Trump's Hormuz "Dual-Track Plan": Can Military Escort and Government Insurance Connect the Global Energy Hub?

On February 28, the U.S.-Israeli coalition launched Operation Epic Fury, launching large-scale airstrikes on Iranian military and nuclear facilities, killing Supreme Leader Khamenei in the first round of strikes. Within hours, the Islamic Revolutionary Guard Corps (IRGC) issued a warning to passing ships via VHF radio, announcing that no ship would be allowed to pass through the strait. On March 2, IRGC senior adviser Ibrahim Jabari publicly declared: “The strait is closed.” If anyone tries to get through, the heroes of the Revolutionary Guard will turn those ships into a sea of fire. He also threatened to attack oil pipelines “to prevent a drop of oil from flowing out of the region, and oil prices will reach $200 in the next few days.”

The actual effect was immediate: traffic in the strait plummeted by about 81% on March 1 compared with the previous week, and by March 2, only four ships of more than 10,000 tons passed through. More than 150-210 tankers are stranded outside the strait. Maersk, Hapag-Lloyd, CMA CGM and Mediterranean Shipping have all suspended the strait. It is worth noting that the IRGC has not issued a formal legal blockade order - the mechanism that really paralyzes shipping is the insurance withdrawal: the seven major P&I associations covering about 90% of the world’s ocean-going tonnage announced the withdrawal, which is more effective in preventing commercial passage than the military threat itself.

To appease the panicked global energy market, the Trump administration urgently announced an unprecedented two-track intervention plan: ordering the U.S. International Development Finance Corporation (DFC) to provide political risk insurance for Gulf shipping and promising naval escort.

As soon as this statement came out, the effect was immediate: after the announcement, the Dow rebounded about 900 points from the intraday low, and the intraday increase in crude oil narrowed from 9% to less than 5%.

However, the market rejoiced too soon, because Trump’s “promise” political signal was far greater than practical feasibility.