The Strait of Hormuz reopened on paper last Friday, when the United States and Iran signed their deal in Geneva and Washington lifted its naval blockade. By the old logic, tankers should be streaming through and crude should be in free fall. It isn't. WTI sits at $75.34 a barrel and Brent at $78.78, only a little below where they traded the day the war ended.
What is holding prices up isn't the politics, and it isn't only the queue of 500 tankers waiting to cross. It's the cost of insuring each ship that makes the trip.
A 20-fold jump in the cost of crossing
Before the war, sending a tanker through Hormuz was almost an afterthought for insurers. War-risk cover ran about a quarter of a percent of the vessel's value. Today underwriters are charging somewhere between 3% and 8%. For a fully loaded supertanker, that single line item now runs $3 million to $8 million per crossing.
Owners do not eat that cost. They fold it into the freight rate, and the freight rate gets baked into the delivered price of every barrel that leaves the Gulf. So even with the channel technically open, a cargo bound for refineries in Asia or Europe still carries a war markup the moment it clears the strait.
That premium, more than the headline price of crude, is why the post-deal slide stalled. The sell-off that took WTI to $81 had room to keep running. Insurance is what set a floor in the mid-$70s instead of the low $60s.
Clearing mines is the easy part
Two hurdles sit between Friday's signature and cheap, free-flowing oil. The first is physical. Each of the strait's two shipping lanes is barely three kilometers across, and parts of the waterway were seeded with mines during the fighting. US defense officials reckon a full sweep could run up to six months. Maritime security firms put the floor at 40 to 50 days before underwriters will even talk about normal passage.
The second hurdle is trust, and it outlasts the minesweeping. Insurers are pricing the future, and the future in the Gulf is still murky.
Oscar Seikaly, chief executive of NSI Insurance Group, framed the problem as the gap between volatility and uncertainty. Sharp price swings, he said, are something underwriters can put a number on. An open-ended risk with no clear edges is not, at least not cheaply. Before they reopen full cover, insurers want to see steady, predictable conduct in the channel and dependable safe passage, not a single signed page with loose ends hanging off it.
Munro Anderson of the marine war-risk firm Vessel Protect drew a similar line. As he sees it, the market needs a ceasefire that genuinely holds and a clean stretch with no fresh ships seized before insurers will bring their capacity back.
Why a thin market stays expensive
Hormuz normally handles around 17 million barrels of crude and condensate a day, close to a fifth of what the world burns, plus roughly a fifth of the global LNG trade. Before February it saw about 178 ships a day. Traffic collapsed by some 95% once the shooting started, and a corridor that empty does not refill in a week.
Each clean, uneventful crossing hands underwriters a fresh data point. String enough of them together and premiums drift down, freight rates ease, and the war markup slowly bleeds out of the oil price. That is a story measured in weeks and months, not trading sessions.
The risk cuts the other way too. One mine strike, one seized tanker, one collapsed clause in the Geneva text, and the insurers reset the clock, and the price with it. For now the cheapest part of moving Gulf oil is the oil itself. The expensive part is convincing someone to guarantee it arrives.