The Strait of Hormuz has become the central pressure point in the U.S.-Iran war, a narrow chokepoint that normally moves about one-fifth of the world’s oil. Since the conflict began, Iran has threatened to strike ships transiting without permission and more than a dozen drone and missile strikes on vessels have been reported. Daily transits have fallen roughly 90–95%, leaving hundreds of tankers effectively trapped inside the Persian Gulf. Marine insurance costs have surged and some U.S. officials have discussed military escorts, but most experts say traffic will not return to normal until the fighting eases substantially.
Insurance and safety
Specialized war-risk insurance for ships transiting the strait has risen to roughly 3.5–10% of a vessel’s value, compared with 1–2% in the conflict’s first week and a fraction of a percent before the war. That insurance covers damage to tankers and oil-spill costs; premiums vary by owner, vessel speed and whether a tanker is laden. Underwriters are still writing policies, but the higher rates reflect elevated danger.
Many industry observers say insurance is only part of the picture. The primary constraint is safety: owners do not want to put crews and ships at risk even if losses would be compensated. As one analyst put it, being insured does not remove the immediate physical danger to people and assets. The U.S. International Development Finance Corporation has proposed a DFC-backed maritime reinsurance program, in partnership with Chubb, that could cover as much as $20 billion in losses. That would be a significant backstop, but it would take time to implement and brokers warn shippers not to expect it to change behavior in the coming days or weeks.
What would make premiums fall?
Insurers say premiums will likely stay high until active hostilities cease. A clear ceasefire or a demonstrable degradation of Iran’s ability to strike ships could push premiums down significantly—potentially back toward about 1% of vessel value—though probably not to prewar lows because the underlying threat could recur. Insurers also want to see many safe, repeated transits over time before they materially lower rates.
Military escorts: limits and role
The idea of naval convoys has been proposed to reassure shippers, but escorts have limits while attacks continue. Today’s threats are mainly drones and ballistic missiles, not the surface-ship attacks of previous eras, and modern surveillance makes it harder to hide vessel identities. Many owners and insurers would remain reluctant to run the gauntlet even with escorts unless the overall threat level falls.
History shows navies have escorted tankers before—such as U.S. escorts for Kuwaiti tankers at the end of the Iran-Iraq War—but experts say escorts are most credible after a ceasefire or as part of a broader, enforceable peace arrangement. Early escorted transits would likely be small-scale tests involving willing vessels.
How a ceasefire might restore flows
If hostilities pause in April or May, some analysts think exports could approach prewar levels by about July, but the restart would be gradual. Roughly 130 crude and fuel oil tankers and about 210 refined-product tankers are currently in the Persian Gulf. Companies would probably send a small number of ships first to test the truce; if those transits succeed, more cautious shippers would follow in a slow trickle that builds confidence over weeks.
Production is another constraint. Several Gulf producers cut output during the crisis, and wells and infrastructure can take weeks to months to bring fully back online. Producers will want confidence the ceasefire is durable before restarting suspended output to avoid restarting and then shutting down again if fighting resumes. Iran’s internal command and political dynamics appear fragmented, adding uncertainty about whether all factions would abide by a ceasefire—an important concern for shippers and insurers.
LNG and longer-term damage
Liquefied natural gas could take far longer to recover. Iranian strikes have damaged facilities in Qatar, the region’s largest LNG exporter; QatarEnergy has said some export capacity is offline and that repairs for some damage could take three to five years. That makes LNG flows and related markets slower to normalize than crude oil shipments.
Why a few ships still transit
Despite the risks, a handful of vessels still transit the strait—on average only a few per day. Some appear linked to Iran or operating with Tehran’s permission. Iran has said it would allow safe passage for vessels from selected ‘friendly’ countries, including China, India and Pakistan, and there are reports Iran may be charging fees for approved transits. But Iran is unlikely to broadly reopen the strait while hostilities continue because control of the chokepoint is a key lever of pressure.
Price and market implications
Oil prices rose sharply after the conflict began and are well above prewar levels. Even after a ceasefire, physical tightness could persist for months because restarting flows and output takes time. Futures markets could sell off quickly on a ceasefire announcement, but physical volumes need weeks to months to normalize. Markets may also remain sensitive to political statements, amplifying volatility and sometimes outpacing the pace of actual physical recovery.
Bottom line: what must happen
– Active hostilities must stop or Iran’s ability to strike ships must be clearly degraded; Iran effectively controls whether many vessels feel safe transiting the strait.
– Insurers need to see repeated, successful transits and credible security guarantees before premiums move back toward normal levels.
– Producers must be willing to restart curtailed output, and damaged infrastructure—especially in the LNG sector—may require much longer repairs.
– Military escorts can help restore confidence but are most effective as part of an enforceable peace arrangement; while fighting continues, escorts alone are unlikely to reopen the strait at scale.
Even after a ceasefire, recovery will be phased: initial test transits, a gradual return by risk-averse shippers, and then ramping up production and exports over weeks to months. That means oil markets and prices are likely to feel the effects well beyond any single political announcement; a full return to preconflict normality will not be immediate.