Global markets have been thrust into turmoil in recent weeks as geopolitical tensions in the Middle East escalate. While the human cost of conflict remains the most important and sobering reality, investors are simultaneously confronting a complex and fast-evolving set of risks – not least the outlook for oil prices and global trade.

What is less widely understood, however, is that the trajectory of oil prices may be shaped less by military developments alone and more by a quieter, largely invisible force: specifically, maritime insurance. Long before oil can flow freely again, insurers must be willing to underwrite the risks of moving it. Amid the frenzied speculation of when the Middle East conflict will end, and trade routes will be reopened, without that confidence, even a physically re-opened shipping route remains, in effect, closed.

The question of safe, insurable passage

At the centre of this dynamic lies the Strait of Hormuz – one of the world’s most critical energy chokepoints. Any disruption here has immediate implications for global supply. Yet markets may be oversimplifying what it means for the Strait to “reopen.” The resumption of safe, insurable passage is a far more complex and time-dependent process than a simple cessation of hostilities.

In the early days of the conflict, we saw war risk insurance in the region either withdrawn or placed on extremely short notice, with premiums rising sharply. This is not a marginal technicality; it is a binding constraint. Oil tankers require multiple layers of insurance – covering the vessel, the cargo, and the crew – before they can load, transit, or dock. Without these, shipping activity essentially grinds to a halt.

The structure of maritime insurance itself adds to the challenge. Commercial insurers operate alongside Protection and Indemnity (P&I) clubs – mutual risk-sharing entities that provide critical liability cover. When risk thresholds are breached, these layers can be pulled back quickly, as we have seen. Reinstating them, however, is a far slower process, dependent on sustained evidence of stability and safety.

History provides a useful guide. In the Black Sea during the Russia-Ukraine War, insurance markets took several months to normalise after periods of heightened risk. Similarly, earlier disruptions to key shipping corridors required extended stretches of calm before underwriters were prepared to return at scale and at commercially viable rates.

For the Strait of Hormuz, the hurdle may be even higher. Insurers are unlikely to rely solely on political assurances or temporary de-escalation. Instead, they may require verifiable, on-the-ground measures, such as mine clearance, secure naval oversight, and credible guarantees of safe passage. These are not developments that materialise overnight.

This creates a meaningful lag between any perceived geopolitical resolution and the actual restoration of oil flows. Markets, influenced by recency bias, may expect a swift normalisation based on past conflicts that appeared contained or short-lived. Yet even in a best-case scenario, the rebuilding of insurance capacity and confidence could take weeks, if not longer.

The shifting of perceived risk

There are, in theory, policy tools that could help bridge this gap. The United States, for instance, has wartime provisions that allow it to provide insurance and reinsurance for domestically flagged vessels. Such mechanisms could partially offset the withdrawal of private insurers. However, their implementation is legally and operationally complex, and to date, there has been little evidence of them being deployed at the scale required to meaningfully shift market dynamics.

Moreover, the reluctance of naval forces to fully guarantee escort and protection for commercial vessels underscores the broader issue: insurance is ultimately a function of perceived risk. Until that perception shifts decisively, capacity will remain constrained.

For investors, this has several important implications.

First, oil prices may remain elevated for longer than expected, even if tensions appear to ease. The bottleneck is not only physical supply, but the ability to move that supply safely and insurably. Second, volatility is likely to persist. As news flow alternates between escalation and de-escalation, markets will continue to reprice not just geopolitical risk, but the slower-moving recovery of the financial infrastructure that underpins trade.

Third, the effects extend well beyond energy markets. Disruptions in a critical shipping artery such as the Strait of Hormuz can ripple through global supply chains, affecting everything from freight costs to inflation expectations. For economies already navigating tight conditions, this adds another layer of uncertainty.

Perhaps most importantly, this episode highlights a broader investment lesson: markets are often driven by factors that sit beneath the surface. While geopolitical headlines dominate attention, it is the underlying systems – insurance, logistics, and institutional confidence – that ultimately determine how quickly normality can be restored.

As the conflict evolves, the temptation will be to focus on visible milestones: ceasefires, negotiations, or military developments. Yet the true signal may lie elsewhere – in the gradual, less visible return of underwriting capacity and the quiet re-entry of insurers willing to take on risk once more.

Until then, the Strait of Hormuz may be opened in theory, but not in practice. And for oil markets – and investors – that distinction matters.