The Trump administration has publicly floated insurance and naval escort proposals aimed at restoring energy flows through the Strait of Hormuz, but we question whether sufficient planning has been completed and whether international coordination is feasible. While the headline oil price reaction was downward, the insurance backstop remains in a concepts-of-a-plan stage. The Development Finance Corporation's proposed coverage would substantially exceed anything the agency has previously undertaken, particularly given the exclusion of war and terrorism from commercial insurance markets.
Coordinating with the world's largest tanker insurers, based in the UK, Norway, and Japan, while overseeing coverage for non-U.S.-flagged vessels presents significant logistical and legal hurdles. Insurers will likely demand durable guarantees before resuming coverage en masse, and courts could challenge the DFC's authority to provide war-risk backstops.
Naval escorts present additional complications. While the U.S. provided Kuwaiti tanker escorts during the 1987 Tanker War phase of the Iran/Iraq conflict, current capacity constraints differ substantially. The U.S. is now leading military operations against Iran while simultaneously managing existing commitments elsewhere, creating questions about available assets for sustained escort operations. Beyond the 11 Iranian ships the White House claims to have destroyed, thousands of small Iranian boats remain capable of harassment, boarding attempts, mine-laying, and interdiction operations.
"The scope and potential risk assumed by the DFC goes far beyond anything undertaken by the agency."
Helima Croft, Head of Global Commodity Strategy and MENA Research, RBC Capital Markets
Iraq faces cascading production shutdowns due to mounting storage constraints, marking an early indicator of major disruption scenarios we have warned about. West Qurna 2, Rumalia, and Maysan fields announced combined production cuts of approximately 1.5 million barrels per day and Iraqi officials have indicated that curtailments could exceed 3 million barrels daily if shipping disruptions continue unresolved. Iraq's Foreign Minister recently raised these material risks with his Saudi counterpart, underscoring regional concern about prolonged Strait closure affecting the roughly 3.4 million barrels per day typically exported through the waterway.
Qatar's LNG and downstream operations have halted following security threats, with production curtailments now spreading to chemical manufacturing. While we continue monitoring for official damage assessments at Ras Laffan, the broader security environment remains a consequential factor. Critically, the Strait of Hormuz lacks de-risking infrastructure for the 20% of global LNG that transits the passage annually. Operator caution and insurance constraints represent substantial hurdles, though we are tracking how U.S. stabilization measures might influence underwriting decisions.
Most of Qatar's LNG exports head to just five Asian consumers, concentrating demand pressure. Intensified bidding for available cargoes has driven European natural gas prices upward sharply, with TTF on track to double versus Friday's close and risks moving further higher if disruptions persist.
Tuesday's drone strike on Fujairah's fuel depot, where debris from an intercepted drone reportedly ignited an oil storage tank at the facility, underscores the limitations of alternative export routes, despite Emirati marketing of the facility as a secure de-risking option outside the Strait's S-curve. The oil terminal exported over 1 million barrels per day of crude and 300 kb/d of refined products in 2025, with area refineries maintaining over 180 kb/d of collective capacity.
The security selling point for Fujairah was already undermined in May 2019 when several tankers faced strikes in nearby waters following U.S. maximum pressure sanctions on Iran, and we anticipate further attacks on Fujairah given the UAE's continued status as a principal Iranian target, partly reflecting its close Israeli ties.
"We continue to caution against assuming that large quantities of exports can safely move through the alternative routes."
Helima Croft, Head of Global Commodity Strategy and MENA Research, RBC Capital Markets
Alternative routing through the Red Sea presents its own vulnerabilities despite rising attention from market participants. Saudi Aramco is reportedly discussing crude loadings from Yanbu, the Red Sea outlet for the East-West pipeline capable of moving 5 million barrels daily of Saudi crude. Red Sea shipping rates have spiked sharply, with Yanbu rates more than doubling to $28 million per tanker. However, the bypass pipeline itself faced Houthi targeting in 2019, resulting in damage to two pumping stations and temporary flow cessations. Yanbu and those potential Red Sea cargoes remain well within the range of Houthi missiles and drone capabilities, cautioning against assumptions that large export quantities can safely move through alternative corridors.
The IEA has convened and stands ready to help stabilize markets, echoing its posture during the 2022 Russia-Ukraine conflict when it coordinated the largest collective emergency stock release since its inception. Members released 182 million barrels from public and industry reserves over two releases during the first few weeks of that war. IEA members maintain over 1 billion barrels in public emergency stocks, with additional reserves held through industry and government obligations. Members are required to hold emergency stocks equivalent to 90 days of net imports in both categories.
While swift responses have precedent, we anticipate sustained disruptions would need to emerge before members tap reserves. The U.S., possessing the largest strategic reserve at approximately 415 million barrels, has not yet indicated consideration of a release, and notable timing constraints limit SPR operational flexibility. Given the scale of potential disruption, strategic reserves would offer minimal relief in prolonged scenarios.
Helima Croft authored "Iran Flashpoints: Concepts of a Plan," published on March 3, 2026. For more information on the full report, please contact your RBC representative.
