What Happened
- Following US-Israeli military strikes on Iran in late February 2026 — including the killing of Iran's supreme leader — Iran's Islamic Revolutionary Guard Corps (IRGC) issued warnings effectively prohibiting vessel passage through the Strait of Hormuz.
- Over 150 merchant ships anchored outside or upstream of the Strait, refusing to transit due to the threat of attack; shipping traffic through the Strait fell by approximately 70% initially and then approached a near-total halt.
- Marine insurance underwriters cancelled war risk coverage for vessels transiting the Persian Gulf, making it effectively impossible for commercial shipping to operate in the region without prohibitive financial exposure.
- War risk premiums — normally around 0.2% of a vessel's value — spiked to approximately 1% of vessel value for a single voyage, adding hundreds of thousands of dollars to each shipment (e.g., a $100 million tanker's voyage premium rising from ~$200,000 to ~$1 million).
- At least five tankers were damaged in attacks; two crew members were killed.
- Insurance companies are seeking to renegotiate the terms of their coverage for ships serving the Persian Gulf, with many simply declining to extend coverage at any price.
- The crisis has direct consequences for India: approximately 50% of India's crude oil and LNG imports transit the Strait of Hormuz.
Static Topic Bridges
The Strait of Hormuz: A Critical Maritime Chokepoint
The Strait of Hormuz is a narrow waterway connecting the Persian Gulf to the Gulf of Oman and the Arabian Sea. It is the world's most important maritime oil transit chokepoint, through which a significant share of globally traded hydrocarbons passes daily.
- Approximately 20% of the world's total petroleum liquids (crude oil, condensates, refined products) transit the Strait of Hormuz daily — around 20-21 million barrels per day (pre-crisis figures).
- It is also a key transit route for liquefied natural gas (LNG) from Qatar, the world's largest LNG exporter.
- The Strait is only 33-39 km wide at its narrowest point, with two 3.2 km wide shipping lanes.
- Countries dependent on Hormuz transit: India, China, Japan, South Korea, and most East Asian economies source substantial portions of their energy imports through this corridor.
- There are limited alternatives: the Saudi East-West pipeline (Petroline) can bypass Hormuz for Saudi crude, but capacity is limited; the UAE's Abu Dhabi Crude Oil Pipeline has some bypass capacity but cannot substitute fully.
Connection to this news: With the Strait effectively closed to commercial shipping, the stranded vessels upstream represent a physical manifestation of what energy security planners have long called the "Hormuz scenario" — a disruption that cascades into global energy markets with immediate consequences.
Marine War Risk Insurance: How It Works and Why It Matters
War risk insurance is a specialised category of marine insurance that covers vessels, cargo, and crew against losses arising from war, acts of terrorism, piracy, and political violence. It is distinct from standard P&I (Protection & Indemnity) and hull insurance.
- War risk insurance is governed by international marine insurance law; key reference documents include the Institute War Clauses (Cargo) and Institute War and Strikes Clauses (Hulls).
- Underwriters at Lloyd's of London and major P&I clubs (such as the International Group of P&I Clubs) are the primary providers of war risk coverage globally.
- Coverage typically includes: damage or loss from mines, torpedoes, bombs, acts of war, civil war, and piracy.
- Insurers can cancel war risk cover on short notice (typically 7-14 days per the Joint War Committee (JWC) protocols) when a zone is listed as a "High Risk Area."
- Without war risk insurance, lenders (who finance vessel purchases) and cargo owners typically will not allow vessels to operate in the affected zone — effectively shutting down commercial shipping regardless of the owner's willingness to take risk.
Connection to this news: The mass cancellation of war risk cover by insurers — not merely the threat of attack — is what operationally halted Strait of Hormuz shipping. The insurance mechanism functions as an automatic market brake in geopolitical crises.
India's Energy Security and the Hormuz Dependency
India's energy security calculus has always included the Hormuz risk. As the world's third-largest oil importer, India's economic stability is directly tied to the uninterrupted flow of crude oil through this waterway.
- Approximately 50% of India's crude oil imports and a significant share of its LNG imports transit the Strait of Hormuz.
- India's Strategic Petroleum Reserve (SPR) at Visakhapatnam, Mangalore, and Padur provides approximately 17-18 days of crude oil coverage — far below the IEA standard of 90 days.
- India's refinery throughput depends on a steady stream of crude imports; any supply disruption cascades quickly into domestic fuel prices.
- India has been diversifying its crude basket: US crude (WTI), Russian crude (Urals, ESPO), African crude (Nigerian, Angolan), and Australian LNG have all grown as alternatives to Middle East supply.
- The Ministry of Petroleum and Natural Gas maintains emergency protocols and has the authority to dip into SPR and direct refiners to alternate sources in crisis situations.
Connection to this news: The Hormuz closure put India's strategic petroleum reserve and diversification strategies to the test simultaneously. The 30-day US waiver for Russian crude was partly a direct response to the supply emergency created by the Hormuz disruption.
UNCLOS and Freedom of Navigation in Straits
Under the United Nations Convention on the Law of the Sea (UNCLOS), international straits used for international navigation are subject to a specific regime of "transit passage" — a right that coastal states cannot suspend.
- Article 37-44, UNCLOS: Straits used for international navigation between one part of the high seas or EEZ and another part are subject to the right of transit passage for all ships and aircraft.
- Transit passage cannot be suspended by the coastal or bordering state, unlike innocent passage through territorial waters (which can be temporarily suspended under Article 25(3) for security reasons).
- Iran and Oman are the two states bordering the Strait of Hormuz. Iran has historically threatened to close the Strait in response to sanctions or military pressure, but doing so would violate UNCLOS.
- The US Fifth Fleet, based in Bahrain, has the mandate of ensuring freedom of navigation in the Persian Gulf and the Strait of Hormuz.
- India has supported freedom of navigation principles internationally, including through Quad partnerships, though it has been careful not to sign on to specific US-led freedom of navigation operations.
Connection to this news: Iran's IRGC warnings effectively asserting closure of the Strait directly contradicted the UNCLOS transit passage regime — and the global response (insurance pullback, shipping halt) showed how geopolitical leverage can achieve what formal legal closure cannot.
Key Facts & Data
- Strait of Hormuz width at narrowest: 33-39 km; shipping lanes: two lanes of 3.2 km each
- Daily oil transit through Strait (pre-crisis): approximately 20-21 million barrels
- Share of global petroleum trade: approximately 20%
- Vessels stranded upstream of Strait: over 150 ships (as of early March 2026)
- Tankers damaged: at least 5; crew killed: at least 2
- War risk premium spike: from ~0.2% to ~1% of vessel value per voyage
- Example cost increase: $100m tanker voyage premium: $200,000 → ~$1 million
- India's Hormuz dependency: approximately 50% of crude oil and LNG imports
- India's SPR coverage: 17-18 days (locations: Visakhapatnam, Mangalore, Padur)
- UNCLOS transit passage provision: Articles 37-44
- Shipping traffic decline through Strait: approximately 70% initially, approaching near-total halt