Washington steps in as private insurers abandon the strait — but with cover cancelled from March 5 and oil up 17% in days, India faces a mounting crisis at the pump
US President Donald Trump has ordered the federal government to provide political risk insurance for all commercial shipping through the Persian Gulf and warned that the US Navy will escort tankers through the Strait of Hormuz if necessary, an intervention that came after private insurers effectively shut down the world’s most critical oil chokepoint without a single mine being laid.
In a post on Truth Social on Tuesday, Trump said he had ordered the US International Development Finance Corporation to provide insurance and financial guarantees for maritime trade through the Gulf at a “very reasonable price,” available to all shipping lines. “No matter what, the United States will ensure the FREE FLOW of ENERGY to the WORLD,” he wrote.
The announcement briefly pulled oil prices off their highs. Brent crude, which had surged as high as $85.12 per barrel during Tuesday’s session — its highest since July 2024 — settled at $81.40 after Trump’s post, up from $73 per barrel on the Friday before US-Israeli strikes on Iran began. That is a rise of over 17 per cent in four trading days. WTI closed at $74.56 per barrel. Analysts still warn prices could still push past $100 if the disruption is not resolved quickly.
What Is at Stake
The numbers passing through the Strait of Hormuz are staggering. According to the US Energy Information Administration, approximately 26 per cent of global seaborne crude oil trade transits the waterway — around 14 million barrels per day of crude and condensate, plus nearly 6 million barrels per day of petroleum products. The strait is also a vital artery for liquefied natural gas, with more than 11 billion cubic feet per day passing through its waters. A prolonged disruption would strain both oil and gas markets simultaneously.
Reports of attacks targeting oil infrastructure in the Gulf, including facilities near Saudi Arabia’s Ras Tanura, pushed prices sharply higher within hours of trading. LNG prices also climbed steeply. Even temporary production pauses, such as those affecting Qatari LNG output, show how the escalation can translate into global economic stress. Over 80 per cent of everything transiting the strait is destined for Asian markets.
Insurance Costs Soar
Following the February 28 strikes on Iran, the IRGC broadcast radio warnings across the waterway that it was closed and any ship attempting passage would be destroyed. This has increased the war-risk premiums on shipping to shoot up within hours. Major underwriters announced cancellation of all maritime war-risk cover from March 5. Freight rates more nearly doubled through much of the Middle East routes.
Without insurance, a supertanker can become a huge liability with damages running into hundreds of millions of dollars, which is a huge risk for commercial operators. This has also meant that Gulf bookings are grinding to a halt, while 150 ships are anchored outside the strait.
Whether Trump’s DFC scheme can reopen it in practical terms remains unclear. Analysts note that federal guarantees will take time to implement and will not function until Iran’s ability to strike ships with drones and anti-ship missiles is meaningfully suppressed.
India: Double Shock, No Easy Exit
India is the economy most directly in the line of fire. The country imports over 85 per cent of its crude — roughly 4.2 million barrels per day — with around 60 per cent sourced from Middle Eastern producers transiting Hormuz. On gas, 53 per cent of India’s LNG imports come from Qatar and the UAE. Nearly all of its LPG supply, which hundreds of millions of households depend on for daily cooking, passes through the same corridor.
The rupee has already slid to 92.06 against the US dollar, amaplifying every barrel’s cost in local currency terms. MCX crude futures surged over 7 per cent in a single session. Analyts estimate that every $10 per barrel rise in oil widens India’s current account deficit by 50 basis points. Energy imports already account for 3.1 per cent of GDP.
Resolution?
Iran’s security chief has publicly rejected any talks with the United States. Trump has said military operations will continue until all objectives are met. Until one side blinks, a 34-kilometre waterway carrying more than a quarter of the world’s seaborne crude may just take a long time before traffic on the strait returns even close to normalcy.
