There's an old saying in risk management: you can price danger, but you can't insure your way out of war. That tension sits at the heart of Washington's latest response to the crisis unfolding across the Persian Gulf.

President Trump has directed the U.S. International Development Finance Corporation to backstop political risk insurance for maritime trade in the region, with a particular focus on energy shipments. He's also floated the possibility of U.S. Navy warships escorting oil tankers through the Strait of Hormuz, promising, in his characteristically emphatic style, to guarantee the "free flow of energy to the world.

It's a bold posture. Whether it's a workable solution is a different question entirely.

A Strait Under Siege

To understand what's at stake, consider the geography. The Strait of Hormuz a narrow chokepoint between Iran and Oman, is the single most important corridor for global energy. Roughly one-fifth of the world's oil and gas exports pass through it daily. There is no true substitute.

That corridor is now effectively paralysed.

Following US and Israeli military strikes, Iran has threatened to target any vessel attempting transit and has backed those threats with action. Major shipping operators, including Maersk, have suspended routes through the strait altogether. War-risk insurance premiums haven't just risen, in many cases, they've been cancelled outright or repriced by 50 to 100 per cent or more. When coverage disappears, ships don't move.

The disruption hasn't stopped at sea. Iranian strikes have now reached onshore infrastructure in neighbouring countries, Qatar's LNG terminals and Saudi refining facilities among them, triggering production shutdowns and rattling confidence in the broader regional export network.

Markets have taken notice. Brent crude has jumped over 7%, touching levels unseen since mid-2014. European and Asian natural gas prices have spiked as LNG flows dry up. Equity markets, already jittery, have slid further as commodity traders price in the prospect of tighter supplies ahead.

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The Limits of a Naval Shield

The Trump administration's twin proposals, government-backed insurance and military escorts, reflect a clear strategic logic: reduce financial risk for shippers, provide physical protection on the water, and keep energy moving. On paper, it's coherent.

On the insurance side, Washington can signal its willingness to backstop commercial risk, but it cannot force private insurers back into a market they've already fled. Many carriers have withdrawn war-risk coverage entirely, and a government guarantee, while helpful at the margins, doesn't automatically restore the commercial insurance ecosystem that shipping lines depend on. Some will still choose to reroute around the Cape of Good Hope adding weeks of travel time and dramatically higher freight costs. Those economics don't disappear with a policy announcement.

The naval escort question is thornier still. Iran's Revolutionary Guard has explicitly warned that ships attempting to transit the strait could be attacked. Several vessels have already taken damage. Placing U.S. warships alongside oil tankers in that environment doesn't neutralise the threat; it raises the stakes considerably. An exchange of fire between American naval forces and Iranian units would not be a contained incident. It would be an escalation with consequences no one can fully predict.

Naval power can protect a vessel at sea. It cannot, by itself, unfreeze shipping lanes, restore insurer confidence, or bring freight rates back to earth.


The Deeper Economic Exposure

Step back from the tactical picture, and a more troubling pattern emerges. This conflict has already crossed from localised disruption into something that threatens the structural integrity of global energy supply chains.

Economists warn that a sustained closure of Hormuz or continued strikes on production and export infrastructure across the Gulf could push crude well past $100 per barrel and constrain global supply for months. That's not just a headline number. Elevated energy prices feed directly into transportation costs, manufacturing inputs, and consumer inflation. In an already fragile global economy, a prolonged supply shock of this scale could meaningfully slow growth across major markets.

Pipeline alternatives do exist. Saudi Arabia and the UAE have overland routes that bypass the strait. But those pipelines were never designed to absorb the full volume that normally moves by tanker, and they certainly can't compensate for the loss of Qatar's LNG export capacity, now under threat.

Confidence Can't Be Mandated

Perhaps the most important thing to understand about this moment is that energy markets don't simply respond to policy announcements, they respond to conditions on the ground. And right now, those conditions are deteriorating faster than diplomatic and logistical responses can keep pace.

Insurance guarantees and naval escorts are meaningful signals that Washington is engaged. But the reopening of the Strait of Hormuz to normal commercial traffic will ultimately require something none of those measures can provide on their own: a genuine reduction in hostilities, some form of negotiated restraint between belligerents, and a credible end to threats against civilian shipping.

Until that happens, the risk premium baked into energy markets will remain and may grow. The longer the disruption endures, the deeper the economic damage becomes. Washington has made clear it's willing to intervene. What remains unclear is whether intervention alone is enough to turn the tide.