Global insurers had only recently moved past the ESG-driven pressure of the early 2020s when conflict in the Middle East disrupted coverage for upstream oil and gas projects.

The world’s lowest-cost oil and gas-producing region became a war zone at the end of February, sending war-risk premiums higher and leaving oil and gas drilling and construction projects facing either delays or significant cost inflation.

After five months of uncertainty over new oil and gas projects in the Middle East, major insurers have shifted more attention toward underwriting drilling and project-construction ventures outside the prolific but highly volatile region.

That has intensified competition for insurance business in oil and gas basins less exposed to geopolitical flare-ups. Insurers are cutting premiums on upstream energy coverage for projects that do not depend on the intermittently closed Strait of Hormuz or other Middle Eastern chokepoints.

For producers, the shift matters because insurance is embedded in the economics of exploration, drilling, construction, and offshore operations. Coverage costs can affect project budgets and financing requirements, particularly for capital-intensive deepwater developments where operators, lenders, and partners typically require protection against operational, property, liability, and political-risk exposures.

Insurers Compete for Projects Outside the Middle East

Premiums for upstream energy insurance outside the Middle East have fallen by about 25% so far this year, insurance brokers told the Financial Times.

In some cases, insurers have reduced premiums by as much as 50%, even at a short-term loss, according to industry insiders cited by the FT.

The rationale is straightforward: as oil and gas companies increase their exposure to basins and projects outside the Middle East, insurers are competing for market share in a global pool of upstream developments that has shrunk because some assets are now located in an active war zone.

“Upstream [energy] has been a very profitable sector for the market for a number of years,” Rupert Mackenzie, a natural resources insurance broker at WTW, told the FT.

“The view from insurers is, this is a sector which they would like to have ongoing exposure,” Mackenzie added.

Mackenzie’s colleagues at WTW said in an April report, Energy Market Review 2026, that “ratings are ‘through the floor’”.

This year, “15–20% reductions are available for core upstream risks with clean loss histories and substantial premium on the slip, with 40%+ reductions still observed in exceptional cases,” WTW said in its annual report, which was published about a month and a half after the Iran war began.

“The overarching pricing trend is unmistakable: even after a decade of softening, the market is still finding new downward territory,” WTW said.

Mackenzie told the FT that the Iran war and the Middle East’s shift into an active war zone have pushed the world’s largest international oil and gas companies to pursue upstream projects away from the region.

The premium cuts also show how quickly underwriting appetite can move when risk is redistributed rather than removed. Middle Eastern assets still face elevated war-risk pricing, while projects in other regions are benefiting from insurers’ efforts to keep exposure to a historically profitable upstream segment.

Big Oil Expands Exploration Far From the Middle East

Against the backdrop of the Middle East conflict, Big Oil companies are seeking to limit losses from curtailed production and barrels not lifted because of the Strait of Hormuz crisis.

They are also pursuing high-impact exploration and upstream projects in areas such as Guyana, Suriname, Namibia, Brazil, Turkey, and Cyprus.

Exxon and Chevron are increasing their focus on the billions of barrels of crude oil discovered offshore Guyana. Separately, Chevron is expanding its business in Venezuela, where the Trump Administration hopes U.S. companies will increase production and oil exports to the United States.

Exxon expects to invest billions of U.S. dollars in Nigeria’s deepwater oil and gas fields. The company is advancing the $7 billion-$8 billion, billion-barrel Owowo deepwater project offshore Nigeria and is “looking into an FID as early as next year,” Hunter Farris, Senior Vice President – Deepwater for ExxonMobil Upstream Company, said in April.

Owowo is only one of Exxon’s new projects in Nigeria, Africa’s top oil producer, which has increased crude oil sales to Asia in recent months as refiners respond to the shock supply loss from the Middle East.

ExxonMobil’s subsidiary in Nigeria and its partners earlier this month committed $1 billion to on-block activities for the Usan Infill Project in OML 138. The project will unlock 40,000 additional barrels of crude oil in 18 months. It also “signifies renewed interest and hope in Nigeria being Esso’s first major deep water project in the country since 2016,” the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) said in early July.

Elsewhere, BP in April acquired interests in three offshore exploration blocks in Namibia, one of the most active exploration destinations, where Shell, TotalEnergies, and Galp have already made large oil discoveries.

TotalEnergies in April signed a Memorandum of Understanding with Türkiye Petrolleri Anonim Ortaklığı (TPAO) to evaluate exploration opportunities in the Black Sea region and internationally.

Companies are also increasingly examining shale opportunities outside the United States, with Argentina, China, Turkey, and Australia attracting interest for potential development of onshore resources located far from the Middle East.

Oil and gas exploration has generated significant value for the industry in recent years. The industry created $54 billion of value after deducting $97 billion in exploration spending from 2021 to 2025, assuming a long-term Brent price of $65 per barrel, according to an April analysis by energy consultancy Wood Mackenzie.

At an $85-per-barrel Brent price, value creation more than doubles to $120 billion, WoodMac said.

That makes insurance pricing one more variable to watch as companies decide which frontier basins move from exploration into sanctioned development. Final investment decisions will still depend on resource quality, fiscal terms, infrastructure, security, and commodity assumptions, but lower non-Middle East premiums can reduce one cost line for projects competing for capital.