Iran warns tankers off the Strait of Hormuz

Iranian Revolutionary Guards warned commercial tankers not to transit the Strait of Hormuz after US and Israeli strikes on Iran, according to Reuters, as ships reported being “stuck” in the narrow waterway. The Guardian reports that roughly one-fifth of global oil supplies and a similar share of seaborne LNG shipments pass through the strait, with up to about 15 million barrels a day of crude potentially exposed if traffic slows or insurers and operators decide the risk is no longer worth it.

The immediate question is whether Tehran can or will impose a formal closure. But the market does not need an official declaration to reprice the route: a chokepoint only 33km wide at its narrowest, with shipping lanes about 3km across in each direction, is vulnerable to mines, drones, small-boat attacks and, crucially, to the perception that any of those are likely. Analysts quoted by the Guardian put a worst-case price spike near $100 a barrel from around $72, a move that would feed directly into transport, power, and food costs across import-dependent economies.

Yet the first-order effect—higher oil and gas prices—is only part of the story. War-risk premia are charged per voyage and can jump overnight; a small change in perceived probability translates into large changes in insurance cost because the loss event is catastrophic. When insurers withdraw or reprice, shipping companies reroute or wait, and the physical constraint becomes a scheduling constraint: fewer transits per day, longer queues, and higher freight rates for everything that shares the same ports, pilots, and tug capacity.

There is also a quieter subsidy embedded in “keeping lanes open”. When naval escorts, air-defence coverage, and intelligence surveillance are provided by states, part of the risk that would otherwise be priced into private premiums is shifted onto taxpayers. In a crisis, that shift becomes visible: the cost of protecting the corridor rises just as the commercial market tries to charge more for using it.

For Europe, the vulnerability is not only the fuel bill but the speed of repricing. Strategic reserves can smooth a short disruption, but they do not create spare tanker capacity, spare LNG cargoes, or spare refinery configurations. A choke point that cannot be bypassed easily turns volatility itself into a commodity, rewarding traders and intermediaries who can carry inventory and finance margin.

By Sunday, no confirmed formal shutdown had been announced. Tankers were still waiting for a green light to move through a two-mile-wide lane that carries a fifth of the world’s oil.