Strait of Hormuz Shipping Plummets 95% as US-Iran Conflict Sends Oil Prices Soaring

The ongoing conflict between the United States and Iran has severely disrupted global oil markets, with the Strait of Hormuz—a critical maritime chokepoint—at the center of escalating tensions. Since the war began nearly a month ago, Iran has threatened to attack vessels passing through the strait without its permission, leading to a dramatic decline in shipping traffic. According to shipping intelligence firm Kpler, daily transits through the Strait of Hormuz have dropped by approximately 90% to 95%, leaving hundreds of oil tankers stranded in the Persian Gulf. This disruption has contributed to a surge in oil prices, with Brent crude trading near $113 per barrel, a more than 50% increase from prewar levels.

The heightened risk in the region has also caused marine insurance premiums for ships navigating the strait to soar. Insurance costs for tankers have risen from less than 1% of a vessel’s value before the conflict to between 3.5% and 10% currently, depending on factors such as the ship’s owner, speed, and cargo. Despite these increases, shipping experts emphasize that insurance costs are not the primary deterrent for vessels; rather, concerns over crew safety and the threat of missile and drone attacks are the main reasons for the reduced traffic. Daniel Sternoff, an analyst at Energy Aspects, stated, “You need to not have fast-moving pointy bits of metal with explosives bearing down onto you at 2,000 miles an hour.”

Efforts to mitigate risks include discussions within the Trump administration about providing military escorts for commercial vessels, though details remain unclear. Additionally, the U.S. International Development Finance Corporation is reportedly partnering with insurance company Chubb to offer political risk insurance backed by up to $20 billion in coverage. However, industry experts caution that such programs may take weeks to implement and that a return to normal shipping conditions is unlikely until a ceasefire or significant de-escalation occurs. Marine insurers have indicated that premiums will remain elevated as long as active hostilities continue, with any reduction contingent on clear, coordinated international assurances of peace and security.

Compounding the instability in the Strait of Hormuz, the Yemen-based Houthi militant group, an Iranian proxy, has recently expanded its involvement in the regional conflict by launching ballistic missile attacks against Israel. The Israel Defense Forces confirmed the missile launch from Yemen and activated aerial defenses to intercept the threat. The Houthis’ entry into the conflict raises concerns about further disruptions to vital shipping lanes, particularly in the Red Sea and the Bab el-Mandeb Strait, another strategic chokepoint that handles about 10% of the world’s seaborne oil shipments. The Houthis have previously targeted vessels in the Red Sea, causing shipping volumes through the Suez Canal to drop by 70% and halving oil flows through Bab el-Mandeb.

Iran has also indicated that the Red Sea could become a target for retaliatory strikes, especially due to the presence of the U.S. aircraft carrier USS Gerald R. Ford in the region. The Iranian military warned that facilities supporting the carrier group would be considered potential targets. Experts warn that the conflict is evolving into a broader regional and economic war, with significant implications for global energy supply chains and maritime commerce. Fawaz Gerges, a professor of international relations at the London School of Economics, noted that the war is no longer limited to military engagements but now involves critical global supply routes and energy infrastructure.