US steps in to shield oil tankers from Hormuz risks with insurance, possible naval escorts

US President Donald Trump on Tuesday ordered the US development finance arm to provide political risk insurance for tankers carrying oil and other goods through the Persian Gulf “at a very reasonable price.”

He also signalled that the US Navy will begin escorting tankers through the Strait of Hormuz, if necessary.

“Effective IMMEDIATELY, I have ordered the United States Development Finance Corporation (DFC) to provide, at a very reasonable price, political risk insurance and guarantees for the Financial Security of ALL Maritime Trade, especially Energy, traveling through the Gulf,” Trump wrote on his Truth Social platform. “If necessary, the United States Navy will begin escorting tankers through the Strait of Hormuz, as soon as possible.”

Trump said that the measure would be available to all shipping companies and said Washington would ensure the “free flow of energy to the world.”

The Strait of Hormuz, located between Oman and Iran and linking the Persian Gulf to the Gulf of Oman and the Arabian Sea, is one of the world’s most critical energy chokepoints.

Oil and gas shipments from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the United Arab Emirates and Iran pass through the narrow waterway.

Roughly 15 million to 20 million barrels of crude oil a day, about one-fifth of global consumption, transit the strait.

Any disruption to traffic there can quickly shake global energy markets.

Iran has attacked several ships in the Strait of Hormuz.

Iran’s Revolutionary Guards have issued VHF radio warnings declaring that “no ship is allowed to pass” the Strait of Hormuz.

Iran has previously targeted ships in the region during periods of heightened conflict, and threats to the waterway have historically triggered spikes in global oil prices.

While Saudi Arabia and the United Arab Emirates operate pipelines that can bypass the strait, most oil exported from the region has no alternative route, according to the US Energy Information Administration.

Under the United Nations Convention on the Law of the Sea, transit through international straits is protected unless the passage is physically blocked.

However, even without a formal blockade, insurers and shipping companies may decide the risks are too high.

Trump’s move to provide political risk insurance and potential escorting of ships by the US Navy can encourage shipping companies to continue its journey through the strait.