The United States says it has destroyed more than a dozen mine-laying Iranian vessels to prevent any attempt to close the Strait of Hormuz, highlighting the important role the narrow passageway plays in global energy supply.
“The scale of what is at stake cannot be overstated,” said Hakan Kaya, senior portfolio manager at investment management firm Neuberger Berman. He said a partial slowdown lasting a week or two could be absorbed by oil companies. But a full or near full closure lasting a month or more would push crude oil prices “well into triple digits” and European natural gas prices “toward or above the crisis levels seen in 2022.”
Here’s what to know about the strait and the widening Iran war.
The Strait of Hormuz is a bending waterway, about 33 kilometers (21 miles) wide at its narrowest point. It connects the Persian Gulf to the Gulf of Oman. From there, ships can then travel to the rest of the world. While Iran and Oman have their territorial waters in the strait, it’s viewed as an international waterway all ships can ply. The UAE, home to the skyscraper-studded city of Dubai, also sits near the waterway.
The Strait of Hormuz through history has been important for trade, with ceramics, ivory, silk and textiles moving from China through the region. In the modern era, it is the route for supertankers carrying oil and gas from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the UAE and Iran. The vast majority of it goes to markets in Asia, including Iran’s only remaining oil customer, China.
While there are pipelines in Saudi Arabia and the UAE that can avoid the passage, the U.S. Energy Information Administration says “most volumes that transit the strait have no alternative means of exiting the region.”
Iran has attacked several ships in the Strait of Hormuz and threatened any ships that try to pass through, effectively but not officially closing it.
The U.S. is rolling out ship reinsurance in the region through the U.S. International Development Finance Corp., a government agency that partners with the private sector to back global investment projects, in an effort to get ships moving through the strait again.
Political risk insurance is a type of coverage intended to protect firms against financial losses caused by unstable political conditions, government actions, or violence. Marine insurers had been canceling or raising rates for insurance in the region.
The U.S. reinsurance facility will insure losses up to approximately $20 billion on a rolling basis, according to the International Development Finance Corp., focusing on insuring cargo and physical damage to a ship’s structure and operating machinery to start.
Trump said that, if necessary, the U.S. Navy would escort oil tankers through the strait, though that has yet to happen.
There is a French-led initiative in the works that could involve European and non-European nations helping to escort tankers with the aim of gradually reopening the strait “as soon as possible after the most intense phase of the conflict is over.”
On Tuesday, Trump said the U.S. military “completely destroyed” 16 inactive Iranian mine-laying ships.
Trump in his social media post added that there would be “more to follow,” suggesting the U.S. would target additional mine-laying vessels.
The announcement of the targeting of the ships came soon after two other social media posts by the U.S. president in which he said he has no reports of Iran putting explosive mines in the strategic waterway, but also warned Tehran if mines were laid he wanted them immediately removed.
“Those ships that got stuck in the Gulf are not going anywhere,” said Tom Goldsby, logistics chairman in the Supply Chain Management Department at the University of Tennessee. “There’s also a whole host of ships that were heading into the Gulf to replace them, and of course they’re anchored or going elsewhere now.”
There are currently about 400 oil and product tankers idle in the Gulf, and one oil tanker passed through the Strait of Hormuz without incident on Monday, according to data from the website MarineTraffic.
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Associated Press writer Aamer Madhani in Washington contributed to this report. Anderson reported from New York.
