 1.5%. So this is a 10x to 30x increase in that premium. Yeah. So that's if you choose to have war risk. And then that will push back into the rest of the conversation that says

what ships are actually transiting in war risk areas at this point. because we're seeing the pivot. We're seeing and we're seeing that that market dropping off very steeply right now. Well, what types of goods would continue to flow logically or economically at these new levels? What is the pivot? Yeah. Joe, I think a good answer to that question right up to that is, let's take the cargoes that have no choice. Okay. One of our ocean freight team as a client and a ship currently loading in Saudi Arabia in the Gulf,

loading dry bullet cargo, the ship's in port. It's loading the ships P&I Club, the insurance group that ensures the ship has issued the notification of the cancellation. The ships, the ship side insurance, right? You've got two sides. You have the cargo insurance, Margo was talking about in some detail. And then there's also the insurance on the ship. So that ship is loading. It's received the notice that their existing war risk coverage under their ship's P&I protection and indemnity policy has been canceled.

they're going to need to renew it. The ship has to continue loading, has to eventually sail at some point, right, when she will, who knows. But there's no choice but to re-up under the higher insurance premium. That ship is already in the Gulf. It's already loaded cargo. So you have the cargo, the cargo interest, the shipper, who owns the dry-bolt goods aboard the ship, going to need to have all-risk cargo insurance on their cargo. And then the ship owner also needs to renew. their P&I policy covering the ship, and there's no choice. Ships there. So now it's going to be, I think one of the terms when it's catching up with our ocean freight team earlier is a slug fest of who's going to pay. Margot and I, an old professor at New York Maritime College of Maritime Law and Insurance with Jeffrey Weiss would have always said, everything we're going to talk about this semester falls up in the category of who pays, right?

Who's responsible to pay? Professor Weiss was famous for that. that who pays, phrase, and it comes into play exactly these situations. So just on this point, can I ask you to explain very simply, I guess, the ecosystem of insurance and shipping and this idea that, you know, you hear about things like the club insurers and then you have the reinsurers. And there seem to be all these different layers. There's the insurer for the cargo. There's the insurer for the ship as you laid out. And then there's this question of who's actually going to pay it because you have, I guess, a chance.

chain that exists between, you know, the charterers, the ship owners, the end buyers of the cargo. Can you just lay that out kind of very simply for us? Yeah. And of course, we're freight people, not insurance experts, and all going well without mentioning names and working on connecting. Tracy and I discussed yesterday working on connecting somebody very key at one of the world leading P&I clubs to potentially come on. You've said it in public, so the pressure is on.

Oh, yeah. Notice I'm not mentioning a gender or a name or anything that gives away anything other than that. So we'll see. Fingers crossed. Exactly. You've already gendered the ships. Sorry, it's a tangent. I was just reading something about how, you know, the English doesn't have gendered now with the exception of ships.

Anyway, sorry, keep going. Yeah, exactly. So, yeah, to break it down very simply, right? The ship owner carries protection and indemnity insurance, hull insurance, those policies that cover the ship and its engines and so forth, all of the physical attributes of the vessel and so forth. That's what the ship owner carries on it. Now, in a contract of carriage, whether it's a charter party or a bill of lading, a liner bill of lading, that has a limitation of liability to the cargo owner in that contract of carriage. carriage. The U.S. law is covered by the Carriage of Goods by Seas Act, Cogsa, which typically carries a $500 per package or per ton limitation of liability. So the ship owner is only liable

to a certain extent of value of the goods that the shipper is carrying on the ship. Now we flip over to the cargo owner side and the cargo owner, knowing that the ship owner only has a certain limitation of liability, the cargo owner will go out. out with the right guidance, we'll get all risks cargo insurance. And that's to provide them the coverage for the value of the goods that they're carrying on board the ship over and above whatever the ship owner's limitation of liability. When there's a casualty and a loss as a cargo owner, you want to be able to collect from your all risk cargo insurance policy and let them fight it out with the shipowner, not be stuck in arbitration in London.

or in Singapore or New York fighting it out later on. And then there's another type of insurance, too, when you're chartering a ship as a cargo interest, you get charterer's liability insurance is pretty common, and that covers the shipper or the cargo interest from other liability elements. Let's say the ship has a casualty and people are killed or hurt. There's going to be lawsuits filed against everyone involved in the ship

And charter's liability insurance covers the charter, the cargo atris liability as it relates to in other damages or if the ship is damaged by their stevedores loading the ship or discharging the ship. So other things that can come into play there too. So I don't know, tried to lay it out as kind of clear as possible. But I know it's convoluted. Yeah, there's a lot of moving parts. Canadian women are looking for more. More to themselves, their businesses, their elected leaders, and the world are out of them. And that's why we're thrilled to introduce the Honest Talk podcast.

I'm Jennifer Stewart. And I'm Catherine Clark. And in this podcast, we interview Canada's most inspiring women. Entrepreneurs, artists, athletes, politicians, and newsmakers, all at different stages of their journey. So if you're looking to connect, then we hope you'll join us. Listen to the Honest Talk podcast on IHart Radio or wherever you listen to your podcasts. Talk to us about the announcement from Trump that the U.S. could get involved and be some sort of play an insurance role here. What can that do? And is that novel? Is that, have, is there any

precedent for anything like that? Yeah, this, you know, this news just, you know, came out. The president will often say things that then need to be implemented by the bureaucrats, right? So the mechanics of it are always complicated. There's precedent for U.S. government agencies providing insurance. The export import bank, for example, offers trade credit insurance. Like, let's take that, for As for protection indemnity, P&I insurance on ships, I'm sure, although I don't have any specific instances, but I'm sure there's been precedent for that in history. So I don't think that that's too much of a stretch for the government to necessarily come in and offer some kind of safety net for ships to be able to get P&I insurance.

What may be more complicated is maybe having U.S. Navy or Coast Guard escorting ships through the Strait of Hormuz. that's not an easy task. That was done, I think what was in the 1980s when we reflagged tankers, put American flags on them to protect them from the Iran-Iraq War. At the time, we had Navy ships escorting ships through the Strait-Oarmuz, but that is an expensive proposition. It's not perfect, right? Missiles and attacks can get through. You're putting U.S. Navy ships, you're taking them out of circulation and out of deployment for other purposes, and you're putting them very much.

much in arms way. That approach to the Strait of Hormuz, navigationally speaking, is delicate to say the least, and it can be very exposing. What's it like actually sailing through the straight? I have not sailed to the straight. Margot has it either, right? Both of us were, both of us stayed a lot to shoreside after. I sailed through the Panama Canal on a Navy tanker, which was, which really was a fun topic with Tom Keene and Paul Sweeney one morning when it looked like we were going to take over Panama the day before. Oh, yeah, of course.

Well, okay, actually, this reminds me, just setting aside the insurance component, do people want to be moving stuff through the strait of Hormuz at the moment? I imagine if you're captaining or crewing a ship. I would love to captain a ship, by the way, but you wouldn't want to be in the straight at the moment, right? There are human considerations beyond just how am I going to get compensation for the cargo or a lost vessel. Obviously, it's a logistical nightmare to get through there. Safety is concerned, personnel. This morning, a small container vessel, I think it was 1800 TEU's 20-foot units, was hit with,

they're saying, an unknown projectile, hit it above the water line, put the engine room on fire. They just abandoned ship. They pulled the whole crew off and abandoned ship. I mean, you don't even stay there to fight the fire. You just get out of there. So yeah, people don't want to to be there. And if you are on the liquid side, petroleum's, crude, you have a harder time avoiding going through that region because of what it is, right? That's the source of a lot of our global oil. But other commodities dry in large part, we can avoid it. So to Anton's comments, the aluminum sector has in large part shifted, deviated from that area for now, but But in addition, ships are navigating away.

And it means a longer transit time, which means a more costly voyage, so it's less desirable. It does increase freight rates. But it's safer. Your goods are safer. And when you start adding on these new war risk premiums, if you're going to take them, I'd venture to guess it's still cheaper to take the long way around now. So it's the kind of thing, for certain liquids, there's no choice. Like, it has to flow through there.

It sounds like for some of these other things, aluminum otherwise, for now, either there's going to be some long route or it's just that is not going to be a source. If we're talking about aluminum, there would just be less aluminum in the world or some existing source of aluminum will ramp up their production. Right. Like take Emirates Global Aluminum, for example, Joe, that the United Arab Emirates have the luxury of having ports and the ability to potentially load ships on the Gulf of Oman side out. outside of the Virgin Gulf, right? So as Margo said, longer route, potentially, not ideal. This is not where they typically load. One thing I haven't looked at is Emirates Global Aluminum shifting some of that aluminum loading

to ports on the Gulf of Oman. We're going to take a look at that. But I wanted to say, you know, and Tracy's question about what a cruise, you know, captainship thinking on this too. I'm going to take you back, Tracy, to a way to answer your question. Imagine two crazy people came up with a scheme to load a teddy bear in a container. and then you're heading to the Persian Gulf. Do you want to risk your life as a ship's crew,

like for somebody's teddy bear, you know, stuck in the middle of a 20-foot container or you're getting off the ship and saying, yeah, I'm not risking my life for that, right? I was going to say, as a side note, though, to that alternate plan on the Gulf of Oman, I was reading that they're reporting missiles and drones in the Gulf of Oman as well.

So in addition to the Straits of Pardloos. I find, by the way, listeners, it's helpful to up a map during some of these conversations. Because, yes, you can see very clearly, Oman has the benefit by and large. I don't know exactly where the ports are on its coast. But, yes, the straight of Hormuz is less of an issue for them, whereas for the UAE, they're right in it. Yeah, unless the Houthis start up again, right?

So the Houthis have been an interesting one. And Morghoy and I were just talking about this ahead of the coming on. The Houthis have put the threat out there that they're going to restart the attacks in the Red Sea and off the coast. of Yemen and potentially significantly deter traffic from heading to the Suez Canal, but they haven't started any attack yet the threats out there. Already you see container ships, container lines, diverting ships to the Cape of Good Hope to round southern tip of Africa to avoid heading into the Red Sea in case the Houthis do start,

start up with the missiles and attacks and boarding ships again. But they've, as of at least 15 minutes ago before we get started this podcast, it's out there is a threat, but the Houthis haven't done anything yet. The threat in it of itself already causes reactions, though, right? Yeah, I remember, I think the big port in Oman is Solala, and I only know this because I visited there once, but like it's pretty close to Yemen, right? Like, I don't think there have been any direct attacks, but certainly relatively close. This reminds me, though, have you seen any early signs of people doing maybe insurance arbitrage? where, you know, like certain flags or certain jurisdictions or entities are willing to run the Hormuz in a way that, I guess, Western companies just aren't at the moment? Or is it too soon for that and too uncertain?

Yeah. I think too soon for that, Tracy, not Hormuz, right? We did see on the Hormuz situation of Persian Gulf haven't seen that happening. There's some ships moving through. So it may be happening, maybe with some of the very few ships that are moving through. But it may be a good anecdote to kind of bring up here was when we were dealing with, you know, a year or plus or so ago. When the Houthis were really, really ramping up their attacks, there was a lot of chatter about the fact that Chinese had essentially the Chinese easy pass toll transponder to get past the Houthi. So we're seeing talk at that time of working with Chinese ship operators and Chinese ship owners that were more competitive. because they could still send their ships through the Red Sea and into the Suez Canal, whereas more western-operated vessels that could be tied to countries that were unfriendly to the Houthis had a really target on them, right? So we're seeing some of that arbitrage a bit during the, when the Houthis were at full swing.

Canadian women are looking for more. More to themselves, their businesses, their elected leaders, and the world are out of them. And that's why we're thrilled to introduce the honest talk. I'm Jennifer Stewart and I'm Catherine Clark and in this podcast we interview Canada's most inspiring women entrepreneurs artists athletes politicians and newsmakers all at different stages of their journey so if you're looking to connect then we hope you'll join us listen to the honest talk podcasts and iHeart radio or wherever you listen to your podcasts one of the impressions that I get with when we have incidents such as this is that there's a certain non-linearity or

that like things really compound over time that, you know, one day disruption is one thing, a two day disruption is another thing. But by the time it gets to 10 days or two weeks or a month, then it really is, it gets exponential. Like talk about, talk to us about the risks and how they compound the longer the war goes on or the longer the disruptions are in this particular part of the world. Well, is that the risk to? Yeah, yeah, global supply chain. Is that the The risk of global supply chains for all of this stuff, the longer this goes on. Well, I think we reflect back. We've lived it very recently in a non-war situation in just what we saw during the aftermath of COVID when shipping just, and I think we actually spoke then about this.

Shipping just grew out of control. And we saw all the subsequent delays. and that was really just because of system overuse, congestion, and ultimately, you know, a bit of failure because our system just wasn't big enough for as much as we were trying to ship during that period. That was when we had container ships and cargo ships stacked off the port of L.A., we had clients with steel coming in where they said, you could be on anchor for four to six weeks waiting for your birth. What do you want to do? then you start to have to look at the bottom line of your dollars and cents.

And that's what we're going to see again. Like anything, it just continues to back up, right? So we have cargo on vessels that aren't getting where they need to be. If it does, it's at a significantly increased cost. Going forward, if you want to book your freight, the baseline, the starting cost is going to be, that much higher because of risk, because of increased sailing distances that you have to go. And once you start using up your assets for longer periods of time, supply and demand, now capacity starts to shrink. So it really becomes quite the domino effect. And the longer it goes,

the more out of whack our system gets, the prices go up. And that's where we can talk about the short term is the price of the commodities. And that's where our jumping off point is as we talk about oil, and we're talking about aluminum and fertilizers and cements and all these raw materials or semi-finished goods. But down the line, we all start to feel it as we did in post-COVID, because that effect does start to trickle into our retail as well. This has the potential to be a disruption on the scale of COVID, or like we're talking about that ballpark if this goes on long enough?

I think that's the wild card. How long does it go on for? Yeah. There's going to be winners and losers, right? In addition to the losers, also always winners, too, right? Going back to the Uthi mess, no one was more excited than ship fuel suppliers down in southern Africa, right? With all the ships moving through the area. that needed to refuel in South African ports rather than in ports in the Red Sea and so forth. So supply chains shift and eventually start to set in. Is this going to your question, Joe, right? Is this going to be at the scale of what we saw with COVID? Boy, I hope not. Or even COVID would hit every part of the world, every port in the world had problems and so forth.

So I think it would take quite a bit for it to get to that stage. But we're ready, as I mentioned earlier, right, with the price of diesel fuel in the U.S. jumping, that's already going to start hitting transport of local goods going from distribution centers to the local public supermarket here in Florida. So it's going, it's trickling down already. We're going to start seeing it. So Margo and I are bracing for the fuel surcharges coming up. Yeah. This also reminds me, I think even before recent events, we were starting to see freight rates pick up a little bit. in the U.S. And some people were talking about a potential turn in the cycle. I imagine higher oil prices will, you know, eat into some of the industry's profits. But before this week's events, did it feel like we were starting to see a little bit of a turn? Yeah, we just earlier recently working on 2026 barge, barge contracts for particularly northbound goods like steel

metals that are part of our typical business market was on the front lines on that. And We didn't see much in the wave significant increases, right? What do I think for? Okay. Yeah. No. No. Routine increases.

It was nothing terrible. Yeah. It seems like it's a lot on the trucking. The freight. Yeah. Truck freight has been. Yeah, where things are more volatile, trucking is so, so reactive to the market.

Much more liquid market, right, with thousands of small carriers and owner operators and so forth. And then rail freight, rail freight is the exact opposite of the truck freight market from liquidity to monopolies. Let's not call them monopolies, actually. Right. But we know in trucks that you have a down period and then thousands and thousands of owner operators will come out of the market and go out of business and so supply swings down and up in trucking in a way that would be unimaginable in something like, right. Exactly. For those reasons. Yeah. Yeah. So I know we've, we've said multiple times now that the wild card is really the length and how long this goes on for it. But are there any, I guess, proactive steps that you're taking in your own business to prepare for

further disruption? Good question. Because where we fit into the supply chain is that our clients are the traders. So we're managing their supply chain. What protective actions or course correctors they have in mind really will relate to their trading book, which is going to probably be sourcing in alternate locations as needed if you can't get your commodity out of the Middle East or an affected region. When we dial into domestic logistics here, North American logistics, we will see everything continue to flow. And we don't expect as much a disruption of capacity, the disruption will be prices, but we'll still be moving, moving things. And we will still see truck, rail, barge, and, you know, ocean freight will be more of the swing item here on

what are the lanes where the freight is moving. Joe, did you ever hear about the story of the ships that were stuck in, I think, the Suez Canal for like years and years and years during the Six Day War? No. So the crews that were stuck on the ships, like started their own postal service and built their own little society. But it's a very interesting story. I certainly hope nothing like that happens this time around. Lots more is produced by Dashel Bennett, Carmen Rodriguez, and Calbrooks. Please rate, review, and subscribe to Oddlots and Lotsmore on your favorite podcast platforms.

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