Before Iran laid mines in the Strait of Hormuz and before the IRGC began striking tankers with drones, the strait had already been effectively closed. Within 48 hours of coordinated U.S.–Israeli airstrikes on Iran on February 28, 2026, war risk premiums surged fivefold, major marine insurers terminated existing coverage and offered replacements at roughly sixty times pre-crisis rates, and Lloyd’s Joint War Committee, a body that assesses high-risk maritime zones, redesignated the entire Arabian Gulf as a conflict zone. Tanker traffic collapsed by more than 80 percent. The kinetic escalation that followed—at least eight vessels struck, the cities of Ras Tanura and Fujairah hit, mines eventually laid—compounded the disruption, but the commercial shutdown preceded the physical blockade. Insurance closed the strait before Iran’s Islamic Revolutionary Guard Corps (IRGC) navy did.
The irregular warfare community has long discussed how adversaries exploit commercial systems to achieve strategic effects. What happened at Hormuz is the clearest case yet of a state actor weaponizing the structural logic of a global commercial infrastructure—marine insurance—to convert limited kinetic action into systemic economic disruption. Disruption, as used here, means something specific: not the physical destruction of infrastructure or the military interdiction of a trade route, but the withdrawal of the commercial preconditions, insurance coverage, underwriting capacity, or institutional risk designations, without which vessels cannot legally or financially operate. The Hormuz closure also echoed a pattern the insurance market had already revealed in the Black Sea in early 2022, when war risk designations and repricing signaled escalation days before Russia’s invasion of Ukraine. This article dissects these mechanisms and argues that insurance-driven maritime closure should be recognized as a distinct irregular warfare capability that any chokepoint-adjacent adversary might replicate.
Anatomy of the Weapon System
To understand why the insurance markets drove the effective closure, treat the maritime insurance industry as a weapon system with identifiable components that an adversary can target, predictable behavior that an adversary can exploit, and exploitable dependencies that make the system’s response self-reinforcing. The subsections that follow map to this framework: the gating function and the institutional trigger are the system’s components; the self-executing property is the predictable behavior that makes the weapon persistent; and the escalation ladder describes the dependencies through which the system cascades toward closure.
Component: The gating function. Commercial shipping cannot operate without insurance. A vessel entering contested waters must hold hull and machinery coverage, protection and indemnity (P&I) coverage, and an additional war risk premium (AWRP). Without all three, ports refuse entry, banks withhold cargo financing, and charterers will not contract the vessel. This is not a preference; it is a structural requirement embedded in port regulations, lending covenants, and charter party agreements across the global maritime industry. The system is binary: insured vessels sail; uninsured vessels do not.
Component: The institutional trigger. Lloyd’s Joint War Committee (JWC), a body comprising underwriting representatives from the Lloyd’s Market Association and the International Underwriting Association, publishes a list of “Areas of Perceived Enhanced Risk.” When a region is designated, every vessel entering those waters must carry AWRP coverage at the prevailing rate or sail without insurance, which is commercially impossible because no port, lender or charterer will accept the vessel. The JWC is not a government body. Its designations are driven by underwriting judgment, not foreign policy. But a JWC designation has the operational effect of a government-imposed exclusion zone: it raises costs, restricts access, and, when premiums cross certain thresholds, eliminates commercial traffic entirely. On March 3, the JWC expanded its Listed Areas to include Bahrain, Djibouti, Kuwait, Oman, and Qatar, converting the entire Arabian Gulf into a designated conflict zone.
Predictable behavior: The self-executing property. This is the most important characteristic of the weapon system, and the one that distinguishes it most sharply from a conventional blockade. Unlike a naval interdiction, which requires sustained force commitment, logistical support, and escalatory risk, the insurance mechanism requires no ongoing military action after the initial strikes. Each actor in the insurance chain follows its own institutional incentives: reinsurers demand higher premiums to reflect elevated exposure, P&I clubs issue expiry notices and renegotiate at prohibitive rates, the JWC expands its designations, shipowners reroute or anchor rather than absorb the new costs, charterers invoke force majeure, and commodity markets reprice. The adversary does not have to enforce the closure. The system enforces it on itself. This is the behavioral property that makes the weapon so cost-effective: Iran’s military investment was finite and bounded; the commercial response was open-ended and self-sustaining.
Dependencies: The escalation ladder. The self-executing behavior operates through a three-step escalation sequence, each triggered by the one before it. Step one is repricing: AWRPs surge, raising transit costs but not halting traffic. Hormuz premiums rose from 0.2 percent to 1 percent of hull value, adding roughly $800,000 per very large crude carrier (VLCC) voyage. Step two is coverage expiry and prohibitive replacement: P&I clubs issue 72-hour notices terminating existing war risk extensions, after which shipowners must renegotiate at dramatically escalated rates. Gard, Skuld, NorthStandard, the London P&I Club, and the American Club all issued notices effective March 5. As Lloyd’s List subsequently clarified, cover was not withdrawn outright, it was replaced at rates so extreme (approximately $30,000 per week for coverage that previously cost $25,000 per year) that the practical effect was identical. Shipowners did not lose access to insurance; they lost access to affordable insurance, which in commercial terms amounts to the same thing. This distinction matters for IW analysis: the weapon does not require the system to refuse service. It requires only that the system reprice beyond the threshold of commercial viability. Step three is institutional expansion: the JWC widens the designated zone, raising the cost floor for all commercial traffic in the broader region. Each step is driven by the commercial logic of the underwriting community, not by any action the adversary takes after the initial strikes.
Precedents and Proof of Concept
The exploitation of commercial maritime systems for strategic effect has earlier precedents. During the Iran–Iraq “Tanker War” of 1984–1988, both belligerents attacked commercial vessels in the Gulf, ultimately striking over 400 ships. War risk premiums surged, and the United States eventually intervened with naval escorts under Operation Earnest Will. The 1980s Tanker War is a misleading analogy for what happened in March 2026. In the 1980s, attacks were sustained over years, the global insurance market was structurally different (less concentrated, less reinsurance-dependent), bypass infrastructure did not exist, and the attacks aimed at destroying cargo and vessels rather than triggering a commercial cascade. The 2026 mechanism is structurally distinct: a limited military action triggered a systemic commercial response because the modern insurance architecture, with its interlocking P&I, reinsurance, and JWC designation systems, is far more tightly coupled than its 1980s predecessor. The weapon is the coupling, not the kinetic action.
The more direct precedent is the 2024–2025 Red Sea crisis. Houthi attacks on commercial shipping in the Bab el-Mandeb Strait never physically closed the waterway, but they drove AWRPs to 0.7–1 percent of vessel value, a 500 percent increase, making transit commercially unviable for most operators. Major carriers rerouted around the Cape of Good Hope without any formal closure being declared. The insurance market made the operational decision, not any military authority. The Red Sea also established a property that makes the insurance weapon particularly persistent: the ratchet effect. Premiums rose rapidly in response to attacks but declined slowly, if at all, even after weeks without incidents. Kpler’s analysis concluded that rates would normalize only when sustained incident-free transit rebuilt actuarial confidence. The adversary gets persistent economic disruption from a finite military investment. The cost is paid upfront; the economic damage compounds over time.
The Red Sea demonstrated that the insurance weapon works at a chokepoint carrying roughly 12 to 15 percent of global trade. The question the IW community should have been asking in early 2026 was whether the same mechanism could be scaled to a chokepoint carrying one-fifth of global oil. Iran answered that question.
How Hormuz Scaled the Concept
The U.S.–Israeli strikes on Iran triggered the insurance cascade; Iran’s retaliatory attacks on tankers and infrastructure sustained and deepened it. The result was a system-level outcome that exceeded what any party intended or controlled, driven as much by institutional market logic as by deliberate state strategy. Two dynamics amplified the effect:
Targeting the bypass infrastructure. The Gulf has limited bypass infrastructure. Saudi Arabia’s East–West pipeline to Red Sea terminals is the largest, with a capacity of 5 million barrels per day. The UAE’s pipeline to Fujairah provides a second route. Kuwait, Iraq, and Qatar have no overland alternatives. Iran’s targeting choices exploited this constraint: strikes on Fujairah’s storage and bunkering hub, Qatar’s Ras Laffan LNG facilities, and Saudi Arabia’s Ras Tanura refinery degraded the bypass options that existed. Saudi Red Sea exports remained further exposed to potential Houthi interdiction from Yemen. A chokepoint without alternatives is not just a bottleneck; it is a single point of failure, and single points of failure are exactly where the insurance weapon is most devastating, because there is no route to which commercial traffic can divert when coverage becomes prohibitively expensive.
Compounding with structural market tightness. The VLCC fleet was already operating at structural capacity before the strikes. Approximately 23 percent of the global VLCC fleet had migrated to the shadow fleet to service sanctioned trades, and aggressive fleet consolidation had concentrated the remaining compliant tonnage among fewer owners. One-year time charter rates had reached $93,000–$105,000 per day before the strikes, the highest in decades. When insurance repricing effectively removed the Gulf from commercially viable trade lanes, a freight market already at capacity absorbed the shock with near-vertical rate spikes: $423,736 per day on the benchmark Middle East–China route. The lesson for IW planners: the insurance weapon is most effective when deployed against chokepoints where the underlying market is already tight. Pre-existing supply constraints amplify the disruption.
Replicability
The insurance weapon is not unique to Iran or to Hormuz. Any state or non-state actor able to threaten commercial shipping near a chokepoint can, in principle, set this cascade in motion. The mechanism requires three conditions: a narrow passage through which significant trade flows, limited bypass alternatives, and a commercial insurance system that functions as a gating mechanism. These conditions exist at the Strait of Malacca (25–30 percent of global trade, 80 percent of China’s oil imports), the Taiwan Strait (over $2.45 trillion in annual goods, one-fifth of global maritime trade), and the Turkish Straits (connecting Black Sea grain exports to global markets). At the Taiwan Strait, the Center for Strategic and International Studies notes that disruption would likely prompt shipping companies to avoid the area to limit insurance costs—a gray-zone application of commercial coercion below the threshold of armed conflict. The IW community should be war-gaming insurance-driven closures as a distinct scenario class at each of these chokepoints, separate from kinetic blockade scenarios.
Implications for the Irregular Warfare Community
The Hormuz crisis exposes a gap in how defense establishments and their allied partners model chokepoint vulnerability. Conventional planning focuses on the kinetic threat: mines, anti-ship missiles, submarine interdiction. Those threats are real. But conventional frameworks did not predict the speed and completeness of the commercial shutdown. The kinetic action was serious; the commercial amplification was systemic. Three implications follow for defense planners, allied governments, and the broader IW research community.
Insurance market intelligence belongs in the operational picture: AWRPs repriced faster than crude futures, equity markets, or sovereign credit default swap spreads. More importantly, the repricing began months before the strikes: Hormuz premiums had risen 60 percent above their 2024 baseline by mid-2025. JWC circulars and AWRP rate quotes are publicly available. We saw a similar early warning signal play out when the JWC designated the Black Sea as high-risk on February 15, 2022, nine days before Russia invaded Ukraine. In both cases, the insurance market priced the conflict before it started. For CENTCOM’s J2, NAVCENT’s maritime operations center, or allied maritime headquarters in the Gulf and Indo-Pacific, AWRP movements should be tracked as leading indicators of chokepoint vulnerability alongside AIS data, overhead imagery, and signals intelligence. If the insurance market is pricing in escalation, the operational picture should reflect that.
Sovereign backstop insurance needs to be a standing capability: The Trump administration’s Development Finance Corporation (DFC) insurance announcement demonstrated that government-backed insurance can partially substitute for withdrawn commercial capacity, freight futures dipped on the news. But an improvised sovereign guarantee announced 72 hours into a crisis is not a strategy. It is a scramble. If the United States and its allies want to maintain freedom of navigation through insurable chokepoints, they need a pre-established sovereign insurance mechanism that indemnifies the governance threat: designed, funded, priced, and exercised before the next closure. The mechanism should include clear activation triggers, reinsurance backstops, and coordination with allied sovereign insurers (notably the UK’s P&I infrastructure and Gulf state risk facilities). Adversaries will probe for gaps in sovereign coverage the same way they probe for gaps in naval posture.
The IW community should study commercial infrastructure as a domain: The insurance weapon is one instance of a broader class of IW tools: the exploitation of commercial systems whose structural logic can be triggered by limited military action to produce cascading economic effects. Payment systems, classification societies, commodity exchanges, and credit rating agencies all exhibit similar gating properties. They function as prerequisites for commercial activity, and their withdrawal can shut down economic sectors. The Economic and Legal Warfare Project has identified this space as critical. The Hormuz case should be its defining case study: a live demonstration that commercial infrastructure is not merely the background against which irregular warfare occurs, but the medium through which it operates.
The next chokepoint may be closed not by mines or missiles, but by a repricing notice from an underwriter, with cover technically available, but at rates no shipowner will pay. The question is whether defense planners will have recognized the weapon system before it fires, or whether they will be caught, once again, treating a commercial decision as a military surprise. The concrete step is straightforward: every combatant command and allied maritime headquarters with chokepoint responsibility should establish a dedicated insurance-market watch function, integrated into existing maritime domain awareness systems, by the end of 2026. The data is public. The mechanism is now proven. The only missing element is institutional attention.
Dr. John George Hatzadony is Program Chair for Homeland Security at Rabdan Academy in Abu Dhabi, UAE and a researcher at the Rabdan Security and Defense Institute (RSDI). His work focuses on the intersection of financial crime, irregular warfare, and supply chain security.
The views expressed are those of the author(s) and do not reflect the official position of the Irregular Warfare Initiative, Princeton University’s Empirical Studies of Conflict Project, the Modern War Institute at West Point, or the United States Government.
Main image is the USS Normandy escorting a merchant vessel through the Strait of Hormuz from DVIDS.
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