The effective closure of the Strait of Hormuz, a vital waterway through which about 20% of the world's crude oil and natural gas typically passes, has roiled global energy markets.
"When analysts have looked at the things that could go wrong in global oil markets, this is about as wrong as things could go at any single point of failure," says Kevin Book, the co-founder of the research firm Clearview Energy Partners.
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Traffic through the normally busy strait faded away in the first few days of the conflict, as Iran declared the strait closed and attacked some ships that attempted the route.
Global crude oil prices — already elevated due to the risk of war — have shot up more than 10% since the U.S. and Israel attacked Iran. Natural gas prices in Europe and Asia, which rely heavily on imported liquefied natural gas, or LNG, have risen even more sharply.
About 20 million barrels of oil per day typically pass through the strait. Some countries, including the U.S., do have stockpiles, and some producers in the Gulf region can redirect oil away from the strait to other ports. But those changes can't make up all of the shortfall.
Recent attacks have struck oil and gas infrastructure in nearby countries, including Saudi Arabia, Qatar and UAE. That raises questions about the feasibility of some alternate routes for oil. And if infrastructure is damaged, the hit to production and exports could even outlast the closure of the strait.
Meanwhile, the strait's closure has cascading effects for the industry. Iraq, a major oil producer, is having to shut down production in some of its largest oil fields because without being able to export it through the Strait of Hormuz, it has nowhere to put that oil.
"We're now facing what looks like the biggest energy crisis since the oil embargo in the 1970s," says Helima Croft, the global head of commodity strategy at RBC Capital Markets.
An 'insurance-driven shutdown'
Iran has often threatened to close the Strait of Hormuz, but never actually attempted it before.
And notably, Iran didn't need a naval blockade to bring traffic to a halt. It didn't use underwater mines or have to rely on anti-ship missiles, but focused on selectively deploying a much cheaper technology.
"All [Iran] had to do was several drone strikes in the vicinity of the Strait of Hormuz," Croft says. "And all of a sudden, insurers and shipping companies decided that it was unsafe to traverse that very narrow S-curve of that waterway."
"It's really an insurance-driven shutdown," she says. Insurers wouldn't underwrite ships, and companies wouldn't risk the passage without coverage.
Many experts were bracing for a repeat of the "tanker war" of the 1980s that had been part of the broader Iran-Iraq conflict, when warships escorted tankers through the strait, avoiding both mines and missiles. An insurance-driven shutdown was not what they anticipated — and it seems to have caught the White House off guard, too, Croft notes.
On Tuesday, President Trump announced that the U.S. government would provide naval escorts to protect tankers — as it did in the tanker war — and additionally, that the U.S. Development Finance Corporation, or DFC, would provide reasonably priced "political risk insurance" to all shipping lines operating in the Gulf. The DFC, established during the first Trump administration, offers that kind of insurance in politically risky scenarios where it serves U.S. strategic interests. The agency referred NPR to a statement saying it's "ready to mobilize" its products in the Middle East.
Will that be enough to coax large numbers of ships back through the strait? Some experts are skeptical.
William Henagan, a fellow at the Council on Foreign Relations, says there are both legal and financial limitations on what the DFC will realistically be able to provide to companies. Legally, the DFC has to make sure companies follow certain environmental and social standards and work in specified countries.
And financially, there's a reason insurers balked at covering ships through the strait. "Even if you were to offer a subsidized price," Henagan says, "it's a war zone. Certain boats are going to sink, and DFC is going to have to pay out the insurance."
The agency has a finite budget. It can't feasibly insure "all maritime trade" in the area, he says. Approving applications will also take time, Henagan notes.
And, of course, even if they can get insurance coverage, many companies still won't want to risk losing their ships.
Stamatis Tsantanis, the chairman and CEO of Greece-based shipping companies Seanergy Maritime and United Maritime, said in a statement emailed to NPR that the offer of escorts and insurance is a "welcome step," but that normal traffic strait won't resume until companies are confident that the trip is "genuinely safe."
"The priority for the industry is not just moving cargo, but protecting the lives of seafarers, the value of vessels, and avoiding what could become a major environmental disaster if a tanker were seriously hit in such a narrow and sensitive waterway," Tsantanis says.
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