As Iran chokes the Strait of Hormuz, US pledges $20B for sea rehabilitation – National
The US says it has reached a new deal to provide up to $20 million in insurance to “restore confidence in maritime commerce” amid Iran’s war in the volatile Gulf region.
This comes days after Iran successfully closed the Strait of Hormuz by threatening almost all ships trying to pass through the narrow choke point between the ports of Persia and Oman, through which 20 percent of the world’s oil and other important goods pass.
On Friday, the US International Development Finance Corporation (DFC), and US Treasury Secretary Scott Bessent, announced an agreement approved by US President Donald Trump to implement what they call “Maritime Reinsurance” in the Gulf region, according to a statement.
Trump said on Tuesday that he would provide financial insurance and support for the merchant marine.
The DFC added that the deal included “a risk of war.”
“I thank President Trump and Secretary Bessent for supporting and endorsing DFC’s plan to restore confidence in maritime trade and stabilize international markets,” said DFC CEO Ben Black in a statement.
“We are confident that our reclamation system will find oil, gasoline, LNG [liquefied natural gas]jet fuel, and fertilizer that crosses the Strait of Hormuz and flows back into the world.”
Soon after the start of the conflict, many insurance companies increased their policy rates for businesses due to the risks in the region during the conflict. If the rates become too high, those businesses may cancel their plans because they cannot afford the required insurance.
Reinsurance is essentially insurance for insurers.
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Where the insurance is between the insurer and the person/business that holds the policy, the reinsurer acts as a sponsor or supplier of those insurance companies.
This means that by offering reinsurance to these insurance companies, they may be less inclined to raise prices for their customers.
The statement said the agreement “will help stabilize international trade, and support American and allied businesses operating in the Middle East during the conflict with Iran.”
Crude oil prices have risen since the start of the war in Iran last weekend as fears spread that global oil supplies could end if the conflict continues.
Oil was above $90 a barrel as of press time, compared to $64 a week earlier.
Higher oil prices often lead to higher prices for consumers at the gas pump, and can even lead to inflation as businesses spend more to ship goods and pass those costs on to consumers.
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