• Shipping through the Strait of Hormuz has collapsed by 90% following US-Israeli strikes on Iran, with Trump administration officials indicating that the threat of mines is sufficient to deter vessel traffic.
  • Energy markets have reacted sharply, with Brent crude rising above $90 per barrel and crude oil prices surging 47% since the end of February, while around 1,000 vessels valued at at least $25 billion are trapped in the Persian Gulf.
  • The Trump administration announced a $20 billion maritime reinsurance program to restore confidence, but shipowners remain reluctant to transit due to safety concerns, with nearly 20 vessels attacked and at least 8 crew members killed.

A Critical Chokepoint in Crisis

Shipping through the Strait of Hormuz has collapsed by 90% following US-Israeli strikes on Iran, creating severe disruption in one of the world's most vital maritime passages. Trump administration officials have indicated that the threat of mines is sufficient to keep ships away from this critical waterway, which carries approximately one quarter of global seaborne oil trade, as well as significant volumes of liquefied natural gas and fertilizers. The situation has escalated rapidly, with around 1,000 vessels currently trapped in the Persian Gulf, according to people familiar with the matter, representing an estimated value of at least $25 billion.

Energy markets have reacted sharply to the developments, with Brent crude rising above $90 per barrel and crude oil prices surging 47% since the end of February. Freight rates for oil tankers and war risk insurance premiums are surging, along with rising marine fuel costs that increase shipping expenses across supply chains. The crisis has also impacted approximately one third of global seaborne fertilizer trade, raising access concerns for developing nations that rely on these shipments.

Government Response and Industry Reluctance

In response to the escalating situation, the Trump administration announced a $20 billion maritime reinsurance program designed to restore confidence in maritime trade through the Strait. The U.S. International Development Finance Corporation selected Chubb (CB) as the lead partner for the program on March 11, but industry sources say this plan is considered insufficient without liability risk coverage. Moody's Ratings (MCO) has echoed these concerns, noting that shipowners remain reluctant to transit the Strait given ongoing safety issues.

"Without adequate protection, companies are simply unwilling to risk their assets and crews," said one shipping executive who requested anonymity due to the sensitivity of the situation. Efforts to secure safe passage have hit a snag as insurance companies face concentrated risk exposure unique to the marine sector, though major global insurers and reinsurers possess sufficient capital to absorb potential losses. The human toll continues to mount, with nearly 20 vessels attacked, at least 8 crew members killed, and approximately 20,000 seafarers stranded on their vessels.

Market Implications and Vulnerable Economies

The crisis comes at a delicate time for global markets. U.S. equity markets declined during the week of March 9-15, with the S&P 500 falling 1.6% amid concerns about the Middle East conflict and oil price volatility. However, Q4 2025 corporate earnings showed resilience, with 13.6% earnings growth on 9.2% revenue gains, suggesting underlying economic strength despite the geopolitical tensions.

Developing economies face particular exposure to the disruption, as high debt burdens and rising borrowing costs limit their capacity to absorb new price shocks. Past crises including COVID-19 and the Ukraine war demonstrated how disruptions to energy, transport, and agricultural inputs rapidly propagate across interconnected global markets. The current situation presents similar challenges, with worst-case insurance exposure potentially reaching $40 billion or higher if the crisis continues to escalate.

As negotiations continue behind the scenes, market participants are watching closely for any signs of resolution. The situation remains fluid, with daily developments influencing shipping decisions and energy prices. For now, the Strait of Hormuz remains effectively closed to most commercial traffic, creating ripple effects across global supply chains that will likely persist until security concerns are adequately addressed.