The total number of oil tankers targeted by the Iranian Revolutionary Guard, in the Strait of Hormuz, has risen to six:
- Sunroof
- Star of Hercules
- MKD Fume
- Unidentified oil tanker West Dubai
- Stena Imprative
- Athens Nova
China and other countries are pressuring Iran to reopen the Strait of Hormuz.. About twenty percent (20%) of the world's daily oil needs, must travel through that Strait to get to market. Now, none of it can and everyone is blaming Iran.
There is one problem. Iran did not close it.
Seven insurance companies in London did.
China buys 80% of Iran’s shipped oil. Beijing has a $400 billion, 25-year cooperation agreement with Tehran. China is Iran’s economic lifeline. If any country on earth has leverage over Iran, it is China. And China is now using that leverage to demand the Strait reopens.
But the Strait was not closed by a sovereign decision. It was closed by the withdrawal of reinsurance capacity from five to ten firms, mostly in London, backstopping twelve P&I clubs that cover 90% of global tonnage. Iran did not order those firms to withdraw. Iran cannot order them to reinstate. Neither can China.
Even if Tehran capitulates entirely tonight and the IRGC stands down, not a single reinsurer reinstates Gulf war risk coverage on a phone call from Beijing. Reinstatement requires rebuilt risk models, voyage-by-voyage re-underwriting, repriced treaty capacity, and a threat environment that actuaries can quantify. None of that exists while 440.9 kilograms of weapons-grade uranium remains unaccounted for and the IRGC is still launching drones at Oman.
China has leverage over Iran. China has zero leverage over Lloyd’s of London.
This is the part nobody is modelling. The country with the most to lose and the most leverage over the belligerent cannot fix the mechanism that actually closed the Strait. Because the mechanism is not geopolitical. It is actuarial. And actuaries do not take calls from the Politburo.
The price of oil is going to go up, very high, very fast. Gasoline costs will follow within a day.
If this situation is not remedied by the end of this week, the increase in energy costs will trigger a worldwide economic Depression within 60 days. It is unavoidable. What fuel exists will cost so much that even if fuel is available, it will cost so much that no one can afford to manufacture or ship.
The economic engines that make our lives livable with goods and services, will simply stop.
