Traffic through the Strait of Hormuz has dwindled to a trickle as the U.S.-Israel war with Iran enters its second week, sending oil prices soaring and raising global anxieties. On Monday, President Donald Trump suggested the U.S. Navy might escort merchant vessels through the vital waterway, a move that has yet to be accompanied by a concrete plan despite his attempts to reassure markets.
The situation has dramatically altered the risk calculus for shipping insurers. Although coverage was initially available for all vessels, a new pattern is emerging: insurance, particularly war risk insurance, remains accessible, but is largely unavailable for ships linked to the United States and Israel. Maritime war insurers are offering the most comprehensive policies, according to industry observers.
Despite the availability of some insurance, the perceived risks are deterring most ships from attempting the passage. Lloyd’s List Intelligence reported just 44 to 45 transits since the beginning of March – a 90 percent decrease from normal traffic levels. As of Sunday midday local time, only a handful of ships were navigating the strait, primarily those belonging to Iran’s “shadow fleet” and vessels operated by Dynacom, a Greek firm owned by billionaire George Prokopiou.
The dangers extend beyond the strait itself. Vessels have been attacked within the Gulf, and a liquefied natural gas plant in Qatar and an oil rig off the Saudi coast have also been targeted. The Strait of Hormuz is critical for global energy supplies, with approximately 20 million barrels of oil and liquefied natural gas passing through it daily in 2025, representing nearly one-fifth of global flows and an estimated $600 billion in annual trade value, according to the U.S. Energy Information Administration.
However, the disruption extends far beyond oil and gas. Aluminum processing facilities in the Gulf region are facing supply chain issues, driving aluminum prices up by more than 27 percent year-on-year as of March 6. The flow of fertilizer ingredients, with 20-30 percent typically transiting the strait, is also threatened. A disruption to nitrogen-based fertilizer shipments could lead to reduced crop yields and increased food prices, mirroring the impact of Russia’s actions on Ukrainian grain supplies, according to researchers at the United Nations University.
The human cost of the conflict is also mounting. Seatrade Maritime News reported at least 10 ships hit by drones or missiles since the war began, resulting in the deaths of at least three seafarers and two port workers. The 1980s Tanker War between Iran and Iraq saw 451 ships attacked – primarily by Iraq – and over 300 seafarers killed, injured, or reported missing.
The majority of seafarers currently operating in the region hail from lower-income economies, with over 13 percent originating from the Philippines, more than 10 percent from Russia, and nearly 6 percent from India. This economic vulnerability may compel them to accept the risks associated with navigating the strait, while insurers and shipowners may be less inclined to do so.
President Trump’s proposal to offer insurance “at a very reasonable price… for the Financial Security of ALL Maritime Trade” has met with limited enthusiasm. The U.S. International Development Finance Corp. (DFC) formalized the plan on March 6, offering reinsurance coverage of up to $20 billion for vessels meeting specific criteria, focusing on hull, machinery, and cargo, and utilizing “preferred American insurance partners.”
However, the shipping industry remains cautious, citing unresolved terms and the logistical challenges of shifting to U.S. Insurers. Questions remain regarding which ships would be escorted by the U.S. Navy, and the scale of such an operation – one Navy ship per merchant vessel, or a larger ratio? What would be the response if an escorted vessel were attacked?
Iran’s Islamic Revolutionary Guard Corps (IRGC) has responded defiantly to the prospect of a U.S. Navy escort, with spokesperson Ali Mohammad Naini reminding the United States of the 1988 mining of the supertanker Bridgeton while under U.S. Navy escort during the Tanker War.
With days passing without the arrival of scheduled shipments of oil, gas, aluminum, fertilizer, and other commodities, China, a major importer of Iranian oil, has halted diesel and gasoline exports, citing reserves of three to six months. Gulf states, heavily reliant on the Strait of Hormuz for essential imports – including 80-90 percent of their barley, corn, and wheat – are drawing down strategic reserves. Qatar’s energy minister has warned that the conflict could “bring down the economies of the world,” potentially forcing Gulf energy exporters to halt production within days and driving oil prices to $150 a barrel.
