The global marine insurance market has delivered a stark assessment of former President Donald Trump’s proposal to revive oil shipments through the Strait of Hormuz, declaring the plan financially and operationally unworkable as hostilities with Iran escalate. Industry analysts and major financial institutions, including JPMorgan, have concluded that the United States government lacks the capacity to provide the staggering $350 billion in war risk coverage required to make tanker transits viable again. This rejection exposes a critical vulnerability in global energy security as one of the world’s most vital maritime chokepoints remains effectively closed to commercial traffic.<\/p>\n
The proposal, floated by the Trump campaign as part of its energy security platform, called for the U.S. government to act as an insurer of last resort for crude oil tankers navigating the Persian Gulf. The concept emerged after commercial insurers withdrew coverage following a series of Iranian attacks on merchant shipping, including the dramatic seizure of the Stolt Zulu chemical tanker and missile strikes on the Pacific Voyager. Without insurance, ship owners cannot operate, and the vital flow of oil\u2014approximately 20% of the world’s seaborne crude\u2014has ground to a halt. The insurance industry’s rejection of the Trump plan leaves the world’s major economies without a clear path to reopening this essential artery.<\/p>\n
JPMorgan’s commodities research team conducted a detailed financial analysis of the proposed government insurance scheme, revealing numbers that dwarf previous maritime interventions. “The U.S. simply does not have the firepower to provide $350 billion in coverage,” the report stated bluntly. This figure represents the aggregate insured value of the tanker fleet that would need to transit the Strait daily to maintain pre-conflict oil flows. The bank’s analysts noted that even the U.S. Treasury’s Exchange Stabilization Fund, used in past financial crises, holds less than $100 billion. The scale of potential claims\u2014should a major incident occur\u2014could cripple a federal insurance program from its inception.<\/p>\n
Before insurers withdrew coverage entirely, war risk premiums for Gulf transits had skyrocketed to unprecedented levels. According to Lloyd’s of London syndicates, premiums reached 10% of a vessel’s hull value per voyage\u2014a cost that made shipping Middle Eastern crude to Asian and European markets financially prohibitive. For a modern Very Large Crude Carrier (VLCC) worth $120 million, this translated to a $12 million insurance premium for a single transit. “No oil company can absorb that cost and remain competitive,” explained a senior executive at a European shipping firm who requested anonymity. “The Trump plan attempted to circumvent this market reality, but the underlying risk hasn’t disappeared.”<\/p>\n
Insurance industry representatives point to the fundamental principle of insurability: risk must be measurable and spread across a large pool. The Iranian threat in the Gulf, they argue, meets neither criterion. “We’re not looking at random piracy or isolated incidents,” said the head of marine underwriting at a leading London firm. “We’re facing state-sponsored, systematic targeting of commercial vessels by a military power using drones, missiles, and fast-attack craft. The correlation risk is 100%\u2014if one tanker is hit, dozens of others in the convoy are immediately at extreme risk. This isn’t insurance; it’s a guarantee of catastrophic loss.”<\/p>\n
In the absence of viable insurance, other proposals have surfaced to secure the shipping lane. The most prominent involves creating military-escorted convoys, similar to operations during the 1980s Tanker War. However, Pentagon officials have privately expressed reservations about committing the necessary naval assets for prolonged convoy duty, noting current deployments in the Red Sea, Mediterranean, and Western Pacific. Furthermore, insurance experts note that even escorted convoys would require substantial coverage. “An escort doesn’t eliminate risk; it merely modifies it,” explained a risk consultant for a major oil company. “Missiles, mines, and swarm attacks still present massive exposure. Insurers would still demand prohibitive premiums.”<\/p>\n
The prolonged closure of the Strait of Hormuz is forcing permanent changes in global energy logistics. Satellite tracking data shows a dramatic increase in ultra-long-haul crude shipments from the Atlantic Basin to Asia, with tankers traveling around Africa’s Cape of Good Hope instead of through the Suez Canal. Simultaneously, investment in pipeline infrastructure from the Gulf to alternative export terminals on the Arabian Sea has accelerated. “The market is voting with its wallet,” observed a Singapore-based oil trader. “Building new pipelines takes years and billions, but that’s exactly what’s happening. The insurance industry’s stance makes clear that the Hormuz risk isn’t temporary.”<\/p>\n
The insurance community’s assessment has ignited political debate in Washington. Trump campaign advisors have dismissed the JPMorgan analysis as “defeatist thinking” and suggested that the mere announcement of U.S. backing would deter Iranian aggression. “When America projects strength, risks diminish,” a campaign statement read. Conversely, Biden administration officials and many congressional leaders point to the insurance rejection as validation of their diplomatic-first approach. “Throwing taxpayer money at uninsurable risks isn’t a strategy; it’s desperation,” remarked a senior Democratic senator on the Armed Services Committee. “This reinforces the need for multilateral pressure and de-escalation.”<\/p>\n
Maritime historians note that while governments have occasionally intervened in marine insurance markets during conflicts\u2014most notably with the British government’s war risks scheme during World War I and the U.S. War Shipping Administration in World War II\u2014the current situation lacks clear parallels. “Those were total wars with national survival at stake, and the government essentially nationalized shipping,” explained a maritime historian at the U.S. Naval War College. “Today, we’re dealing with a regional confrontation affecting global commerce. The legal, financial, and political frameworks for a U.S. government insurance program simply don’t exist, and creating them would require congressional action unlikely in the current polarized environment.”<\/p>\n
The crisis has exposed another critical layer of vulnerability: the global reinsurance market’s complete retreat from Gulf war risks. Reinsurers, who provide backup coverage to primary insurers, began withdrawing capacity months before the direct insurers. “Once Munich Re, Swiss Re, and Berkshire Hathaway pulled out, the game was over,” said a Lloyd’s broker. “Primary insurers can’t retain $350 billion in risk on their balance sheets. Without reinsurance, the entire structure collapses. No government program can easily replace that global capital pool.”<\/p>\n
A handful of specialist war risk insurers continue to offer limited coverage for specific, high-value operations, but at prices that reflect their niche status. These firms typically insure military support vessels or specially sanctioned humanitarian shipments, not the routine flow of commercial crude. “We’re talking about $50 million in capacity for a $350 billion problem,” noted the CEO of one such firm. “We can help with discrete, critical shipments, but we cannot solve the systemic issue. The Trump proposal fundamentally misunderstands the scale of the capital required.”<\/p>\n
Maritime lawyers highlight another obstacle: the immense liability the U.S. government would assume under such a program. “If a U.S.-insured tanker is attacked and causes an environmental disaster in the Gulf, who pays?” asked a partner at a leading maritime law firm. “The Oil Pollution Act of 1990 could expose taxpayers to tens of billions in cleanup costs. And what about crew deaths or injuries? The Jones Act and general maritime law create massive exposure. These aren’t abstract risks; they’re inevitable outcomes in a war zone.”<\/p>\n
Major oil companies and trading houses are now operating on the assumption that the Strait of Hormuz will remain commercially impassable for the foreseeable future. Contingency plans once considered extreme are now being implemented. These include expanding strategic petroleum reserves in consuming countries, accelerating development of non-Gulf crude sources, and investing in oil-saving technologies. “The insurance market has sent the clearest possible signal,” said the chief supply officer of a European energy major. “This isn’t a temporary disruption. This is a permanent reconfiguration of global oil trade. Our planning reflects that new reality.”<\/p>\n
Economists note that while oil prices initially spiked on supply fears, the market has now incorporated a “Hormuz premium” into long-term price structures. This premium reflects not just physical disruption but the insurance and security costs that have become embedded in global oil economics. “We’ve moved from a temporary shock to a permanent cost increase,” explained the chief economist of an international energy agency. “Even if transits resume tomorrow, the risk premium won’t fully disappear because the market now prices in the possibility of sudden closure. The insurance industry’s stance has made that risk tangible and quantifiable.”<\/p>\n
The unanimous verdict from the world’s insurance capitals leaves policymakers with few palatable options. Diplomatic efforts to de-escalate the Iran conflict face profound challenges, while military solutions risk expanding the war. Meanwhile, the global economy continues to adapt to what appears to be a lasting transformation in energy logistics. The stark numbers from JPMorgan and the insurance industry’s firm rejection have clarified a fundamental truth: in modern global commerce, the movement of goods depends not just on ships and ports, but on the intricate, fragile web of financial guarantees that make trade possible. When that web fails, the alternatives are neither simple nor cheap, and no single nation\u2014not even the United States\u2014can easily recreate it by fiat. The closure of the Strait of Hormuz may ultimately be remembered not for the missiles fired or ships seized, but for the moment the world realized some risks are too vast even for superpowers to underwrite.<\/p>\n","protected":false},"excerpt":{"rendered":"
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