As the cost of oil shifts closer to $120 per barrel and stock markets across the world saw significant falls, there are growing concerns that a prolonged conflict in the middle east may lead to a global economic crisis.

With major oil and gas producers in the Middle East announcing they are ready to cut production and refineries and facilities across the region continues to come under attack. Iran has also warned it will attack vessels which look to transit the Strait of Hormuz leading to insurers taking a very conservative approach to cover and with it vessel owners’ decisions that to transit the area is simply too big a risk.

The USA has sought to encourage the movement of oil and gas through the Strait having announced it is to offer insurance cover for those vessels which are seeking insurance.

The  US International Development Finance Corporation (DFC) CEO Ben Black and U.S. Treasury Secretary Scott Bessent have  announced an agreement on a detailed implementation plan approved by US President Donald Trump to deploy Maritime Reinsurance, including war risk, in the Gulf region.

“This announcement marks a key milestone toward the rapid implementation of president Trump’s directive to utilize DFC’s innovative financial toolkit to safeguard the continued flow of trade” the DFC announced in a statement.

“I am grateful to president Trump and secretary Bessent for their support and approval of DFC’s plan to restore confidence in maritime trade and stabilize international markets. Working alongside CENTCOM, DFC coverage will offer a level of security no other policy can provide. We are confident that our reinsurance plan will get oil, gasoline, LNG, jet fuel, and fertilizer through the Strait of Hormuz and flowing again to the world,” said  Black.

Under the scheme the maritime reinsurance facility will:

• Insure losses up to approximately $20 billion on a rolling basis.
• The revolving insurance offering will apply only to vessels that meet the criteria.
• Insurance will focus on Hull & Machinery and Cargo to start.
• DFC has identified best-in-class, preferred American insurance partners.
• DFC and Treasury are coordinating closely with CENTCOM on next steps in the implementation of this plan.

The situation remains fast moving but the direction of travel continues to be one of falling production and an inability to move the oil and gas that has been produced  in the region.

The International Energy Agency is said to be working with finance ministers in the G7 to coordinate an emergency release of petroleum to ease the current crisis.

The IEA said the global oil market has been in significant surplus since the start of 2025. Ahead of the military actions that began on 28 February, global oil supply was also expected to far exceed demand in 2026. However, prolonged supply disruptions could flip the market into a deficit.

Notably, IEA Member countries hold over 1.2 billion barrels of public emergency oil stocks. These, and a further 600 million of industry stocks held under government obligation, can bring additional supply to market if needed.

“The Gulf region is a key source of exports of oil products to global markets, notably for middle distillates such as diesel and jet fuel,” The IEA added. “Globally, markets for middle distillates have been relatively tight compared with those for other products, with sustained imports into European markets a key driver. As such, there appears to be little flexibility for refineries to increase the yield of diesel and jet fuel further to compensate in the event of sustained supply losses.”

About 80% of oil and oil products transiting the Strait in 2025 was destined for Asia. However, the age cy said the impacts of a prolonged disruption to shipping would be global given the impact on prices and potential for physical shortages to develop.

“Any extended disruption in the Strait of Hormuz could also render unavailable the vast majority of the world’s spare oil production capacity, most of which is held by Saudi Arabia,” it warned.