The Iran-U.S. Conflict: How the Strait of Hormuz Crisis Is Reshaping Global Oil Markets

A Critical Chokepoint Under Threat

As the conflict between the United States and Iran approaches its one-month milestone, the world is witnessing an unprecedented disruption to global oil supplies that experts warn could last well beyond any ceasefire agreement. The Strait of Hormuz, a narrow waterway between Iran and the Arabian Peninsula that typically handles about one-fifth of the world’s oil shipments, has become the focal point of Iran’s strategy to exert pressure on its adversaries. Since hostilities began, Iran has issued stark warnings to shipping companies, threatening to attack any vessels attempting to pass through the strait without explicit Iranian permission. These aren’t empty threats—more than a dozen confirmed drone and missile strikes have targeted ships in the region, creating an atmosphere of genuine fear among maritime operators. The impact has been dramatic and immediate: daily transits through the strait have plummeted by an astonishing 90% to 95%, according to shipping intelligence firm Kpler. Hundreds of oil tankers now find themselves trapped in the Persian Gulf, unable to safely navigate these treacherous waters. The ripple effects are being felt worldwide, with Brent crude oil prices soaring to nearly $113 per barrel—a staggering 50% increase from pre-conflict levels. American consumers are feeling the pinch at gas pumps, while Asian nations heavily dependent on Middle Eastern oil are beginning to face the specter of genuine shortages.

Insurance Costs Skyrocket, But Safety Concerns Dominate

The specialized marine insurance required for ships attempting to navigate the Strait of Hormuz has reached astronomical levels, reflecting the extraordinary risks involved. David Smith, head of marine at London-based insurance brokerage McGill and Partners, reports that coverage now costs anywhere from 3.5% to 10% of a vessel’s total value—a dramatic jump from the 1% to 2% charged during the war’s first week, and exponentially higher than the fraction of a percent that was standard before conflict erupted. This particular type of insurance is comprehensive, covering everything from physical damage to the tanker itself to the potentially enormous costs associated with environmental cleanup should an oil spill occur. The exact premium varies based on multiple factors, including the ship owner’s track record, the vessel’s speed, and whether it’s laden with oil or traveling empty. However, contrary to what one might assume, shipping experts emphasize that these eye-watering insurance costs aren’t the primary factor keeping tankers away from the strait. Matt Wright, principal freight analyst at Kpler, explains that while insurance premiums are exceptionally high, the rates that tankers can charge for making deliveries from the Persian Gulf “more than make up for it.” The real deterrent is far more fundamental: the genuine risk to human life and the potential for catastrophic loss of vessels and cargo. As Smith eloquently puts it, “You can be insured, but it doesn’t mean you’re not still massively concerned about losing your ship, losing your crew or causing an oil spill.” Ship owners are reluctant to put both valuable assets and, more importantly, human beings who “didn’t sign up for this” in harm’s way, regardless of insurance coverage or potential profits.

The Long Wait for Normal Operations to Resume

Industry insiders and analysts are increasingly united in their belief that conditions in the Strait of Hormuz won’t return to anything resembling normal until there’s a significant de-escalation or complete end to hostilities. Daniel Sternoff, an analyst at Energy Aspects and senior fellow at Columbia’s Center on Global Energy Policy, puts it bluntly when discussing what’s needed for ships to safely transit again: “You need to not have fast-moving pointy bits of metal with explosives bearing down onto you at 2,000 miles an hour.” One commercial marine insurer, speaking to CBS News, confirmed this reality in stark terms: “Premiums reflect risk, which means they are unlikely to reduce significantly in the conflict zone until active hostilities are suspended.” Even in the event of a ceasefire, experts don’t anticipate an immediate return to pre-war insurance rates. Smith predicts that a cessation of hostilities or clear evidence that Iran’s capability to strike ships has been severely degraded might bring premiums down to around 1% of vessel value—still significantly higher than before the conflict because, as he notes, “hostilities could break out at any time.” Gill Martin from insurance broker Howden emphasizes that for premiums to truly return to pre-conflict levels, “the market would likely require clear, coordinated international messaging confirming that peace has been established, alongside credible guarantees around security and clarity on how these would be enforced.” Philip Smaje from insurance broker Aon adds another layer of complexity: even once safe passage becomes theoretically possible, insurance companies won’t immediately adjust their pricing. One vessel successfully making the journey won’t be sufficient evidence; insurers will need to see “numerous vessels going through the strait successfully over a period of time” before they feel confident enough to modify their risk assessments and corresponding rates.

Military Escorts Face Practical and Political Hurdles

The Trump administration has floated the possibility of providing military escorts for commercial vessels transiting the Strait of Hormuz, but significant questions remain about when and how such a program might be implemented. Secretary of State Marco Rubio indicated that escorts won’t happen immediately but could become a “post-conflict necessity.” President Trump has also suggested that countries more dependent on Middle Eastern oil than the United States should shoulder much of the responsibility for protecting shipping lanes. However, energy and maritime experts express considerable skepticism about the effectiveness of military escorts while active combat continues. Wright from Kpler states plainly: “I don’t think a naval convoy is a realistic possibility while we’re at this current level of attacks. I don’t think it would add any confidence to commercial shipping.” The concept of escorting ships through these waters isn’t unprecedented—during the final years of the Iran-Iraq War nearly four decades ago, the U.S. Navy protected Kuwaiti oil tankers from Iranian mines and missiles. But as energy consultant Ellen Wald points out, “it’s not the 1980s anymore, and things are a little more sophisticated.” Modern tracking technology makes it nearly impossible to disguise a ship’s origin or its cargo’s source, and today’s primary threats come from drones and ballistic missiles rather than naval vessels. Wald believes that even with military convoy options available, many shipping companies will remain hesitant to risk the journey, especially initially. “You’d have to have a couple ships willing to take the risk to transit and see if they can transit safely,” she explains. “And once that happens, more will go.” Wright suggests that naval escorts might prove most valuable after diplomatic progress or a ceasefire, serving to “give confidence on top of those agreements” rather than as a standalone solution during active hostilities.

The Complex Process of Ramping Up After Conflict

Should the war conclude with a ceasefire in the coming months, the return to normal operations will be neither immediate nor simple. Wright estimates that if fighting ends by April or May, oil exports from the region might not return to previous levels until July at the earliest. The backlog is substantial: approximately 130 crude oil and fuel oil tankers currently sit in the Persian Gulf, along with about 210 tankers carrying refined products like gasoline, according to Rohit Rathod, a senior oil market analyst at Vortexa. These vessels won’t all rush for the exits simultaneously. Instead, a smaller group of less risk-averse companies will likely send their tankers through first, essentially testing the waters. If these initial passages proceed without incident, a “watch-and-wait cohort” of more cautious shippers will gradually follow. “It will be a slow trickle, and then it will build, and it will build,” Wright predicts. “Everybody who’s not in the first tranche will look and say, ‘Oh, how did they get on?’ And, ‘OK, let’s give it a go.'” Additional complications arise from the fact that several Arab oil-producing states have curtailed production during the conflict. Oil wells cannot simply be switched back on like a light switch—the process could take two to three months, according to Rathod. Furthermore, producers will need substantial confidence in any ceasefire’s durability before committing to restart production, as Sternoff explains: “You can’t be in a situation where you try to reopen fields, and you load them up on tankers, and then the tankers can’t flow, so you have to shut everything down again.” The situation is further complicated by uncertainties about how centralized Iran’s decision-making apparatus currently is, raising questions about whether all elements of the Iranian military and government would honor a ceasefire agreement. For liquified natural gas exports, the timeline for recovery is even longer, as facilities in Qatar—the region’s largest LNG producer—have sustained heavy damage from Iranian attacks, with repairs potentially taking three to five years.

An Uncertain Future for Global Energy Markets

Even amid the ongoing conflict, a small number of vessels—averaging about five per day—continue to transit the Strait of Hormuz. Some of these are Iranian-linked ships, allowing the country to maintain some oil sales despite the war. Iran has announced it will permit safe passage for vessels from “friendly” countries including China, India, and Pakistan. President Trump has characterized these limited passages as a “present” from Iran, referring to approximately ten “big boats of oil” that were allowed through, though details remain unclear. Reports have also emerged of Iran attempting to establish what maritime analysts call a “toll booth” system, demanding substantial fees from ships seeking passage. However, analysts like Wright are skeptical that Iran will allow many approved transits while maintaining its leverage: “If they alleviate too much pressure on that by trying to appease certain friendly nations, then they may undermine the whole goal of what they’re doing.” Looking ahead to the eventual resolution of this crisis, Sternoff warns that even an immediate ceasefire wouldn’t bring instant relief to oil markets. While futures prices might plummet on paper following peace news, the physical volume of oil flowing from the Middle East would take considerable time to ramp up. “We’ll definitely be having effects on oil prices all the way through this year relative to prewar levels, even if we have a completely wrapped-up ceasefire tomorrow morning,” he cautions. Wald observes a troubling disconnect between physical oil supplies and financial market prices, with dramatic price swings occurring based on statements from Washington or Tehran rather than underlying supply realities. “The relationship between what’s going on physically and what’s going on on people’s computer screens, there’s a massive disconnect to the point where it’s starting to look like gambling,” she notes. As this conflict continues, the world faces not just immediate energy supply challenges, but a longer-term reckoning with the fragility of global oil infrastructure and the profound leverage that control of critical shipping chokepoints provides in modern geopolitical conflicts.