To keep cargo flowing, President Donald Trump said in a social media post on Tuesday that the US Navy would begin “escorting tankers through the Strait of Hormuz” if necessary. But since then, traffic has almost stopped and it is not clear whether any tankers have taken up the government’s offer.
“Naval escorts help reduce the risk to protected vessels,” said Jacob Larsen, chief safety and security officer at global shipping organization BIMCO. “It is unrealistic to provide protection for all tankers currently operating in areas threatened by Iran as this would require a large number of warships and other military assets.”
According to insurance broker Marsh Risk, more than 150 vessels, including oil and liquid natural gas tankers, have been forced to anchor or reroute, causing significant operational challenges. Insurers are canceling coverage under war risk policies, creating a coverage gap that increases the cost of safe passage. Marsh said rates had risen to 1.25% of the vessel’s value from 0.25% of the vessel’s value on Tuesday and further increases were expected as tensions rose.
Trump tried to play down the insurance issue by saying on Truth Social that he had ordered the US International Development Finance Corporation to insure ships traveling through the Gulf.
The corporation, which describes itself as the “international investment arm” of the federal government, “provides support to commercial shipping charterers, ship owners and major marine insurance providers to reduce market barriers and ensure the free flow of goods and capital,” it said in a statement.
A narrow waterway along Iran’s southern coast, the Strait of Hormuz passes one-fifth of the world’s oil supply and is an important route for other commodities such as aluminum, sugar and fertilizers.
As shipping there has stalled, oil and gas prices have risen. On Wednesday, US gas prices averaged $3.19 per gallon, up 22 cents from a week ago, according to AAA. They are now an average of 10 cents higher than they were a year ago.
Gas prices are a bright spot in the inflation story — and a strong talking point for the Trump administration. Over the past year, gas prices have fallen while grocery, auto insurance, housing and electricity prices have risen.
Now, with gas prices jumping and US crude nearing $80 a barrel, that bright spot is starting to fade. Expensive crude oil typically feeds into higher gasoline and diesel prices, pushing up inflation and costing consumers more to fill up at the pump. At the same time, shipping disruptions can drive up transportation and production costs — creating delays, port congestion and widespread supply shocks.
And if prices stay high enough, it will eventually push consumers to spend, which will hurt global growth.
“The real risk isn’t immediate commodity shortages — it’s persistent energy-driven cost inflation that works its way through global supply chains,” said Matt Lextutis, director of global supply chain and procurement consultancy Eficio. “This is a top priority for supply chain and procurement managers to address and monitor.”
The combination of slow growth and high inflation, an economic situation known as stagflation, creates a complicated situation for the Federal Reserve, which is trying to bring inflation down to its 2% target.
Although prices moderated, with inflation at 2.4% year-on-year in January, it was above the central bank’s 2% target. If this conflict triggers a rise in inflation, interest rates may remain high for longer. Already, analysts have downplayed expectations of a Fed rate cut this month.
That can have wide-ranging implications — including for anyone looking to buy or refinance a home. Mortgage rates fell in the weeks leading up to the war — and fell below 6% for the first time since 2022. Now, they are back to 6.07%.
Iran cannot technically close the Strait of Hormuz, but its officials said earlier this week that the country would set fire to any ships trying to pass through, Iranian state media said. The UK’s Maritime Trade Operations said on Wednesday it had received a report of a container ship being hit by an “unknown projectile”.
Many major shipping and logistics companies have restricted or stopped bookings through the region since the strikes began early Saturday in Iran, including Maersk, MSC Group, CMA CGM, Hapag-Lloyd, COSCO and Emirates SkyCargo. Essential items including food and medicine are being exempted.
