US insurance giant Chubb has been chosen as lead underwriter for the US International Development Finance Corporation's $20 billion plan to resume commercial shipping in the Gulf amid the Iran war, the agency said.
The conflict has led to the effective closure of the Strait of Hormuz, a key waterway through which a fifth of the world's oil passes, as ships remain hesitant to operate in it. It is the primary export route for oil produced by Opec member nations Saudi Arabia, the UAE, Kuwait, Qatar, Iraq, Bahrain and Iran.
Disruptions in the strait have raised concerns of a fuel shock similar to the 1970s oil crisis.
“The commerce passing through the Strait of Hormuz plays a vital role in the global economy, and providing vessels with insurance protection is essential for resuming trade flows,” Chubb chairman Evan Greenberg said in a statement.
Several US insurance companies have been identified to provide reinsurance policies behind Chubb and alongside DFC to expand market capacity, the agency said. More reinsurance partners could be announced at a later date.
The DFC reinsurance facility will insure losses of up to $20 billion on a rolling basis, it said.
US President Donald Trump has been seeking to reassure energy and financial markets that the war could be ending soon, while fears of an energy disruption caused oil prices to surge as high as $120 a barrel.
Markets were unconvinced by a co-ordinated measure from the International Energy Agency to release 400 million barrels from its strategic oil reserves, the largest release of oil stock in its history.
“The oil market challenges we are facing are unprecedented in scale, therefore I am very glad that IEA member countries have responded with an emergency collective action of unprecedented size,” IEA executive director Fatih Birol said in a statement.
Prices for global crude oil benchmark Brent were up 4.79 at $92.01 a barrel as of 3.13pm ET, while the US gauge West Texas Intermediate was last trading 4.67 per cent higher at $87.35 a barrel.
Iran has increased its threats against energy markets, warning that prices could climb to $200 a barrel after an Iranian drone struck Oman's largest oil storage centre, Reuters reported, quoting British maritime security firm Ambrey and Oman TV.
In its short-term energy outlook released on Tuesday, the US Energy Information Administration said it anticipates Brent crude oil price to remain above $95 a barrel over the next two months due to disruptions in the strait before falling to about $70 a barrel by the end of the year, although these figures depend on the duration of the conflict.
The agency anticipates the waterway's effective closure to cause the Middle East's oil production to fall further in the coming weeks before gradually easing as transit resumes. It anticipates US crude oil production to average 13.6 million bpd in 2026.
