Senior fellow, Transatlantic Security Initiative in the Scowcroft Center for Strategy and Security, Atlantic Council
What it will take to get ships
through the Strait of Hormuz
Some have suggested that what is keeping ships from transiting the Strait of Hormuz is that insurers have stopped providing coverage, but that's incorrect: Insurance has remained available throughout the Iranian de facto blockade, the US blockade of Iranian ports, and this week’s launched-then-suspended US escort initiative. What has stopped most Western-linked ships from attempting the journey was instead duty of care.
Shipowners and charterers certainly have the means to pay the suddenly much higher insurance premiums, but transiting would have meant the very real risk of Iranian attacks, risking seafarers’ lives. Even without attempting the Hormuz transit, more than thirty vessels have been hit in the Persian Gulf and the Gulf of Oman. At least seventeen seafarers and dockworkers have been injured; eleven are known to have been killed.
No insurance can bring seafarers back to life, and like all employers, shipping lines bear a responsibility to their employees. What’s more, the shipping sector is struggling to recruit seafarers. Storms and long absences already make life on board unappealing to most (which is why the shipping industry relies heavily on crews from a few nations such as India and the Philippines). Waiting in the Gulf means tedium, fear of attacks, and the risk of supplies drying up. But being sent directly into the line of fire would be far worse. Most Western-linked ships will keep waiting in the Gulf until it's safe to leave.
THE LATEST
Defense and security
The “limits of military power” become apparent in the strait
US Navy photo
On Monday, Washington announced what it called “Project Freedom” to reopen the Strait of Hormuz, saying it had sunk six Iranian boats that threatened commercial vessels, and opened a more secure shipping lane close to the Omani side of the strait. Two merchant ships passed through. Hundreds remain in the Gulf, with major shipping company Hapag-Lloyd announcing that its risk assessment was “unchanged” and its ships would stay put. Iran launched missile and drone strikes against a key oil facility in the United Arab Emirates, the first since the cease-fire took effect nearly a month ago. On Tuesday, US President Donald Trump said the US would pause the efforts to guide vessels through while negotiations with Iran continued.
Expert take
Amir Asmar
Nonresident senior fellow, Scowcroft Middle East Security Initiative, Atlantic Council Middle East programs
“The uncertain cease-fire in the Gulf reflects growing US understanding of the limits of military power to effect policy change. Tehran is probably surprised at its continuing success in keeping the Strait of Hormuz largely closed and is unlikely to capitulate to US demands without some concessions. With the regime losing power an unlikely prospect, the only means to fully re-open Hormuz—apart from a negotiated solution—is via force, a months-long project, according to some estimates attributed to the Pentagon.”
Energy
As oil exports plummet, renewables face an unusual pricing problem
Maritime monitor TankerTracker reported that Kuwait did not export a single barrel of crude oil in April—a first since the end of the Gulf War in 1991. Meanwhile, Europe is grappling with negative electricity prices, which occur when supply outstrips demand and excess supply can’t be stored. With many solar panels and wind turbines installed across Europe in recent years, sunnier and breezier days producing more energy than can be used or stored is a growing problem. Because all power producers take the financial hit from subzero prices, this could put the renewables boom—and potentially the larger transition to clean energy—at risk.
Expert take
Ben Cahill
Nonresident senior fellow, Global Energy Center, Atlantic Council
“The fact that one of the world's ten largest oil producers exported no crude in April illustrates the depth of this energy crisis. Kuwait, like other Gulf producers, awaits a resolution of safe transit through the Strait of Hormuz. Kuwait Petroleum Corporation's CEO has estimated it will take three to four months to restore full production even after a resolution of the conflict. Factors that will affect the pace of a post-war recovery include the extent of damage to upstream facilities and loading terminals. Kuwait, Saudi Arabia, and the UAE are more likely to see a rapid rebound, but Iraq's post-war production recovery is more uncertain.”
Economy
Gulf states look for new models
Amid tensions over Europe’s response to the US war on Iran, Trump threatened Friday to impose 25 percent tariffs on EU-made cars. European Commission President Ursula von der Leyen pushed back, insisting the terms of last July’s Turnberry accord—which set auto tariffs at 15 percent—must be honored and that Brussels is prepared for “every scenario.” France’s President Emmanuel Macron reinforced the message, warning that reopening the agreement would invite a full EU response. Gulf commerce ministers met virtually and discussed the need for deeper regional integration, as free-trade agreement negotiations between the Gulf Cooperation Council and other countries and groups, including the EU, move forward. Eurozone finance ministers also met with higher prices, rising inflation, and slower growth looming.
Expert take
Khaled Sakr
Nonresident senior fellow, MENA Futures Lab, Atlantic Council’s Rafik Hariri Center for the Middle East
“The Iran war has shaken the national security and economic development models of the Arab Gulf countries. Whether the transition to new models is destabilizing or brings more collaboration and stability largely depends on whether the recent rift between UAE and Saudi Arabia widens or is mended. In the short and medium term, the decline in oil output will be mitigated by higher prices and the immense size of the countries’ sovereign wealth funds. These funds will, however, invest more cautiously domestically and abroad. All the above will translate into negative spillovers internationally and will likely contribute to higher inflation and lower growth globally.”
