Trump’s Strait of Hormuz Plan: Oil Prices, Iran War & Shipping Crisis

A Strait Under Siege: Global Trade Faces Peril as Conflict Escalates

More than a week into the escalating conflict between the United States, Israel, and Iran, commercial traffic through the Strait of Hormuz has dwindled to a fraction of its normal volume. This vital waterway, responsible for roughly 20% of the world’s oil supply, is now a focal point of international anxiety, driving up oil prices and prompting a proposed U.S. Navy escort plan. While President Donald Trump has sought to reassure markets, a concrete plan remains elusive, leaving the future of global energy supplies and trade hanging in the balance. The disruption extends far beyond energy, impacting aluminum processing and even fertilizer supplies, with potentially devastating consequences for global food security.

The Strategic Chokepoint and Rising Insurance Costs

The immediate impact of the conflict is visible in the drastically reduced ship traffic. According to Lloyd’s List Intelligence, only 44 to 45 ships have transited the Strait since the beginning of March – a 90% decrease from typical levels. While insurance coverage, particularly war risk insurance, remains available, it is increasingly restricted. Ships linked to the United States and Israel are finding it significantly harder to secure comprehensive coverage, a clear indication of the heightened risk perception. Notably, vessels operated by Dynacom, a Greek firm, and those belonging to Iran’s “shadow fleet” have continued to navigate the strait, albeit with considerable risk. The situation is further complicated by attacks on ships even *within* the Gulf, including a Qatari liquefied natural gas plant and an oil rig off the Saudi coast.

Beyond Oil: A Ripple Effect Across Global Markets

The implications of a prolonged disruption to the Strait of Hormuz extend far beyond crude oil. Nearly a quarter of the world’s oil and gas transits the strait, but its importance as a trade route is far broader. Aluminum smelters in the Gulf region rely heavily on the strait for raw materials, leading to a more than 27% year-on-year increase in aluminum prices as of March 6, 2026. Perhaps more critically, the strait is a crucial artery for fertilizer ingredients, with 20-30% of global supply passing through it. A disruption to these shipments could have severe consequences for agricultural production worldwide. Nima Shokri and Salome M.S. Shokri-Kuehni of the United Nations University warn that a failure to deliver nitrogen-based fertilizers on time could force farmers to reduce application rates or alter crop mixes, potentially leading to millions of tonnes of lost crops and cascading effects on global food prices – a scenario reminiscent of the disruptions caused by Russia’s actions in Ukraine.

Echoes of the Tanker War: A History of Maritime Conflict

The current crisis evokes memories of the Tanker War between Iran and Iraq in the 1980s, a period marked by relentless attacks on commercial shipping. During that conflict, 451 ships were attacked – primarily by Iraq – resulting in the deaths, injuries, or disappearances of over 300 seafarers. While the world now has better access to information and stronger duty-of-care regulations for seafarers, the underlying vulnerability of maritime trade remains. The crews navigating these dangerous waters are overwhelmingly from lower-income economies, with over 13% hailing from the Philippines, more than 10% from Russia, and nearly 6% from India. This economic desperation may compel them to accept the risks associated with transiting the strait, while insurers and shipowners may be less willing to bear the burden.

Trump’s Proposal and Iranian Defiance

In an attempt to alleviate the crisis, President Trump proposed a U.S. Navy escort program for merchant vessels, initially announced on Truth Social. This plan was formalized on March 6 by the U.S. International Development Finance Corp. (DFC), offering insurance coverage of up to $20 billion for vessels meeting specific criteria. However, the proposal has met with limited enthusiasm from the shipping industry. Concerns center around the lack of clarity regarding the terms of the insurance, the potential requirement for shipowners to switch to U.S. Insurers, and the logistical challenges of providing escorts. The DFC stated it would coordinate with U.S. Central Command, but questions remain about which ships would be escorted and how the escort operation would be conducted. Iran’s Islamic Revolutionary Guard Corps (IRGC) has responded defiantly, expressing a willingness to confront any U.S. Navy presence, and referencing the 1988 attack on the Bridgeton, a supertanker damaged by IRGC mines while under U.S. Navy escort.

Regional and Global Vulnerabilities

The disruption in the Strait of Hormuz is particularly acute for countries in the Gulf region. The United Arab Emirates relies on the strait for 80-90% of its barley, corn, and wheat imports, while Saudi Arabia is similarly dependent. Qatar’s energy minister, Saad al-Kaabi, has warned that the conflict could “bring down the economies of the world,” potentially forcing Gulf energy exporters to shut down production within days and driving oil prices to $150 a barrel. China, a major consumer of Iranian oil, has reserves sufficient for three to six months, but has recently halted diesel and gasoline exports, indicating a growing concern about supply security.

What Remains Unclear and What to Expect

The immediate future remains highly uncertain. While President Trump has suggested the conflict is nearing completion, Iran continues to launch missile and drone attacks. The duration of the disruption to the Strait of Hormuz will depend heavily on the trajectory of the conflict. If the war concludes within days, the disruption could be managed, but a prolonged conflict lasting weeks or months could have catastrophic consequences for global trade and energy markets. The effectiveness of the proposed U.S. Navy escort program remains to be seen, and its implementation faces significant logistical and political hurdles. The key procedural question now is whether the DFC can finalize the terms of its insurance policy and attract sufficient participation from shipowners. The coming days will be critical in determining whether the Strait of Hormuz can be stabilized or whether it will remain a major source of global economic and security risk.