Ships in Strait of Hormuz to be 'set ablaze', IRGC official says, as insurers cancel coverage
The world’s largest insurance providers are cancelling war-risk coverage for ships in the Persian Gulf after a senior official in the Iranian Revolutionary Guard Corps (IRGC) said Iran would “fire” on any ship transiting the Strait of Hormuz as a result of the US and Israeli attack.
"The strait (of Hormuz) is closed. If anyone tries to pass, the heroes of the Revolutionary Guards and the regular navy will set those ships ablaze," Ebrahim Jabbari, a senior adviser to the IRGC commander-in-chief, said on Monday, according to state media.
The Strait of Hormuz is a critical waterway just 21 miles wide at its narrowest point, through which about 20 percent of the world's daily oil consumption and natural gas passes.
A closure of the strait could also impact container vessels, sending shipping prices up. Jeremy Nixon, CEO of the container carrier, Ocean Network Express, told Reuters on Monday that 10 percent of the global fleet of container vessels is “caught up” in the Strait of Hormuz’s closure.
Jabbari’s statement comes as major providers of war-risk insurance, critical for vessels to transit conflict zones, said they would start withholding coverage as of Thursday.
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Just the loss of war-risk insurance alone could mean a de facto closure of the Strait of Hormuz for western-owned tankers. Iran has long relied on a shadow fleet of vessels operating outside the western insurance system to ship its oil.
According to a report by Bloomberg on Monday, the international group of insurance associations that are cancelling war-risk insurance for vessels in the Persian Gulf provide the protection for about 90 percent of the world’s ocean-going tonnage.
As the war on Iran escalates, energy has become a target. Saudi Arabia’s biggest domestic oil refinery was forced to suspend production after a drone strike.
Meanwhile, state-owned QatarEnergy said it was halting production at its Ras Laffan plant after it was attacked by a drone.
The Qatari plant covers about 20 percent of the global liquefied natural gas (LNG) supply.
Europe and Asia are particularly vulnerable to any blockage of LNG from the Persian Gulf. The benchmark European gas price rose by as much as 45 percent on Monday.
Iran’s Tasnim news agency published a report on Monday that denied Iran had targeted the Gulf states' energy facilities.
Regardless, a closure of the Strait of Hormuz would effectively have the same result by blocking oil and gas shipments from the region, driving up energy prices, and preventing the Gulf's main export.
Brent crude, the international benchmark, surged up to eight percent on Monday to settle at $78.40 per barrel.
US Secretary of State Marco Rubio said on Monday that the Trump administration will introduce action on Tuesday to “mitigate” rising energy prices caused by the war on Iran.
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