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More than one week into the U.S.-Israel war on Iran, traffic through the Strait of Hormuz has trickled away to virtually nothing. Oil prices and global anxieties have both spiked, which in turn have prompted U.S. President Donald Trump to suggest the U.S. Navy might escort<\/a> merchant vessels through the crucial strait. That\u2019s a risky proposition in itself, but there\u2019s also no concrete plan on the table yet, despite Trump\u2019s efforts on Monday to calm markets. Until then\u2014whenever and however that happens\u2014the violence will continue and the turbulence in global oil and commodities markets with it.<\/p>\n In the first days of the war, many shipping watchers, including yours truly<\/a>, focused on the insurance rates for ships needing to pass through the perilous Strait of Hormuz, when insurers appeared to be covering all deals. Now, a slightly different picture is beginning to emerge. Some insurance<\/a>, most especially war insurance, is available, except for ships linked to the United States and Israel. Unsurprisingly, maritime war insurers are providing the most comprehensive coverage.<\/p>\n<\/p><\/div>\n More than one week into the U.S.-Israel war on Iran, traffic through the Strait of Hormuz has trickled away to virtually nothing. Oil prices and global anxieties have both spiked, which in turn have prompted U.S. President Donald Trump to suggest the U.S. Navy might escort<\/a> merchant vessels through the crucial strait. That\u2019s a risky proposition in itself, but there\u2019s also no concrete plan on the table yet, despite Trump\u2019s efforts on Monday to calm markets. Until then\u2014whenever and however that happens\u2014the violence will continue and the turbulence in global oil and commodities markets with it.<\/p>\n In the first days of the war, many shipping watchers, including yours truly<\/a>, focused on the insurance rates for ships needing to pass through the perilous Strait of Hormuz, when insurers appeared to be covering all deals. Now, a slightly different picture is beginning to emerge. Some insurance<\/a>, most especially war insurance, is available, except for ships linked to the United States and Israel. Unsurprisingly, maritime war insurers are providing the most comprehensive coverage.<\/p>\n Even so, the risks to ships and crews alike are so severe that only the fewest of ships are attempting the voyage. On March 6, GCaptain<\/em> reported<\/a> that just 44 to 45 ships had transited since the beginning of the month\u2014a 90 percent decrease in normal traffic, according Lloyd\u2019s List Intelligence, a shipping intelligence service. At midday local time on Sunday, only a handful of ships were passing through the strait. So far, the ships have primarily been part of the Iranian shadow fleet, although vessels operated by Dynacom, a Greek firm led by billionaire shipowner George Prokopiou, were also risking the journey<\/a>. Waiting inside the Gulf is hardly safe either: Ships have been hit there, as have a Qatari liquefied natural gas plant<\/a> and an oil rig off the Saudi coast.<\/p>\n Nearly a quarter of the world\u2019s oil and gas , but far more than that is at stake. Aluminum is processed at smelters in the Gulf, and on March 6, aluminum prices were up by more than 27 percent<\/a> year-on-year. It\u2019s also a potential crisis for fertilizer ingredients<\/a>, 20-30 percent of which ordinarily pass through the strait on their way from Gulf countries to global markets.<\/p>\n If shipments of nitrogen-based fertilizers \u201cfail to arrive on time, farmers face difficult choices such as how to pay sharply higher prices, reduce application rates, or alter crop mixes. Because of how crops respond, even modest reductions in nitrogen use can produce disproportionately large declines in yield. That could translate into millions of tonnes of lost crops. The consequences would ripple through global supply chains into feed markets, livestock production, biofuels and ultimately retail food prices,\u201d Nima Shokri and Salome M.S. Shokri-Kuehni, both at the United Nations University, pointed out<\/a> recently in the Conversation<\/em>. That\u2019s precisely what Russia\u2019s damage has done to Ukrainian grain supply.<\/p>\n Abstract risks on paper can leave ships and people alike bloody wrecks in reality. On March 6, Seatrade Maritime News<\/em>, an industry publication, listed<\/a> at least 10 ships hit by drones or missiles since the war began. At least three seafarers and two port workers have been killed<\/a>. During the Tanker War between Iran and Iraq in the 1980s, 451 ships<\/a> were attacked\u2014most by Iraq\u2014and more than 300 seafarers were killed, injured, or reported missing. Most of the world didn\u2019t pay much attention to those losses, perhaps because many seafarers already came from poorer nations and the sea is, by definition, far away from most of us.<\/p>\n Today, the world has better access to information\u2014and stronger duty-of-care rules. But despite the improvements, which also include amenities such as onboard Wi-Fi, the seafarers now in harm\u2019s way in the Gulf and the Strait of Hormuz, and everywhere on the world\u2019s oceans, are primarily from lower-income economies. More than 13 percent<\/a> hail from the Philippines, the top country of origin; more than 10 percent are from Russia and nearly 6 percent from India. That desperation may cause them to accept the risk of navigating the strait; insurers and shipowners, on the other end of the wealth spectrum, may be less willing.<\/p>\n The realities of risk are the reason why Trump\u2019s proposal, originally floated<\/a> on Truth Social, of insurance \u201cat a very reasonable price \u2026 for the Financial Security of ALL Maritime Trade, especially Energy, traveling through the Gulf\u201d has triggered minimal reaction.<\/p>\n The proposal, which was formalized by the U.S. International Development Finance Corp. (DFC) on March 6, \u201cwill offer a level of security no other policy can provide,\u201d DFC CEO Ben Black said<\/a> in a statement announcing the reinsurance policy. The statement also provided the criteria under which it will be offered: It will insure losses up to around $20 billion, apply only to vessels that \u201cmeet the criteria,\u201d focus on hull and machinery as well as cargo, and will be available via \u201cpreferred American insurance partners.\u201d<\/p>\n The shipping industry\u2019s enthusiasm, though, is limited: The terms have not been fully established, and it would require shipowners to quickly shift to U.S. insurers. The DFC said it would coordinate with U.S. Central Command, and Trump said on Truth Social that the U.S. Navy could escort ships through the strait, but it\u2019s unclear which ships might be escorted: the ships potentially switching to the DFC\u2019s partners, even if they\u2019re not flagged or owned in the United States? Ships flagged or owned in the United States or carrying cargo for the United States? And if escorting comes to pass, what would it look like? One U.S. Navy ship per merchant vessel? One per five or 10 merchant vessels? What if a merchant vessel being escorted gets attacked anyway? Are U.S. Navy ships capable of fending off every suicide drone or stray missile?<\/p>\n In response to the proposed U.S. Navy escort, Iran\u2019s Islamic Revolutionary Guard Corps (IRGC)\u2014which operates its own navy, separate from the Iranian navy, and focuses on the Strait of Hormuz\u2014was defiant. \u201cWe are waiting for their presence,\u201d IRGC spokesperson Ali Mohammad Naini told<\/a> Iran\u2019s Fars News Agency and took the opportunity to remind the United States of the Bridgeton<\/em>, a supertanker damaged by IRGC mines as it was being escorted through the Gulf by the U.S. Navy during the Tanker War.<\/p>\n Meanwhile, days\u2019 worth of oil, gas, aluminum, fertilizer, and other commodities aren\u2019t reaching their destinations, and ships aren\u2019t picking up more cargo. China, which buys<\/a> nearly all Iran\u2019s oil, has reserves<\/a> of between three to six months and has just halted diesel and gasoline exports. Buyers of Gulf energy are already feeling the pain.<\/p>\n Then there are the Gulf states. Around 80-90 percent<\/a> of all barley, corn, and wheat the United Arab Emirates consumes arrives via the Strait of Hormuz, the trade intelligence firm Kpler reports; Saudi Arabia, too, depends<\/a> on the strait for much of its imports, not least because the Red Sea, on its other coast, has seen Western shipping lines divert away for the past couple of years. That\u2019s not mentioning all the other commodities that reach the Gulf states via the Strait of Hormuz. The UAE has been investing in strategic food reserves that are expected to last four to six months<\/a>.<\/p>\n But burning through strategic reserves is a last, and partial, resort. So perilous is the situation that Qatar\u2019s energy minister has warned<\/a>, in a recent interview with the Financial Times<\/em>, that the war in Iran could \u201cbring down the economies of the world.\u201d The war, Saad al-Kaabi predicted, would force all Gulf energy exporters to shut down production \u201cwithin days\u201d and drive oil to $150 a barrel.<\/p>\n If Trump decides that Iran has been defeated within the next few days, the disruption in the Strait of Hormuz could be managed. If the war lasts for weeks, or even months, all bets are off.<\/p>\n<\/p><\/div>\n