The Wall Street Journal reports:

Escalating Iranian attacks and the U.S. government’s decision to hold off on military escorts for oil tankers through the Strait of Hormuz are raising the prospect of a prolonged closure that would choke off exports through the world’s most important energy-transport route.

On Wednesday, the Islamic Revolutionary Guard Corps struck three cargo ships attempting to transit the waterway, the only sea route out of the Persian Gulf. It warned that any other vessels trying to move through the strait also would be targeted.

Later on Wednesday night, in an incident far from the strait, two foreign tankers carrying Iraqi fuel oil were ablaze in Iraqi waters after being hit by projectiles, Iraqi ports officials said.

The U.S. has turned down repeated requests for tanker escorts from oil companies, said officials from Gulf countries. Defense officials say it is too risky to send warships into the confined waters of the strait—which is about 21 miles wide at its narrowest point—until the risks of Iranian fire have receded.

American forces have hit Iran’s navy, and its drone and missile crews, in an effort to curb the threat. But Iran is still landing blows. Added to that are the risks of naval mines and Iranian submarines lurking below.

With traffic paralyzed as a result, the shutdown of the strait is fast causing a global economic disruption and a major military and political challenge for the Trump administration.

Shippers were bracing for an extended shutdown of the waterway, where traffic could take a long time to recover even after the conflict ends.

“It will take time. Not only do we need hostilities to stop, but also shipowners to perceive that the risk to the people on board and to the ships has been materially reduced,” said Jerry Kalogiratos, chief executive of Athens-based Capital Clean Energy Carriers, which transports liquefied natural gas. “Think about the Red Sea: Six months after the Houthis stopped the attacks, and traffic has not normalized,” he said, referring to Yemen’s Iran-backed militants. “It’s all about perception of safety. And we are far away from that.” [Continue reading…]

The Wall Street Journal reports:

President Trump’s plan to sell insurance for ships in the Gulf, a way of easing the war-induced crunch in oil supplies, is proving easier said than done.

The effort was designed to help “ensure the free flow of energy to the world,” Trump said in a social-media post last week. The U.S. would provide, at a very reasonable price, political risk insurance for all shipping, backed if necessary by U.S. Navy escorts, he said.

The U.S. Development Finance Corp., part of the federal government, was tasked with implementing the $20 billion plan, an “America First”-style insurance program, led by American insurers.

This U.S.-centric idea ran counter to the market realities, according to industry executives.

Maritime war risks policies are sold mostly out of Lloyd’s of London, with foreign insurers covering foreign ships and cargo.

“There’s a whole ecosystem around war risks,” said David Smith, head of marine with broker McGill and Partners. “It’s very rare that U.S. insurers position themselves anywhere near that particular ecosystem.”

U.S. officials called London insurers and brokers, trying to figure out how the market operates, industry insiders said. Some have received calls asking for confidential data on the Lloyd’s market that participants have been reluctant to share.

The administration adapted its plan on Friday after shipowners and insurers questioned its practicality. The DFC pivoted to proposing using the $20 billion as reinsurance, or coverage insurers can buy to offset certain risks. [Continue reading…]