President Trump announced that the US Development Finance Corporation will provide political risk insurance for all maritime trade in The Gulf, with Navy escorts through the strait of Hormuz if required. The target is not Iran's navy. It is the insurance market.
After three major Protection & Indemnity clubs — American Steamship Owners Mutual, London P&I, and Skuld — cancelled war risk coverage last week, the commercial mechanism for Gulf shipping collapsed. Without P&I insurance, vessels cannot be financed, flagged, or operated by any major shipping line. The effect was more complete than a naval blockade: vessel traffic through Hormuz fell 80%, and VLCC daily freight rates hit $423,736 per day — an all-time record exceeding the 1991 Gulf War peak. Iran's strategy of raising costs across dispersed targets had found its most effective lever not in missile salvos but in actuarial tables.
Government-backed War risk coverage for commercial shipping at this scale has not been deployed since the US War Risk Insurance Act of 1914, passed in the opening weeks of the First World War when European insurers withdrew from transatlantic routes. Operation Earnest Will (1987–88) provided Navy escorts for reflagged Kuwaiti tankers during the Iran-Iraq tanker war, but Washington did not underwrite the insurance itself. The Earnest Will precedent is instructive in another respect: 126 vessels were escorted over fourteen months, and the operation still produced the mining of USS Samuel B. Roberts and the accidental shootdown of Iran Air Flight 655 — 290 civilians killed. Military escorts through contested waters carry operational risks that compound over time.
The scheme's limitation defines its politics. Coverage applies to US-aligned shipping under US or allied flags. Chinese, Russian, and Indian tankers operating under separate commercial arrangements are not automatically included. Roughly 60% of Gulf oil exports flow to Asia, not to the United States or Europe. The architecture creates an insured lane for Western-aligned commerce and uninsured passage for everyone else — at the precise moment when Asian economies face the sharpest energy price exposure. Brent Crude had risen from approximately $73 before the strikes to $85–90 per barrel; European gas prices nearly doubled. Beijing has not commented. Oil prices initially fell on the announcement — a market bet that some shipping will resume, not that the underlying risk has changed. The two-tier structure also creates a de facto incentive system: countries that align with Washington get insured passage; countries that do not, pay the war premium themselves. Whether that is trade policy dressed as maritime security or maritime security with trade policy consequences depends on which capital is reading it.
