Trump’s Hormuz strategy may raise energy costs as India faces fertilizer and LNG supply risks

A sudden halt in oil tanker movements through the Strait of Hormuz is raising serious concerns for India’s energy security and fertilizer supply, as analysts warn that the disruption could trigger wider economic consequences across global markets, an NDTV report said.

Energy economist Anas Alhajji says the global energy system has entered “uncharted territory” after insurers abruptly withdrew war-risk coverage for ships moving through the world’s most critical oil chokepoint.

“We are entering uncharted territory across multiple energy and commodity markets, including crude oil, refined products, LNG, natural gas liquids, fertilizers, methanol, and other petroleum derivatives,” Alhajji said.

The immediate trigger for the crisis was not a direct Iranian military attack on tankers but a financial shock that brought shipping activity to a sudden standstill.

According to Alhajji, major European and global insurance companies abruptly cancelled war-risk coverage for vessels passing through the Strait of Hormuz or sharply increased premiums, making voyages economically unviable. As a result, many shipowners have halted operations through the route.

“No one anticipated this,” Alhajji said. “While the world has experienced shipping disruptions in recent decades, nothing quite like this has occurred before.”

The Strait of Hormuz is a critical artery in global energy trade. Around 15 to 20 percent of the world’s oil supply and roughly 20 percent of global LNG shipments move through the narrow waterway connecting the Persian Gulf to international markets.

Alhajji argues that the disruption is currently being driven less by military action and more by decisions within the global financial and insurance system.

“Until Iran actually attacks and sinks a major oil tanker in the strait, the real disruption is coming from insurance cancellations and rate hikes,” he said.

Trump’s silence raises questions

Another factor drawing attention, Alhajji noted, is the response from the United States. Despite frequently criticizing high oil prices, US President Donald Trump has remained largely silent on the insurance crisis even as it disrupts global trade and pushes energy prices higher.

“The silence from President Trump on this insurance debacle is striking,” Alhajji said. “It raises suspicions that the broader campaign against Iran may involve larger geopolitical and economic objectives.”

One possible objective could involve reviving a Cold War-era maritime strategy. Trump has indicated that the US Navy could escort oil and LNG tankers through the Strait of Hormuz if the situation deteriorates further.

Such a move would mirror tanker escort operations carried out by American naval forces during the Iran-Iraq war in the 1980s to protect Kuwaiti oil shipments. If implemented, the strategy could reshape global energy economics.

Military escorts might lower the risk of attacks but would likely increase transport costs, insurance premiums, and shipping delays, effectively raising the cost of exporting oil and LNG from the Gulf.

“That raises the cost and risk of Gulf shipments and increases the relative competitiveness of US oil and LNG,” Alhajji said.

India faces growing risks

The disruption is already beginning to affect emerging economies, including India. About a quarter of India’s fertilizer imports pass through the Strait of Hormuz, while the country’s fertilizer sector depends heavily on imported gas and oil from Gulf producers.

With LNG supply disruptions, particularly from Qatar, Indian authorities have already instructed fertilizer manufacturers to reduce natural gas consumption.

The timing is particularly sensitive as the disruption comes just before India’s crucial planting season.

“If agricultural output falls significantly this year, India could end up importing more agricultural products from the United States. That is precisely the outcome Washington has long sought,” Alhajji said.

The crisis is also impacting other developing economies. Bangladesh has begun cutting power supply as LNG imports tighten, while Egypt and Jordan have lost gas flows from Israel. At the same time, several Gulf producers have reduced output of oil, LNG, and petrochemicals amid the uncertainty.

Energy markets brace for volatility

Global energy markets are now preparing for prolonged volatility. Citigroup expects Brent crude to trade between $80 and $90 per barrel in the near term if tensions de-escalate within one to two weeks following leadership changes in Iran or a strategic pause by the United States.

Goldman Sachs estimates that oil prices currently include an $18 per barrel geopolitical risk premium linked to the conflict. If only half the oil flows through the Strait of Hormuz is disrupted for a month, the bank expects that premium to fall to around $4 per barrel. However, more severe scenarios remain possible.

Consultancy Wood Mackenzie has warned that oil prices could surge above $100 per barrel if tanker flows are not restored quickly.

“Higher oil and gas prices are certain as the closure of the Strait of Hormuz threatens to disrupt 15 percent of global oil supply and 20 percent of global LNG supply,” said Alan Gelder, senior vice president of refining and oil markets at Wood Mackenzie. Alhajji warned that the implications could extend far beyond energy markets.

“If the insurance crisis persists and the conflict does not end soon the world risks spiraling into a severe economic and political crisis,” he said.

“Global trade flows are shifting dramatically, and if this continues long enough, we could even see regime change, just not necessarily where people expect.”