The unlikely tool Trump is eyeing to tackle rising oil prices amid the Iran conflict

The new battleground in the Gulf isn't just on the water - it's in the insurance market, where war-risk coverage can determine which oil tankers sail and which stay put.

With the conflict driving gasoline prices higher, the White House is weighing steps to keep oil flowing through the Strait of Hormuz and to keep prices from climbing further.

The Strait of Hormuz, a narrow passage between Iran and Oman, carries roughly 20 million barrels of oil a day and about one-fifth of global supply of liquefied natural gas. When conflict flares in the region, even the threat of disruption can rattle markets because so much of the world's energy moves through that single corridor.

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And with so much at stake, the White House is turning to an unlikely tool: insurance.

President Donald Trump said the U.S. could use a government-backed insurance program to lower war-risk premiums for vessels in the region. Under a backstop, the government would absorb part of any major losses, easing pressure on private insurers and shipowners.

Because when danger rises, the bill rises.

Insurers charge more to cover ships and cargo, shippers add "war-risk" surcharges and some vessels slow down, detour or pause altogether. Those delays can tighten supply and push crude prices higher even if oil production hasn't changed.

Against that backdrop, the latest disruption, sparked by U.S.-Israeli strikes starting on Feb. 27 and retaliatory Iranian drone and missile attacks across the region, is forcing shippers and insurers to rethink whether it's safe to transit the waterway. 

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Some global insurers are already tightening terms. Maritime insurance titans Gard, Skuld, NorthStandard, the London P&I Club and the American Club, have already canceled war-risk coverage, leaving voyages through Iranian and nearby waters without insurance.

Not all coverage is disappearing though. Lloyd's of London, an insurance marketplace that brings together multiple insurers to cover large, high-risk voyages, said its vessels operating in the Gulf region have a combined hull value exceeding $25 billion. It added that coverage is still in place.

A Lloyd's spokesperson told Reuters the market is in talks with U.S. officials about possible options. Separately, global insurance broker Marsh said it met with Trump administration representatives to discuss the idea.

Matt Smith, an analyst at Kpler, said coverage is a baseline requirement for ships transiting the Strait of Hormuz, but it doesn't eliminate the risk. 

"It's essential for all of these tankers to have insurance. You simply cannot pass through the Strait of Hormuz if you don't have the insurance, given the high possibility of getting struck by a missile," Smith told Fox News Digital.

"But even with that insurance in place, it's little comfort for those on the ship if there's a chance the vessel is going to be attacked," he added.

With that calculus in mind, Maersk, widely regarded as a bellwether for global ocean freight, said it will suspend all vessel crossings through the Strait of Hormuz until further notice and warned service to Arabian Gulf ports could be delayed.

When big shippers hit the brakes, the ripple effects can be felt fast. If oil becomes more expensive or slower to reach buyers, those increases can move through the supply chain and show up for Americans at the pump.

How much Americans feel at the pump will depend on how long the disruption lasts and whether shipping and insurance markets stabilize. Until then, the world's most important energy chokepoint is likely to keep traders and drivers on edge.