Hormuz Cover Hits 10%

The Strait of Hormuz has not been closed. No pipeline has been severed, no LNG terminal has gone dark, and no formal blockade has been declared. Yet the price of passing through it is already being repriced in a way Europe can feel.

War-risk insurance for a single journey through the strait has risen from about 0.25% to 4–5% of a vessel's hull value, with some quotes reaching 10% (S&P Global, DW). For a large tanker, that is not a line item. It is a commercial decision about whether the voyage is worth making.

Hormuz is the narrow stretch where the Persian Gulf tightens between Iran and Oman. In the first half of 2025, almost 21 million barrels per day of crude and petroleum products moved through it, roughly a fifth of global oil-related supply (CFR). After renewed US-Iran strikes in early July, vessel traffic fell sharply.

Lloyd's Market Association, which coordinates London's marine-insurance market, has said war-risk cover is still available. The issue, it stressed, is that ships are staying away because owners are worried about crew and vessel safety (LMA). That distinction matters. The route remains legally open, but it is becoming commercially unattractive.

How insurance moves gas prices

Insurance is the first lever. When premiums rise, shipowners push the cost into war-risk surcharges in charter contracts. Crews may refuse the voyage. Charterers may decide the surcharge is too high. Cargoes are delayed while buyers wait for a safer window.

The result is a supply squeeze before any physical supply has been cut. Fewer ships move. The ships that do move cost more. That risk then feeds into commodity benchmarks, which is why an insurance quote in the Gulf can end up inside a European household bill.

European gas prices moved within hours. On 13 July, the front-month Dutch TTF contract, Europe's main wholesale gas benchmark, opened at about €50.4/MWh, roughly 3.5% above the previous session (OilPrice, TradingPedia).

TTF had already risen more than 15% over the previous week. Four Dutch energy suppliers responded by lifting fixed gas tariffs by 1.2–1.5% (Energievergelijk). Hormuz does not have to shut for the effect to reach consumers. It only has to make the marginal cargo more expensive.

Italy's substitution test

Italy shows how the chain works once it reaches a country dependent on the route. More than 46% of Italian LNG came from Qatar in 2024 (BNP Paribas). After QatarEnergy reportedly declared force majeure on shipments through Hormuz, Italy's Adriatic LNG terminal at Porto Tolle kept volumes close to normal by taking US cargoes instead of Qatari ones, according to Italian energy press reports.

That is the reassuring version of the story: the lights stay on. The less comfortable version is that spot-market cargoes cost more than long-term Qatari supply, and substitution works only while US LNG is available at prices Italy can live with.

Eni chief Claudio Descalzi told the Italian parliament that the problem goes beyond crude. After Europe cut Russian supply, about 60% of the continent's diesel and jet fuel comes from the Gulf, while European refining capacity has shrunk (Corriere della Sera). Those are corporate claims rather than independent statistics. Still, Descalzi is describing a supply chain his company operates inside.

Spain complicates the argument. Madrid says its direct exposure to Hormuz is limited, and Spain has the EU's largest regasification capacity. But terminals can unload LNG; they cannot make a scarce cargo cheap. When global risk raises the price of the next available shipment, Spain is bidding against Asia and everyone else (El País). Infrastructure buys room for manoeuvre, not immunity.

What the EU can and cannot control

Kaja Kallas, the EU's foreign-policy chief, has framed the task as protecting navigation "both in the Gulf, but also in the Red Sea" (EEAS). The European Commission says gas storage targets remain achievable and that spare LNG import capacity gives the bloc a buffer.

That is true as far as it goes. But extending ASPIDES, the EU naval mission set up in 2024 to protect Red Sea shipping, towards Hormuz is reportedly contested. Spain and Italy are said to favour diplomacy over a wider military commitment, which reflects a familiar EU constraint: the bloc can coordinate energy stocks more easily than it can project military power into a contested maritime corridor.

For Ireland, the immediate exposure is indirect but real. Irish gas prices are shaped by the same European benchmarks, and the country has little room to pretend that global LNG risk is someone else's problem. A disruption priced in Rotterdam or Milan does not stay there.

The EU can manage storage. It can use import terminals better. It can try to keep diplomatic channels open. What it cannot do is set the insurance premium, the charter rate or the war-risk surcharge that decides whether a ship sails.

Europe does not need Hormuz to close to feel the damage. It only needs insurers, shipowners, crews and charterers to decide, voyage by voyage, that the passage no longer justifies the risk. That is already happening.