The Strait of Hormuz shipping crisis has entered a dangerous new phase, as President Donald Trump vows to protect the free flow of energy through the Persian Gulf with insurance guarantees and possible naval escorts. While the pledge briefly soothed oil markets, the global shipping and insurance industries remain deeply skeptical, warning that Washington’s proposal addresses only part of a far broader and more complex breakdown in maritime security.
Speaking after a weekend of escalating military action involving the United States, Israel, and Iran, Trump said his administration would ensure that oil and gas shipments continue moving through one of the world’s most vital energy corridors. Yet for shipowners facing unprecedented risks, the promise has done little to ease fears over potential losses, spiraling costs, and the absence of a clear, workable framework.
Analysts at RBC Capital Markets LLC said Trump’s comments triggered a temporary pullback in oil prices but failed to resolve deeper concerns. In a note to clients, the bank questioned how quickly any insurance backstop could be implemented and whether it would be sufficient in a rapidly deteriorating security environment.
The renewed violence has pushed the Strait of Hormuz shipping crisis to a point where many vessels are now unwilling or unable to transit the narrow waterway linking the Persian Gulf to global markets. US and Israeli strikes on Iran have been followed by a series of attacks on commercial shipping, effectively choking off a passage through which roughly a fifth of the world’s oil supply normally flows.
As traffic through the strait slows to a crawl, the consequences are rippling across the energy and maritime sectors. Producers in the Gulf are struggling to export crude, storage tanks at regional refineries are filling rapidly, and the cost of chartering supertankers has surged to levels rarely seen outside of major wars.
At the same time, the world’s largest insurance mutuals have withdrawn war-risk coverage for vessels operating in the area, leaving shipowners exposed to potentially catastrophic losses. Without insurance, many owners simply refuse to sail, regardless of the prices on offer.
“The core issue for shipowners is the real risk of loss,” said Karnan Thirupathy, a partner at Kennedys Law LLP who specializes in commodities, shipping, and insurance. “No one enters a trade when the probability of a total loss becomes unacceptably high.”
The effects are already being felt on land. Iraq, the region’s second-largest oil producer after Saudi Arabia, has begun cutting output sharply as exports stall. Officials in Baghdad have warned that deeper reductions could follow if the Strait of Hormuz shipping crisis drags on, underlining the vulnerability of producers that depend heavily on maritime routes.
Central to Trump’s proposal is the use of the US International Development Finance Corporation. Traditionally focused on mobilizing private-sector investment in developing countries, the DFC would, under this plan, help support charterers, shipowners, and key maritime insurers by providing reinsurance or financial guarantees.
There is precedent for such an approach. In late 2023, a multilateral facility involving Lloyd’s insurers and the Ukrainian government helped restore maritime exports from Ukraine by offering affordable war-risk coverage, particularly for grain shipments. The DFC played a limited role in that effort, offering reinsurance support that helped unlock private capital.
However, industry experts stress that replicating such a model across the Persian Gulf would be vastly more complex. The scale of oil, gas, and refined fuel exports passing through the strait dwarfs Ukraine’s grain trade, while the number of stakeholders involved — from producers and refiners to traders and end consumers — is far larger.
Several shipowners also expressed concern about tying long-term operations to a US administration known for abrupt policy shifts. While Trump’s announcement calmed markets briefly, industry participants say confidence cannot be rebuilt overnight, especially when details remain scarce.
Beyond insurance, Trump has floated the idea of using the US Navy to escort tankers through contested waters. Yet here, too, skepticism runs deep. Shipowners point to Iran’s continued ability to strike vessels and the practical limitations of providing escorts to hundreds of tankers each month.
Confidence in naval protection has also been shaken by ongoing Houthi attacks in the Red Sea, which have persisted despite international naval deployments. Many tankers passing through the Strait of Hormuz are neither US-owned nor US-flagged, raising questions about whether they would qualify for escorts or receive the same level of protection.
“The United States is leading military operations against Iran, and the question is whether there are enough naval assets to do everything at once,” RBC analysts wrote. That includes escorting commercial ships while maintaining broader military pressure on Tehran.
The risks are compounded by geography. The strait narrows to just over 30 kilometers at its tightest point, leaving limited room for maneuver and making escorted convoys highly visible targets. As one shipping executive put it privately, escorted vessels could become “sitting ducks” if hostilities intensify.
Time is running out
Even a limited plan to restart some traffic would take weeks, if not months, to implement. Insurance structures must be negotiated, naval schedules coordinated, and confidence slowly rebuilt among shipowners and crews. For producers facing storage constraints and consumers worried about supply shortages, time is a luxury they may not have.
“This is welcome in principle, but it won’t happen overnight,” said Warren Patterson, head of commodities strategy at ING Groep NV. While naval escorts could help at the margins, he warned that the broader Strait of Hormuz shipping crisis remains unresolved.
The longer the disruption lasts, the greater the risk of lasting damage to global energy markets. Prolonged outages could accelerate inflation, strain government budgets, and prompt emergency stockpile releases in major consuming nations.
For now, the Strait of Hormuz shipping crisis sits at the intersection of geopolitics, insurance, and hard operational reality. Trump’s proposals have bought time and tempered market panic, but they fall short of a comprehensive solution to a historic breakdown in maritime security.
Shipowners, insurers, and traders agree on one point: restoring confidence will require not just financial guarantees or naval presence, but a sustained de-escalation of regional tensions. Until that happens, many vessels are likely to remain anchored, and the world’s most important oil chokepoint will continue to operate far below capacity.
As the crisis deepens, the question is no longer whether energy flows can be protected in theory, but whether they can be secured in practice — and fast enough to prevent lasting economic fallout.
