Why Surging Commodity Prices Demand a Rethink of Business Interruption Coverage
When the commodity prices driving a business’s revenue shift as sharply as they have in early 2026, the assumptions built into an organisations insurance programme can quickly fall behind. This piece looks at what that means and where the gaps tend to appear.
As of early March 2026, oil prices have soared. Although prices have sharply risen and then fallen back several times in response to the rapidly shifting nature of events, projections suggest a real potential surge to USD 150 a barrel. Global oil benchmarks have seen their strongest weekly uptick since 2020, and global natural gas prices have also risen sharply, extending their biggest gains since the energy crisis of 2022. With energy infrastructure in the GCC now also being subject to a (growing) number of attacks, and the near closure of the Strait of Hormuz, businesses of all types face uncertainties and interruptions.
For any business whose revenue is connected to commodity markets, or indeed that is reliant on imports that travel through the Strait, these shifts raise a question that goes beyond market commentary: Does the cover sitting behind the business still match the income it is actually generating? Where declared values were set in a lower price environment, the answer increasingly is no.
What business interruption cover is designed to do
Business interruption cover is designed to cover losses of revenue or profit that a business experiences during periods where it cannot carry out its usual activities due to a covered event such as a fire, explosion, or natural catastrophe. The cover should protect the business until it has fully recovered. In simple terms, it aims to put the business back into the position it would have been in without the event occurring.
The level of cover generally depends upon the profits that have been lost – a figure reached based on a company’s historical output and orders; fixed costs such as rent, salaries, and debt payments; and temporary relocation. Cover might also include other additional costs, such as the need to relocate production or operations, and costs to expedite recovery, such as rush orders for replacement machinery or outsourcing production. Training costs may also be included if staff need to be retrained to work on new systems or equipment.
Some policies can also include cover for losses at suppliers or customers sites, sometimes referred to in the market as contingent business interruption. This cover can be important for businesses relying on key suppliers, third-party processing facilities, vendors or customers.
Why declared values are under scrutiny
If we look at one sector as an example - the current commercial property insurance market - underwriters are scrutinising how businesses have calculated their business interruption values. Insurers also include volatility clauses, with an annual and monthly cap on what can be recovered under a business interruption claim. Typically, these are in the range of 110% - 120% of declared annual values. The problem is – and what is happening now with soaring commodity prices (because of the geopolitical situation) - a hard cap based on lower commodity prices can potentially fall short of actual values, leaving a very real hole in a company’s recovery if a claim arises.
Companies involved in the production and distribution of oil and gas, alongside organisations operating across energy and power, heavy industry and manufacturing, as well as aviation, logistics and shipping, construction and infrastructure, and retail and FMCG, are therefore well‑advised to review the business interruption wording in their policies to ensure coverage remains aligned with the current commodity price environment.
Reviewing the recovery period
In addition to reviewing commodity price assumptions, businesses are also advised to review how long they are likely to need to fully recover. This (known in the market as indemnity periods) is selected at the time the cover is arranged, but when exceptional circumstances arise - such as conflict - indemnity periods may need to be extended.
Right now, indemnity periods are highly likely to be a matter of concern, given the supply chain disruptions at critical chokepoints like the Strait of Hormuz, which have caused a decline in shipping traffic, raising the risk of delays and supply shortages. Delays in the shipment of critical equipment required in the event of a rebuild will likely extend how long it takes for a business to resume normal operations.
Business interruption values must, therefore, be increased accordingly if a recovery period greater than 12 months is selected. The period may have to consider a range of new recovery needs – such as site clearance, design and planning applications, rebuild time, replacement of plant and machinery, sourcing stock and rebuilding the customer and supplier base.
One of the most misunderstood aspects of setting suitable recovery periods is that they must also indicate the timescale a business anticipates will be necessary for it to return to its pre-loss production level. Importantly, they must also reflect and build provision for potential delays. Even after the property has been reinstated, it can take an extended period for a business to integrate new equipment, train new staff, or win back lost customers. For businesses in the GCC that are operating under today’s geopolitical circumstances, these issues are now becoming a critical consideration – indeed a necessity.
Bringing in specialist support
Specialist support is a crucial part of this journey within the context of the current situation. The range of potential interruptions in terms of complexity, scale and nature of interruptions means that firms will need guidance on how to navigate such an unusually unpredictable set of events.
Working with risk and insurance specialists can make a real difference here. They can stress-test your business interruption values and help you to understand what a recovery might look like under certain circumstances, and advise on how long repairs would realistically take, whether production could move to an undamaged site, or whether alternative shipping routes could keep goods flowing while you rebuild. The goal is straightforward: making sure your cover reflects what it would genuinely cost to get your property, equipment, and revenue back to where they were before a loss.