Energy and insurance specialists have cast doubt on Donald Trump’s plans to insure tankers in the Gulf, complicating the US president’s efforts to curb the oil price surge triggered by his war in Iran.
Trump on Tuesday tasked the Development Finance Corporation to provide insurance to vessels sailing through the Strait of Hormuz, where flows have slowed to a trickle since the outbreak of war with Iran.
The president’s vow to provide insurance and potentially naval escorts to ships passing through the critical waterway initially helped soothe energy markets but Wall Street and the City of London have cast doubt on his plan, sparking fresh alarm over supply security.
New research from JPMorgan shows the DFC has access to just $154bn of the $352bn needed to underwrite the 329 oil vessels in the region.
Natasha Kaneva, an energy analyst at JPMorgan, said: “Each would require oil‐pollution, salvage, hull and third‐party liability coverage in the event of a total loss, implying about $352bn of maximum insurance coverage that private markets are not presently providing.”
Private insurers have told ship owners in recent days that they will cancel policies and sharply increase price as the war in the Middle East escalates, the FT has previously reported.
Insurance market figures said they doubted the DFC’s balance sheet was large enough to underwrite the values at risk or that the agency would be nimble enough to help idling tankers secure cover in the coming days.
“DFC is not set up to write short-term risk and it doesn’t have any experience in this class of business,” said Maximilian Hess, founder of Enmetena Advisory, a political risk consultancy that advises London insurers.
“It can offer reinsurance cover under its statutory authorities and I imagine if Trump wants this to happen, that is the only way it can go. That is not straightforward.”
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The DFC is only allowed to have a maximum total liability of $205bn through 2031, of which it had used $51.5bn by the end of 2025, according to JPMorgan. Raising the cap would require an act of Congress.
The figures will undermine the president’s efforts to instil confidence in shipping executives who have been reluctant to send vessels through the strait, the chokepoint for about 20mn barrels a day of oil supply — about a fifth of the world’s demand.
US crude oil prices have surged almost 20 per cent since the war began on Saturday, hitting the highest level since July 2024 and rapidly pushing up petrol prices at the pump. The rises threaten to inflame an affordability crisis that has eroded Trump’s popularity.
A White House official said the DFC and Treasury department have “been speaking with insurers and have conducted extensive analyses on the maritime situation in the Gulf”.
He said JPMorgan’s research is “based on faulty assumptions about what insurance coverage is actually needed in the region and how potential DFC insurance coverage would be structured”.
The official added: “More announcements are forthcoming on this presidential priority, but the administration is confident that the DFC has the necessary resources to plug the gap.”
Iran has threatened to set fire to any ships that cross the strait, leaving shipowners reluctant to send vessels through.
At least eight commercial vessels, most of which were oil tankers, have been hit in the area since Sunday.
Stamatis Tsantanis, chief executive of US-listed Seanergy Maritime which operates a fleet of 25 vessels, said: “The priority for the industry is not just moving cargo, but protecting the lives of seafarers, the value of vessels and avoiding what could become a major environmental disaster if a tanker were seriously hit in such a narrow and sensitive waterway.”
“Shipping has always adapted to geopolitical tensions, but restoring normal flows through Hormuz will depend on credible security arrangements that give crews, owners and insurers the confidence that transit through the strait is genuinely safe,” he added.
Amos Hochstein, chief energy adviser to former president Joe Biden, said insuring maritime traffic strayed beyond the normal remit of the DFC and suggested the plan had not been fully thought through.
“These insurance policies are not a joke,” said Hochstein, now a managing partner at TWG Global. “DFC normally does financing. So, if you start becoming an insurance company for oil tankers, what if three tankers get hit and a tanker got hit yesterday?”
“The Trump administration has on occasion put out big pronouncements of a policy decision and then said, ‘we’ll figure out the details later’. The problem is that every day that goes by where the straits are closed, this eventually becomes a real crisis.”
The shipping industry has been seriously disrupted since the US and Israel launched their initial strikes on Iran on Saturday as insurers quickly sent out notices of cancellation and raised premiums.
In some cases vessels secured new coverage at prices that were multiples of their previous policies, but the wave of cancellations acted as a shock to the market, maritime security experts said, slowing traffic through the Gulf.
By midweek, insurance remained available but prices had risen as much as 12 times, with some insurers declining to provide cover through the Strait.
Just 40 tankers passed through the strait this week, a tiny fraction of the normal traffic. European gas prices have surged 50 per cent to their highest levels in years, while Brent crude, the international oil benchmark, advanced almost 5 per cent to $85.17 on Thursday and is up 17 per cent since last Friday.
About 1,000 vessels — half of which are oil and gas tankers — were in the Gulf and surrounding waters as of Thursday, according to the Lloyd’s Market Association trade body.
The ships’ aggregate insured “hull” value was more than $25bn even before adding the value of commodities carried onboard.
Shipping investors and security experts said freight costs and the risk of attack had become at least as much a deterrent for vessels as higher insurance rates.
Bob McNally, founder of Rapidan Energy, a Washington-based consultancy, said: “The necessary precondition for the resumption of tanker flows through the strait is the demonstrated suppression of Iran’s military capability to attack shipping.”
“Insurance will remain prohibitively expensive unless this happens and there is a question mark over whether seafarers will agree to go through the strait due to safety concerns,” he added.
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