Shipping grinds to a near halt in the Strait of Hormuz, posing risks of major disruptions to global trade

Strait of Hormuz Shipping Crisis Disrupts Global Trade

The usually bustling Strait of Hormuz, a critical passage for oil and cargo vessels, has seen its traffic dwindle dramatically due to escalating conflict in the Middle East. Heightened tensions, including U.S. military actions and Iranian threats against passing ships, have made traversing this essential route too dangerous for many in the global shipping industry.

According to MarineTraffic, a ship tracking service, tanker movement through the strait on Wednesday had plummeted by about 90% compared to the previous week, with numerous oil and gas tankers now waiting just outside the area.

In response to the crisis, former President Donald Trump announced on Truth Social that the U.S. Navy would be prepared to escort tankers through the strait if needed. Despite this pledge, vessel movement remains minimal, and it is uncertain whether any ships have accepted the proposed military protection.

Jakob Larsen, who oversees safety and security at the international shipping group BIMCO, noted, “Naval escorts could lower the risk for protected ships. However, safeguarding every tanker in areas threatened by Iran would demand an enormous deployment of military resources, which is not feasible.”

Marsh Risk, an insurance broker, reported that over 150 ships—including oil and liquefied natural gas tankers—have been forced to anchor or change course, leading to significant operational disruptions. Many insurers are withdrawing war risk coverage, leaving a gap that has sharply increased the cost of insuring safe passage. Marsh indicated that insurance rates have jumped from 0.25% to 1.25% of a vessel’s value since Tuesday, with further hikes likely as hostilities continue.

To address the insurance shortfall, Trump stated on Truth Social that he had directed the U.S. International Development Finance Corporation to provide coverage for ships navigating the gulf.

This agency, which identifies itself as the federal government’s international investment branch, announced it would support commercial shipping operators, shipowners, and key maritime insurers to reduce market disruptions and help maintain the steady movement of goods and capital.

The Strait’s Global Importance

Located along Iran’s southern coast, the Strait of Hormuz is a narrow channel that handles about 20% of the world’s oil shipments and is also vital for transporting commodities such as aluminum, sugar, and fertilizer.

With shipping activity nearly halted, energy prices have surged. On Wednesday, the average price for gasoline in the U.S. climbed to $3.19 per gallon, a 22-cent increase from the previous week, according to AAA. This is also 10 cents higher than the average price a year ago.

Economic Ripple Effects

Previously, declining gas prices had been a positive factor in the inflation outlook and a key talking point for the Trump administration. Over the past year, gas prices had dropped even as costs for groceries, auto insurance, housing, and electricity continued to rise.

Now, with oil prices approaching $80 per barrel and gasoline costs spiking, that positive trend is fading. Higher crude prices typically translate into more expensive gasoline and diesel, fueling inflation and increasing costs for consumers. Disruptions in shipping can also drive up transportation and manufacturing expenses, leading to delays, port congestion, and broader supply chain shocks.

If these elevated prices persist, consumers may eventually cut back on spending, which could slow global economic growth.

Matt Lekstutis, a director at supply chain consultancy Efficio, explained, “The main concern isn’t an immediate shortage of goods, but rather prolonged energy-driven inflation that spreads through global supply chains. This issue is now a top priority for supply chain and procurement professionals.”

The combination of slower economic growth and rising inflation—a scenario known as stagflation—poses a challenge for the Federal Reserve, which has been working to bring inflation down to its 2% target.

Although inflation has eased to 2.4% year-over-year as of January, it remains above the central bank’s goal. Should the conflict cause another inflation surge, interest rates may stay elevated for longer. Already, analysts have scaled back expectations for a rate cut by the Fed this month.

This has broad implications, especially for those seeking to buy or refinance homes. Mortgage rates, which had fallen below 6% for the first time since 2022 before the conflict, have now risen back to 6.07%.

Security and Shipping Restrictions

While Iran does not have the technical means to completely close the Strait of Hormuz, Iranian officials recently warned they would attack any vessel attempting to pass, according to state media. The U.K.’s Maritime Trade Operations reported on Wednesday that a container ship had been struck by an “unknown projectile.”

Since the onset of strikes on Iran early Saturday, many major shipping and logistics firms—including Maersk, MSC Group, CMA CGM, Hapag-Lloyd, COSCO, and Emirates SkyCargo—have limited or suspended bookings through the region. Exceptions are being made for critical supplies such as food and medicine.

This article is adapted from a report originally published on NBCNews.com.