If Australia had wanted early warning of disruption in the Strait of Hormuz that began last month, it needed only to have monitored maritime war-risk insurance premiums. These rose sharply well before physical interruption of shipping occurred.
Another telling indicator was the price of nitrogen fertiliser, which began climbing weeks before supply constraints became visible in trade flows.
These signals illustrate how markets do not merely react to crises; they anticipate them. If systematically monitored, such indicators could give policymakers actionable lead times in which to prepare. They could pre-position fuel stocks, secure alternative supply contracts and activate contingency planning – all before disruptions cascade through energy, agriculture and logistics systems.
This points to a clear policy gap. Australia’s current resilience framework relies heavily on static stockpiles and lagging indicators. It lacks a mechanism for continuous, forward-looking risk detection. The country needs an early warning system that integrates real-time data on shipping insurance, commodity prices and freight flows. This would function as a live dashboard of systemic stress, enabling faster and more informed decision-making in periods of geopolitical volatility.
According to market reporting and broker estimates, pre-crisis premiums of 0.1 to 0.3 percent of vessel value rose to 1 to 2 percent or more per voyage immediately following the escalation, with smaller increases already visible in the days leading up to it. This abnormal rise shows that markets saw the risk as real and urgent, while governments were slow to recognise it.
War-risk insurance is one of the best ways to anticipate changes in global trade flows. Underwriters don’t wait for proof; they set prices based on what they think might happen. When premiums rise quickly, it’s a sign that many experts anticipate pressure on the system, based on politics, shipping data and risk.
Things change quickly. As premiums go up, sailing through risky areas becomes too expensive. Shipowners delay or change their routes, insurers limit coverage and shipping capacity shrinks before there is any official blockade or restriction. By the time governments respond, the market has already moved.
This is an established trend with a rarely challenged order of events. Markets anticipate disruption and price in risk, followed by physical problems such as shipping restrictions, and policy comes last. Government focus is still on stockpiles and diversification, which are necessary but reactionary steps. The Australian government’s Minimum Stockholding Obligation assumes shocks will occur but doesn’t help spot them early. It must address this gap with a digital early warning system. The Minimum Stockholding Obligation is an Australian policy that requires fuel importers to hold minimum reserves of petrol, diesel and jet fuel to buffer supply disruptions, but it is designed for resilience, not early warning.
An early warning system would help Australia save money and stay in control over supply choices. Without it, a government responds slowly and ends up competing for supplies in markets that are already stressed. This pushes prices even higher and limits its choices.
Once early changes are detected, the government can take the following proactive steps:
—Look for alternative sources of oil or key goods from unaffected regions, such as the United States or Southeast Asia, before global prices rise significantly;
—Team up with industry to warn local fuel distributors and logistics companies so they can increase their stockpiles; and
—Manage public expectations and prevent panic buying by sharing early updates on potential price hikes or the need to conserve fuel.
The information needed to act early is already available; it just needs to be collated. Maritime insurance markets give real-time updates on geopolitical risks. When premiums go up in key locations such as the Strait of Hormuz, it’s a sign that trouble is likely. If these higher rates persist, it’s an early warning sign that supply chains will tighten.
Currently, officials rely mainly on slower channels, such as diplomacy, intelligence reports and interagency meetings. With constant shocks and fragile supply chains, this delay is now critical. Australia doesn’t need more data; it just needs to make better use of what it and indeed every other country already has.
Setting up an early warning system to track maritime insurance premiums would be straightforward. Policymakers can spot problems early by watching how premiums change on important routes. They can then act in advance, securing other supplies, changing how they buy and activating backup plans before the situation worsens. While this system wouldn’t eliminate all uncertainty, it would help the government to respond sooner rather than just react.
Canberra must act now and use early market signals to make decisions, to avoid falling behind in the next crisis. It must listen to the warning and lead, not follow.