Trump’s escort announcement met with scepticism as traffic trickles through Strait of Hormuz
THE prospect of US naval escorts and state-backed war risk insurance has been greeted across the shipping and insurance sectors with scepticism and confusion as traders await further details of US President Donald Trump’s plan to guarantee the free flow of energy shipments through the Strait of Hormuz.
In the absence of any detail, insurers remain unconvinced that Trump’s plan for the US Development Finance Corporation to provide guarantees “at a very reasonable price... for the Financial Security of ALL Maritime Trade, especially energy, traveling through the Gulf” offered any immediate change to the market.
Despite several requests for information, London insurers remain unclear how the proposal might work in practice and whether it could help bring down prices, but as one senior figure described it “it is not currently being factored into the market”.
Meanwhile, Trump’s announcement on Tuesday evening that “if necessary, the US Navy will begin escorting tankers through the Strait of Hormuz, as soon as possible” is yet to be followed up with any detail. Initial conversations between shipping industry officials and operational naval personnel suggest that escorts would not be immediately available, despite Trump’s social media pledge.
Two shipowners with tankers currently stuck inside the MEG told Lloyd’s List that escorts would not tempt them through while combat operations were still taking place.
While naval escorts could help reduce the threat for the ships being protected, providing protection for all tankers operating in areas threatened by Iran is widely regarded by industry and insurance sources as unrealistic given that this would require a very high number of warships and other military assets.
Trump announced his escort plans in a social media post on Tuesday, less than 24 hours after industry officials were told by the US Navy that there was “no chance” of such escorts materialising.
Iranian anti-ship
According to Joshua Tallis, naval analyst at the Center for Naval Analyses, escorts are more likely to start after more damage is done to Iran’s capabilities to attack ships.
“I suspect that any concerted US escort operation probably would come only after the initial phase of major hostilities passes and likely following some additional strikes to further suppress Iranian anti-ship capabilities,” he told Lloyd’s List.
“Conditions will dictate that timeline, but seven to 10 days is probably a good initial estimate.”
Iran’s capabilities to attack ships are not limited to missile and drones, Tallis said. The US said it had hit a dozen Iranian naval vessels, but Iran has small craft and the capability to mine the strait.
“Fast-attack craft armed with rockets and small missiles, a large stockpile of naval mines (some possibly laid clandestinely by dhows), and uncrewed surface systems are potent asymmetric threats to commercial traffic that are difficult for warships to counter from a safe distance as compared to aerial systems like drones and missiles.”
Even if Iran’s capabilities to harm ships are significantly degraded and escorts are deployed, prior experience in the Red Sea crisis indicates that may not be enough to adequately restore shipping’s confidence and spur a return to normal transit levels.
“Over two years of attempts to incentivise a return to Red Sea traffic, the US relied on very effective missile defences by the navy but failed to account for or modify the market pressures exerted by insurance rates,” said Tallis.
Analysis of Lloyd’s List Intelligence data shows four ships, equivalent to 346,037 dwt, transited the Strait of Hormuz on March 3.
Half sailed eastbound towards the Gulf of Oman, while two Greek-owned ballast tankers headed into the Middle East Gulf.
Both tankers, a long range one and suezmax, disabled their Automatic Identification System data during the period they passed through the strait.
At least three Greek tanker owners are known to be actively discussing suezmax fixtures through the strait with the intention of transiting at night with AIS turned off, Lloyd’s List understands.
Since the start of the month some five tankers can be tracked entering the MEG, two suezmaxes, two long range one tankers, and one panamax.
Most traffic, about 75%, through the strait is heading eastbound away from the gulf where the situation remains unstable with six ships in the area hit over the last few days.
It is not just tankers that are moving to position themselves within the MEG, though.
Since March 1, two bulk carriers, one general cargoship and a containership have all sailed westbound through the strait.
One of the bulk carriers is berthed at a port in the United Arab Emirates while the other is still on route.
The general cargoship is anchoring off Iraq, while the containership — a sanctioned ship flagged with Iran — has made its way to the area off Bandar Abbas.
Passages through the strait are challenging to ascertain given widespread GNSS interference and potential dark transits by vessels.
Lloyd’s List has identified six dark transits through the Strait of Hormuz over the past three days. This number could increase as more data becomes available.
There are a handful of other vessels that disappeared while actively sailing towards the strait that have yet to reappear.
AIS data shows several vessels heading in the direction of the chokepoint on Wednesday.
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