The silent power behind the global oil trade

Solly Rakgomo | Monday April 6, 2026 06:00

Oil does not move through a war zone just because a tanker is physically capable of sailing. It moves only when financiers, charterers, cargo owners, and insurers accept the risk. That is why the Joint War Committee, the International Underwriting Association risk list, and the March 2026 circular that revised listed areas matter far more than many politicians admit. As Reuters reported, once London market underwriters expand a high-risk designation, shipping costs jump immediately. My view is simple: modern oil warfare is not only fought with weapons. It is fought through actuarial judgment, contract language, and the price of fear.

The Strait is not just

geography; it is a pricing machineThe Strait of Hormuz matters because it is not a symbolic route. It is a life artery of the world economy. The US Energy Information Administration says flows through the strait in 2024 and early 2025 accounted for more than one quarter of global seaborne oil trade, while its broader study of world oil transit chokepoints shows why no serious market participant can treat this route as marginal. The International Energy Agency makes the same point in starker terms: around 20 million barrels a day move through this narrow passage, with most of it headed to Asia. A recent Reuters graphic clearly captures the scale. So, when risk is repriced here, the effect does not stay local. It spreads to freight, refining margins, inflation expectations, and political nerves in capitals far from the Gulf.

Listed areas turn fear into hard cost

What makes marine insurance so powerful is that it converts vague tension into an immediate invoice. A missile launch, a drone strike, or even a credible threat can turn a routine voyage into a special case that requires additional war cover. That is where the price shock begins. According to Lloyd’s List, some ships linked to the United States, the United Kingdom, or Israel have faced sharply higher war cover costs than others. At the same time, Reuters reported on damaged tankers and stranded ships and noted that premiums in the Gulf surged from around 0.2% one percent of vessel value in a very short span. A fresh JPMorgan estimate carried by Reuters suggests the market consequences can quickly grow into a major supply squeeze. This is why the real escalation point is often the insurance quote, not the naval statement.

Short notice gives

underwriters strategic powerThe most overlooked part of this system is not just the premium. It is the cancellation power. In recent days, notices from Gard, UK P&I, and a later UK P&I Strait of Hormuz notice have shown how fast cover can be narrowed or withdrawn when reinsurers step back. The Swedish Club circular points to the same reality. Older and still widely cited clause wordings show why this matters. Some forms provide for very short cancellation windows, and other standard wordings allow 48-hour cancellation. So, the issue is not whether every policy uses the same clock. The issue is that the clock is short. In a crisis, that gives underwriters and reinsurers enormous leverage over trade behaviour.

Iran does not need a formal

closure to achieve pressureThis is where the strategic logic becomes clear. Iran does not necessarily need to sink enough ships to physically seal the Strait. It does not even need a legally recognised blockade. It only needs to create a level of perceived danger that makes insurers, reinsurers, shipowners, and banks step back. The recent notices from West P&I, Skuld, the Japan P&I Club, and NorthStandard all point in that direction. Once cover is curtailed or becomes too expensive, chartering slows, financing becomes harder, and cargoes get delayed. That is not a side effect. It is the pressure point. In practical terms, the insurance market can make the Strait feel closed long before a navy declares it closed. That is why insurance is not just a back-office service here. It is a front-line instrument of geopolitical power.

The real lesson for policymakers

Policymakers still talk about energy security as if it were mainly a matter of pipelines, reserves, and military escorts. That view is too narrow. Energy security also depends on whether private risk markets remain willing to underwrite passage through danger. If governments want to protect oil flows, they cannot focus only on naval deterrence.

They must also understand insurance capacity, reinsurance appetite, contract triggers, and how quickly listed-area decisions ripple through trade finance. The current Hormuz tension is a warning. The market can absorb many political speeches. It cannot ignore a serious insurance notice. This is the clearest sign of how conflict has changed. The oil trade is no longer disrupted only when ships are hit. It is disrupted when underwriters decide where the next ship might be. That judgment, made in insurance rooms far from the Gulf, now has immediate consequences for the entire world economy.