War-risk premiums are already 4,000 times higher than before the Iran-US conflict began. Now, if Trump follows through on his threat to seize Kharg Island, underwriters may be facing something far worse.
President Trump threatened Thursday to strike Iran "VERY HARD" again and take "total control" of the country's oil and gas markets, posting to Truth Social that the US "in the not too distant future" would seize Kharg Island - Iran's main oil export hub, handling roughly 90% of its shipments - and run its energy markets, as he put it, "much like we have with Venezuela, which is working out brilliantly for both Venezuela and the United States of America."
The threat came after a fresh wave of US airstrikes near the Strait of Hormuz and Iranian retaliatory strikes on US military facilities in Bahrain, Kuwait, and Jordan. It marks, according to the Wall Street Journal, which first reported the story, Trump's third strategic shift toward Iran since the war began in February - from decapitation strikes, to economic blockade, to what now appears to be a bid for outright military and economic subjugation.
The trajectory matters as much as the immediate threat. The Strait of Hormuz carries approximately 20% of the world's seaborne oil and gas through a single, unsubstitutable chokepoint, according to S&P Global. When hostilities broke out in late February, all 12 members of the International Group of P&I Clubs - covering 90% of the world's ocean-going tonnage - cancelled certain war coverage on 72-hour notice, the S&P Global report stated. Hull war premiums, which before the conflict sat at around 0.25% of a ship's value, surged to as high as 10% per transit at their peak in mid-March. Howden Re described the repricing as "permanent structural," warning in a late-March briefing that a prolonged Hormuz closure could constitute a "multi-decade-level loss event" for the industry.
The human toll has underscored why. At least nine to fifteen tankers sustained damage since the conflict began, including the Honduran-flagged Nova, struck by two drones and burning in the Strait, and the US-flagged Stena Imperative. At least four seafarers were killed in a separate attack on a tug near the waterway.
The scale of the dislocation drew direct government intervention. The Trump administration directed the US International Development Finance Corporation to establish a $40 billion revolving reinsurance facility spanning hull, cargo, and liability risks, with Chubb named as lead partner. The Lloyd's Market Association clarified in March that coverage remained available in the London market, noting that 88% of surveyed participants retained appetite to underwrite hull war risks - but acknowledged that reduced vessel traffic was being driven primarily by crew and vessel safety concerns, not a failure of the market itself.
As of early May, the Joint Maritime Information Centre still classified the threat level in the Strait as CRITICAL, warning of unsurveyed mines and describing transit near the Traffic Separation Scheme as "extremely hazardous”.
Seizing Kharg Island would almost certainly require ground troops - a significant escalation from the air campaign that has defined the conflict so far - and would entrench rather than resolve the Hormuz blockade. The island's oil infrastructure, which Trump previously said he chose not to "wipe out" when US forces first struck military targets there in March, would under any occupation scenario become simultaneously a military objective and an insured asset at the centre of competing legal and contractual questions that the market has no established framework to resolve cleanly.
The Venezuela comparison, while framed by Trump as a success story, is instructive in ways that should give underwriters pause. US economic assumption of Venezuelan oil operations deepened political risk exposures across Latin America, triggered sustained litigation over asset ownership, and created long-tail liability questions that remain unresolved years later. A similar playbook applied to the Gulf - the world's most critical energy corridor - would generate political risk, trade credit, and D&O exposures of a scale and complexity that dwarfs anything the Venezuela situation produced.
For hull and cargo underwriters, a Kharg operation would likely trigger renewed cancellation notices and further capacity contraction. For energy and property underwriters, the second-order risks are already visible: Iran has struck Saudi Arabia's Ras Tanura refinery and Bahrain's sole refinery with drones during the current conflict, and a ground escalation would expand the target set considerably. Iran has also warned that any country permitting strikes from its territory would be treated as an aggressor - a posture that has already drawn missile fire on US facilities across three Gulf states.
The war is now in its fourth month, with no deal in sight and a US president who has just reached for his bluntest instrument yet. For insurers with exposure to energy, marine, property, or political risk in the region, the question is no longer whether this market has been permanently repriced. It is how much further it has to go.
