How a twenty-one-mile strait is rewriting the rules of global shipping

Few passages in world history have been as consequential for commerce and conflict as the Strait of Hormuz, and in the space of a single weekend it has once again demonstrated its capacity to destabilise the entire architecture of global energy trade.

The escalation of the United States and Israeli military campaign against Iran, and Tehran’s retaliatory threats and attacks on vessels traversing this narrow neck of water between the Persian Gulf and the Gulf of Oman, have produced what commodity analysts at Kpler describe as an effective closure for commercial shipping: a de facto blockade achieved not through formal legal declaration but through insurance withdrawal, the flight of ship operators and the anchoring of tankers in the open ocean.

The physical geography explains both the strait’s importance and its vulnerability. At its narrowest it measures twenty-one miles across, with commercial shipping lanes only three kilometres wide in each direction. Yet it accommodates the world’s largest crude oil carriers, LNG tankers, container vessels and product tankers. The United States Energy Information Administration recorded approximately twenty million barrels of oil per day flowing through it in 2023, around twenty percent of global petroleum consumption. Kpler’s 2025 figure is thirteen million barrels per day, equivalent to thirty-one percent of all seaborne oil flows. The strait also carries one-fifth of global LNG supply, ninety-three billion cubic feet per day from Qatar alone, plus large volumes of jet fuel, naphtha and gasoline. No other chokepoint carries a comparable share of the world’s energy trade.

Since Iran’s IRGC began broadcasting warnings by VHF radio that no vessel was permitted to pass, confirmed by an official of the EU naval mission Aspides, the industry response has been decisive and uniform. Maersk, Hapag-Lloyd, MSC and CMA CGM, the four largest container lines on the planet, suspended all transits. Greek shipowners, who control the world’s largest tanker fleet, were advised to avoid the waterway. The result was a seventy percent decline in transit traffic, with over one hundred and fifty tankers, crude carriers and LNG vessels anchored in Gulf waters.

Whether shipowners will accept idle time rather than transit is being answered in real time. A VLCC carrying two million barrels at eighty dollars per barrel holds cargo worth one hundred and sixty million dollars, with the vessel itself worth seventy to one hundred million more. No prudent owner commits that combined value to a war zone without insurance cover, and cover is precisely what is no longer available. The London market and the International Group of P&I Clubs, which insure approximately ninety percent of the world’s ocean-going tonnage, are withdrawing or restricting war risk cover for Persian Gulf waters. Premiums have surged fifty percent to a six-year high.

Vessels without cover breach their charterparty obligations. Owners who sail without it face uninsured losses in the hundreds of millions and personal liability for crew casualties. The rational decision is to anchor.

The legal framework here is well established. The BIMCO war risk clauses, CONWARTIME 2025 and VOYWAR 2025, empower a vessel’s master to refuse entry into any area that poses, in his reasonable judgment, a danger to vessel, cargo or crew, without that refusal constituting a breach of the charterparty. Charterers who direct a vessel into a war risk area without arranging adequate cover or protective measures may themselves be liable for additional premiums, rerouting costs, loss of hire and crew danger pay. The IRGC’s broadcasts and the confirmed attacks on three tankers are precisely the objective indicators that justify a master’s refusal. The Joint War Committee of the Lloyd’s Market Association had already listed the Persian Gulf as a designated risk area; that listing is now under urgent review. As the Shipping Team at Smith and Partners has advised, shipowners and charterers operating in or near affected waters should be urgently reviewing their charterparty war risk clauses, confirming their insurance position and documenting every navigational decision taken in response to the crisis.

Rerouting around the Cape of Good Hope adds ten to fifteen days to voyages that previously transited the Suez Canal and Bab el-Mandeb. Those extra days mean fuel costs, crew wages, port fees and capital locked in transit, all ultimately borne by consumers and industries worldwide. The Bab el-Mandeb was already disrupted by Houthi attacks since late 2023. Maersk’s decision to suspend trans-Suez sailings in addition to its Hormuz suspension means the two most critical corridors connecting Asia and the Middle East to Europe and the Americas are simultaneously closed to mainstream commercial shipping. The Cape route, once a historical last resort, is now effectively the primary route for global seaborne trade. Its capacity is finite.
For Nigerian shipping, the crisis compounds existing burdens. Nigeria already bears war risk surcharges that the Nigerian Shippers’ Council and Nigerian Navy have described as unjustified and politically driven, and demonstrably so, given three consecutive years without a recorded pirate attack on Nigerian waters. With global war risk sentiment now inflamed by actual Gulf hostilities, those surcharges will harden, and the Shippers’ Council’s ongoing campaign to delist Nigeria from the war risk zone faces a more difficult environment.

The oil price dimension offers Nigeria a different calculation. Nigeria’s 2026 budget was benchmarked at sixty-four dollars and eighty-five cents per barrel. Brent hit eighty dollars on Monday, with Rystad Energy projecting ninety-two dollars near-term and Goldman Sachs and Barclays flagging three-digit prices if disruption is sustained. Nigeria produces approximately 1.45 million barrels per day, below its OPEC quota but trending upward after years of underperformance, meaning the OPEC+ invitation to produce more arrives at a moment when Nigeria has genuine capacity to respond. A sustained ninety-dollar price generates foreign exchange receipts well above budget projections, with direct benefits for the naira and external reserves.

The Dangote refinery adds a structural dimension that distinguishes this crisis from earlier oil shocks for Nigeria. Under the naira-for-crude arrangement with NNPCL, operational since late 2024, Dangote purchases Nigerian crude priced in naira, eliminating the dollar cost of feedstock and reducing the forex demand that domestic refining would otherwise generate. Consumers still feel upward price pressure because Dangote prices output at import parity, benchmarked to global refined product costs. But the refining margin and the foreign exchange saving remain in Nigeria rather than flowing to foreign refiners. For a country that spent decades exporting crude and reimporting refined products at full dollar cost, that structural shift matters. The price pass-through from global crude prices is real, but it is no longer complete.

What the Hormuz crisis illustrates most sharply is that global shipping runs on a web of legal, commercial and insurance arrangements that function only so long as the underlying risk environment stays within tolerable bounds. When a twenty-one-mile strait goes quiet, the silence is heard in fuel pumps in Lagos, factories in Seoul and supermarkets in London.

Nigeria sits at the intersection of those who may briefly gain from that silence and those who will ultimately pay for it.

The task for Nigerian policymakers is to capture the windfall, manage the costs with discipline, and use the clarity that crisis provides to advance the structural reforms that would make these vulnerabilities, one day, less acute.