Strait of Hormuz effectively closed as ceasefire unravels
- O'Connor Warren
- May 4
- 2 min read
Shutdown heightens risks for marine insurers and global shipping
Iran has effectively closed the Strait of Hormuz following Israeli strikes on Lebanon, deepening disruption in one of the world’s most vital maritime chokepoints and raising serious concerns for insurers, shipping operators and global supply chains.
A ceasefire agreement between the United States and Iran included provisions for the temporary reopening of the strategic waterway. In practice, however, vessel traffic failed to rebound in the hours following the ceasefire announcement, leaving the strait functionally closed.
Although Tehran agreed on Wednesday to allow passage under the oversight of its armed forces, Iran’s coast guard warned that any vessel attempting to transit without authorisation would be “targeted and destroyed”.
Tensions escalated further after Israel launched large-scale strikes on Lebanon, reportedly killing around 250 people. US President Donald Trump stated that Lebanon was not covered by the ceasefire agreement, prompting Iran to formally close the Strait of Hormuz—a move that could critically undermine the durability of the truce.
Why the Strait of Hormuz matters
The Strait of Hormuz is a critical artery for global trade, carrying around 20% of the world’s oil supply under normal conditions. Ongoing conflict has already severely disrupted traffic, leaving vessels stranded and operators facing continued uncertainty, despite ceasefire negotiations.
While Iranian authorities have suggested that transit may be permitted under specific conditions, shipping activity has yet to normalise, with operators remaining hesitant to enter the region.
Immediate impact on marine insurance
The prolonged disruption has had a substantial and measurable impact on marine insurance markets. Since the initial closure, risk premiums across marine, energy and political violence lines have surged, as insurers rapidly reassessed exposure and, in some cases, withdrew capacity altogether.
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