Hormuz Strait Crisis: Europe in Energy Shock, Trump Proposes Military Convoys

The situation in the Hormuz Strait has reached a critical point. Iran has tightened naval control over the strategic waterway while major maritime insurers have suspended coverage for ships passing through the region. As tanker traffic collapses and energy markets surge, Europe faces the prospect of a severe supply shock while Donald Trump attempts to aggressively calm the markets.

Photo: commons.wikimedia.org by MODIS Land Rapid Response Team, NASA GSFC, https://creativecommons.org/public-domain/pdm/

Strait of Hormuz

Iran and Insurers Effectively Close the Hormuz Strait

The waters around the Hormuz Strait currently remain under the full control of Iran's navy. A queue of roughly 150 oil tankers and LNG carriers has formed near the passage, highlighting the growing disruption to global energy trade.

If the situation continues for several weeks, analysts warn that the consequences could extend far beyond rising fuel prices. Natural gas prices could double, while gasoline and diesel costs may increase by at least 20 percent.

The problem does not stem only from Iran's military presence. Major marine insurers have suspended war-risk coverage for vessels operating in the region. Companies such as Gard, Skuld, NorthStandard, London P&I Club, and American Club have stopped issuing policies for ships traveling through the strait.

Shipowners now face the difficult choice of purchasing new policies at dramatically higher premiums or avoiding the route entirely.

According to shipping analytics firm Vortexa, only four supertankers passed through the strait on Sunday, March 1. Just one day earlier, the number stood at 102. Analysts believe the few vessels that still transited the route were likely carrying oil or liquefied natural gas destined for China.

Energy analysts at JPMorgan & Chase estimate that if the Hormuz Strait remains effectively closed for more than 25 days, energy producers could be forced to halt extraction due to overflowing storage facilities and a lack of available tankers.

Some disruptions have already appeared. Oil production has stopped at several Iraqi fields, including Rumaila, operated by BP, and West Qurna-2, where Chevron is acquiring rights from Lukoil amid sanctions pressure. Qatar has also suspended operations at several liquefied natural gas facilities.

Europe Faces the Prospect of Energy Collapse

Aleksandar Vučić, the president of Serbia, warned that rising energy prices could devastate European economies.

"If the situation in the Hormuz Strait continues like this, we will all experience hell in Europe in the literal sense of the word," he said.

Norway has also warned that it cannot single-handedly replace disrupted oil and gas supplies. The warning comes ahead of a new European Union policy that will prohibit short-term contracts for Russian liquefied natural gas beginning April 25.

As a result, prices at the European gas hub TTF surged sharply by March 4, reaching between $1,800 and $2,100 per thousand cubic meters, or roughly €160 per megawatt-hour.

Markets have already begun pricing in what traders call a "war premium.” European gas storage facilities remain depleted after winter, and large-scale alternative supply sources are limited. For many analysts, the only comparable supply capacity would require a return to Russian gas imports.

Meanwhile, German Chancellor Friedrich Merz appeared at the White House on March 3 in support of the US strategy, even though Germany could be among the first European economies to suffer from gas shortages.

The stakes extend beyond energy. Roughly 90 percent of food imports for Gulf countries pass through the Hormuz Strait, along with around 15 percent of global fertilizer exports.

If both the Hormuz Strait and the Bab el-Mandeb Strait near Yemen become blocked, analysts warn that global prices could surge across multiple sectors. Fertilizer markets have already reacted: according to Trading Economics, the price of urea jumped from $470 to $531 in just four days.

Trump's Plan: Military Convoys and US Insurance Guarantees

Against this backdrop, Donald Trump announced two emergency measures designed to stabilize global energy markets.

The US International Development Finance Corporation (DFC) may provide political-risk insurance and financial security guarantees for maritime trade at what the administration described as "very reasonable prices.”

In addition, the United States could deploy naval escorts for oil tankers traveling through the Hormuz Strait.

"If necessary, US naval forces will begin escorting tankers through the Hormuz Strait as soon as possible," Trump said.

However, several questions remain unanswered. It is unclear how quickly the DFC can implement large-scale insurance coverage or how much financial responsibility the agency can assume.

There are also concerns about whether naval convoys could fully protect commercial vessels from anti-ship missiles, naval mines, and drone attacks deployed by Iran.

According to industry reports cited by Lloyd's List, major shipping companies remain skeptical about the proposal. Even with a military escort, large tankers traveling through the narrow waterway could still face significant risks.

In effect, analysts view Trump's strategy as an aggressive attempt to calm panic across global oil markets.

Meanwhile, Russia stands to benefit from the situation for obvious reasons: disruptions in Middle Eastern energy exports tend to drive global oil and gas prices higher, strengthening the position of alternative suppliers.