The United States and Iran exchanged fire in the Strait of Hormuz on Monday, trading cruise missiles, drones and helicopter attacks in the most direct military confrontation between the two countries since the conflict began in February - as Iranian drones struck an Emirati oil terminal and a South Korean cargo ship caught fire in the strait, plunging an already fractured insurance market into fresh uncertainty.
US Central Command chief Adm. Bradley Cooper told reporters that US Apache and SH-60 Seahawk helicopters destroyed six Iranian small boats after Iran launched "multiple cruise missiles, drones and small boats" at US Navy ships and at commercial vessels the American military was seeking to protect under President Trump's "Project Freedom" operation. Cooper said the US had established a one-way lane through the strait to allow commercial vessels that had been "held hostage" in the Persian Gulf for weeks to exit, though he declined to say how many ships had used it.
Iran's army chief, Maj. Gen. Amir Hatami, warned that any US aircraft carriers approaching Hormuz would be met with force. "The American aircraft carriers, with the stealth of radar silence, imagined they could approach the Strait of Hormuz; but our response was fire," he said on X. "Every inch of these waters is within the range of our will."
The kinetic exchange rattled oil markets and pushed Brent crude above $111 a barrel. It also underscored what marine insurers and shipowners have argued for weeks: political announcements alone do not make a chokepoint safe to cross.
A drone strike on the VTTI oil storage terminal in Fujairah - the UAE's main bunkering port, jointly owned by IFM Global Infrastructure Fund, Vitol Group and ADNOC - caused a major fire that injured three Indian nationals, Emirati authorities said. All three were taken to hospital. Separately, ADNOC confirmed that one of its tankers was struck by two Iranian drones off the coast of Oman. The UAE issued a missile threat warning and said its military had intercepted three Iranian missiles - the first such intercepts since the country declared its airspace free of threats nearly a month ago.
South Korea's foreign ministry confirmed an explosion and fire aboard the HMM Namu, a Panama-flagged cargo vessel operated by Korean shipper HMM, in the strait itself. There were no reported casualties, and HMM said the fire broke out in the engine room.
The US military said two US-flagged merchant ships had transited the strait safely. Iran's Revolutionary Guards dismissed those claims as "baseless" and "outright lies," saying no commercial vessels had crossed. The contradictory statements left the actual status of the waterway - and the credibility of Project Freedom - in genuine doubt.
Situation Map — May 4, 2026
The Strait of Hormuz and Monday's attacks
Fujairah lies outside the strait — it was meant to be the safe alternative. Monday changed that.
Map is illustrative. Attack locations are approximate based on wire reports. The strait narrows to roughly 33km at its narrowest point between Iran and Oman's Musandam peninsula. Sources: Bloomberg, Reuters, CNN, US Central Command, May 4, 2026.
The Strait of Hormuz, through which roughly a fifth of the world's oil and liquefied natural gas moved before the war began on February 28, has been commercially closed for longer than it has been militarily dangerous. When US and Israeli forces launched strikes on Iranian targets on that date, war-risk premiums surged fivefold within 48 hours, the Lloyd's Market Association's Joint War Committee redesignated the entire Arabian Gulf as a conflict zone, and tanker traffic collapsed by more than 80 per cent before Iran's physical blockade was even formally declared.
That dynamic - in which the insurance market closed the strait before the Iranian navy did - has defined the two months since. A ceasefire announced on April 7 changed the political temperature but did little to reopen commercial shipping lanes. Coverage must be renegotiated individually for each vessel, on a voyage-by-voyage basis, with fresh actuarial assessments made by each layer of the reinsurance chain. Capacity withdrawn at the treaty reinsurance level must be reinstated through negotiation, not by political announcement.
Before the war, insuring a very large crude carrier for a Hormuz transit cost roughly 0.2 per cent of the vessel's hull value - a few hundred thousand dollars for a round trip. Within days of the first strikes, those rates climbed to between 1.5 and 3 per cent of hull value, with vessels deemed to have American, British or Israeli connections charged as much as 5 per cent. For a tanker worth $150 million, that is an insurance bill of up to $7.5 million for a single voyage.
Monday's attacks are likely to push those numbers higher still.
In March, the Trump administration directed the US International Development Finance Corporation to provide political risk insurance to keep commercial shipping moving. Chubb was named as lead underwriter for the facility, which was structured to provide war hull, war protection-and-indemnity and war cargo cover for eligible vessels transiting under conditions approved by the US government. The DFC later expanded the facility's capacity to $40 billion by bringing in six additional US insurers - Travelers, Liberty Mutual, Berkshire Hathaway, AIG, Starr and CNA.
The facility requires applicants to disclose vessel origin, destination, beneficial ownership and the identity of cargo owners and lenders. That granular vetting process has been slow, and it has not been designed to respond to the kind of rapid escalation seen on Monday.
Calvin Gray, global head of marine at Intact Insurance, has warned that the conditions required for stable, insurable passage remain absent. Writing before Monday's strikes, he said the strait may be "officially open" without being anywhere near normal. "Shipowners are rightly cautious, and insurers will take the same approach," he said. "Cover will return where voyages are considered safe, but that threshold has not yet fully been met."
Monday's events moved that threshold further away.
The container shipping group Hapag-Lloyd said on Monday that it still considered transit through the strait not possible. The International Maritime Organization has estimated that hundreds of commercial vessels and as many as 20,000 seafarers have been unable to transit the strait since the conflict began.
A separate layer of difficulty is emerging around how losses are classified - and who pays them. Mahmoud Abuwasel, an international disputes partner at Wasel & Wasel, has warned of a growing divergence between how governments define the Hormuz situation and how insurers interpret liability. "We colloquially talk about it as a war, but from the United States' official position, it's not a war," he said. "That distinction matters because it directly affects whether war-risk provisions in insurance policies are triggered."
The distinction has practical consequences for shipowners filing claims today. It also echoes earlier precedent: during the Yugoslav conflict in the 1990s, arbitration upheld an insurer's position that a conflict not formally declared as a war by NATO powers did not trigger war exclusion clauses.
For marine brokers, a central concern is coverage gaps for loss caused by delay rather than direct physical damage - a category that is affecting a far larger number of cargo owners than those whose vessels have been physically struck. Nick Francis, marine partner at Kennedys, has warned that constructive total loss issues will arise for vessels trapped in the Gulf as the 12-month deprivation threshold approaches. Roughly 750 vessels worth approximately $25 billion were in the Persian Gulf when fighting began on February 28, according to figures from Aon.
At the center of the Hormuz standoff is an impasse that Monday's attacks deepened rather than resolved. Iran says it will only reopen the strait after the US lifts its naval blockade on Iranian ports. Washington wants Tehran to act first. A shaky ceasefire has been in place since April 7, but attempts to arrange further face-to-face talks have failed.
Iran is reviewing a US response to a 14-point proposal - conveyed via Pakistan - that reportedly calls for a complete end to the conflict within 30 days, the withdrawal of US forces, the lifting of the maritime blockade, the removal of sanctions and the payment of reparations. The nuclear issue was not included. Trump said over the weekend that the proposal would not be enough to satisfy him.
Iran's semi-official Fars news agency reported that Iranian forces fired on US Navy ships approaching the strait. The US military denied an initial Iranian claim that a warship had been struck; Iran later described the fire as warning shots, before the CENTCOM briefing confirmed the destruction of six Iranian boats by US helicopters.
Cooper was careful to reframe the nature of the American operation on Monday. There are no ship-by-ship "escorts," he said - rather, the US has assembled "multiple layers" of protection including ships, helicopters, aircraft, airborne early warning and electronic warfare. "I think we have a much better defensive arrangement in this process," he said. The distinction matters for insurers: a layered defensive perimeter is harder to price than a named-vessel convoy, and the legal and underwriting implications of vessels operating inside a US-defined "enhanced security area" without a formal escort remain untested.
The war, which began on February 28 when the US and Israel began bombing Iran, has killed more than 5,500 people, most of them in Iran and Lebanon. The UAE has intercepted thousands of Iranian drones and missiles since the conflict began and was considered one of the more stable staging points for international shipping trying to avoid the strait. Monday's attack on Fujairah - which lies outside the strait and had been one of the few functional export alternatives in the region - removes that assumption.
China, meanwhile, has ordered its companies to ignore US sanctions on private oil refiners linked to the Iranian oil trade, adding a further dimension to a crisis that is increasingly drawing in the world's major economies.
For more on the insurance dimension of the Hormuz crisis, see Insurance Business's ongoing coverage: A ceasefire won't reopen the insurance market - not yet - Trump's naval blockade deepens the insurance crisis - State-backed reinsurance schemes may complicate Gulf claims
