Strait of Hormuz: another global corridor under pressure

Recent events in the Middle East have brought renewed attention to the Strait of Hormuz, one of the world’s most important energy shipping corridors.

The humanitarian consequences of the conflict remain the central story. From a global systems perspective, however, the Strait of Hormuz is where the economic effects are now becoming most visible.

A critical energy corridor

Roughly 20% of global oil shipments and LNG trade normally pass through the Strait. In volume terms, that equates to around 21 million barrels of oil per day moving through the corridor under normal conditions.

That concentration means disruption propagates quickly: first through shipping and insurance, then into energy markets, and ultimately into inflation, growth and financial conditions.

The exposure is significant because several major producers rely on this single corridor to reach global markets. Saudi Arabia, the United Arab Emirates, Kuwait, Iraq and Qatar export the majority of their oil and LNG through Hormuz. Qatar alone accounts for roughly 20% of global LNG exports, almost all of which transit the Strait.

Around four-fifths of the oil moving through Hormuz ultimately flows to Asian markets, particularly China, India, Japan and South Korea. Disruption in a narrow stretch of water therefore transmits rapidly into global energy supply and industrial supply chains.

Shipping disruption and insurance transmission

Recent developments illustrate how quickly disruption can develop.

Multiple commercial vessels have been attacked in or near the Strait in recent weeks, and tanker traffic has slowed sharply as operators reassess transit risk. Shipping activity has reportedly fallen dramatically at times, with large numbers of vessels waiting outside the Gulf.

At the same time, the risk of naval mines has become a central concern. U.S. forces have targeted vessels suspected of laying mines, highlighting how seriously the threat is being taken by naval planners and shipping operators. There have also been increasing reports of GPS jamming and spoofing affecting vessels in the region, further complicating navigation for commercial shipping.

Some vessels have reportedly begun altering their AIS (Automatic Identification System) broadcasts to suggest links to Chinese operators in an attempt to reduce the likelihood of being targeted.

A corridor like Hormuz does not need to be formally closed to disrupt global trade. If shipowners, charterers, insurers and naval authorities judge the risk too high, traffic can slow dramatically even while the route technically remains open.

Insurance markets sit directly within that transmission mechanism.

Several marine insurers have issued cancellation notices for war-risk cover covering voyages through the Gulf, while the wider London market continues to offer cover in some cases but at significantly higher prices and tighter terms. Premiums have risen sharply as underwriters reassess exposure to missile, drone and mine risks in the region. For shipowners, insurance availability can determine whether vessels sail at all.

Energy markets have already reacted. Oil prices initially jumped sharply following the escalation and remain volatile as markets try to assess how long disruption could persist. In response, the International Energy Agency has announced a coordinated release of around 400 million barrels of strategic reserves from its member governments, which is the largest emergency release in its history. The move is intended to stabilise markets as disruption to shipping through the Strait of Hormuz continues.

However, strategic stock releases can only offset supply disruption temporarily. Energy markets remain focused on whether oil flows (rather than stored reserves) can continue moving through the corridor. The macroeconomic implications are now being discussed openly. Sustained energy price increases feed directly into inflation, while higher energy costs simultaneously suppress economic activity. That combination (ie higher inflation alongside weaker growth) is the classic recipe for stagflation.

What this means for insurers

For insurers, the Strait of Hormuz provides another example of a pattern that is becoming increasingly visible across global systems. Geopolitical pressures are progressively concentrating activity into a small number of critical corridors. We are seeing this in aviation routing across the Caucasus, and now in maritime energy flows through Hormuz.

When global systems rely heavily on a small number of routes, disruption can transmit quickly across multiple exposures: marine, energy, trade credit, business interruption, political risk and investment markets.

Conditions around Hormuz are evolving rapidly. Developments can change within hours, and the associated exposures can shift just as quickly. For insurers, that means these risks cannot be captured once in a static scenario. They require ongoing monitoring and regular revisiting of scenarios and stress tests as conditions develop.