Iran’s threat to close the Strait of Hormuz has returned to the global risk agenda, after reports in late June and early July indicated Tehran had made preparations to mine the strategic waterway.

According to U.S. officials cited by Reuters, intelligence showed Iran loaded anti-ship mines onto vessels operating in the Gulf, raising concerns that it was laying the groundwork to disrupt shipping traffic through the strait, though no mines were deployed.

This came just weeks after Iran’s parliament passed a non-binding resolution supporting the closure of the Strait of Hormuz in the event of foreign aggression. A senior Iranian lawmaker also stated that shutting the strait remained one of Iran’s “options” should its national interests be threatened.

The Strait of Hormuz is a critical chokepoint through which roughly 20% of the world’s oil and a significant share of global LNG supplies pass. Any disruption — whether by military action, proxy harassment, or geopolitical escalation — could have far-reaching consequences for energy markets, shipping costs, and insurance exposure.

Here is our assessment of where this crisis may ultimately lead:

Scenario 1: Iran backs down

In this scenario, Iran maintains its rhetorical threats but refrains from taking any direct action to block or disrupt shipping.

Implications for risk managers:

• Minimal operational disruption: Energy markets may remain jittery, but global trade routes continue operating without interruption. Companies should still monitor the situation closely but are unlikely to need emergency adjustments.
• Insurance stability: War risk premiums for Gulf transit routes may tick upward slightly, but comprehensive coverage remains available at relatively stable rates.
• Communication priority: Risk managers should ensure internal stakeholders remain informed while avoiding overreaction that could lead to unnecessary business adjustments.

Likelihood: Moderately likely. Iran has used threats as a diplomatic tool before without following through militarily.

Scenario 2: Partial disruption through proxy activity

Rather than a formal closure, Iran engages in lower-level disruptive tactics, such as seizing tankers, deploying naval mines, or using proxy groups to harass commercial vessels.

Implications for risk managers:

• Supply chain delays: Shipping routes through the Gulf may face delays or diversions, especially for energy or commodity cargoes. Companies should prepare for volatility in delivery times and freight costs.
• Insurance review: War risk insurers may reclassify the region as high-risk, triggering premium hikes and coverage adjustments. Firms may face challenges securing affordable marine cargo insurance.
• Crisis planning: Companies with exposure to the region should activate contingency plans, ensure emergency supplier networks are in place, and conduct tabletop simulations around logistics disruptions.

Likelihood: Moderately likely. This approach allows Iran to signal strength without triggering all-out conflict.

Scenario 3: Full shutdown of the Strait

Iran enacts a temporary or prolonged closure of the Strait of Hormuz, either by military blockade, missile threat, or mining key channels.

Implications for risk managers:

• Energy shock: Crude oil and LNG prices could spike dramatically, affecting global manufacturing, transportation, and food production. Businesses reliant on fuel or petrochemicals should prepare for price volatility.
• Insurance disruption: Many underwriters may withdraw coverage for transits through the Gulf. Marine and political risk cover could be unavailable or prohibitively expensive.
• Financial forecasting stress: Risk managers should work with treasury teams to stress-test budgets against fuel inflation, supply chain interruptions, and FX instability triggered by market panic.

Likelihood: Less likely. The geopolitical and economic fallout would be severe—but cannot be ruled out entirely.

Scenario 4: Multinational military intervention

In response to a full or partial closure, the US and allied navies intervene to restore safe passage through the Strait.

Implications for risk managers:

• Heightened risk of escalation: Military engagement may escalate unpredictably, putting assets and personnel in the region at greater physical and reputational risk.
• Operational challenges: Evacuations, trade rerouting, and suspended operations may be required for businesses with Middle East presence or partnerships.
• Insurance exclusions: Acts of war may fall outside standard policies. Risk managers must scrutinize coverage wording, especially on exclusions for state-on-state conflict.

Likelihood: Least likely, but plausible if shipping is seriously threatened.