The Contested Status of the Strait of Hormuz

Formally, the Strait of Hormuz falls within the scope of the 1982 United Nations Convention on the Law of the Sea (UNCLOS), as it is used for international shipping.

The Convention establishes a ‘transit passage’ regime for such straits. Consequently, all vessels (both merchant and military) are entitled to freedom of navigation and passage solely for continuous and expeditious transit through the strait. The authorities of the coastal states must not impede this in any way.

However, there are two important points to note. Firstly, the Strait of Hormuz is almost entirely covered by the 12-mile territorial waters of Iran and Oman. In other words, transit effectively takes place through the territorial waters of these countries. Secondly, neither Iran nor the US has ratified UNCLOS. Formally, this Convention isn’t binding on them. Thus, Iran is guided by its own national regulations, which classify the Strait as territorial waters. The Iranian authorities don’t regard passage through the Strait as transit under the Convention. However, there is a position in international law that the strategic importance of the Strait of Hormuz is so great that transit passage should be governed not only by the Convention but also by maritime custom. This allows similar rules of the Convention to be applied even in cases where coastal states haven’t

ratified it. From this perspective, Iran is indeed in breach of international law.

The Insurance Market’s Response to New War Risks

Generally, an insurer isn’t liable for losses arising from acts of war. The Joint War Committee’s publications are used to identify regions of military conflict. If a particular territory is included on the special list (JWC Listed Areas), standard insurance policies don’t provide insurance coverage there.

On the very first day of hostilities in the Middle East, insurers began revoking insurance policies and withdrawing cover for war risks for vessels transiting the Persian Gulf and the Strait of Hormuz. Consequently, the revision of insurance terms led to an increase in rates, which by early March 2026 amounted to 1–3% of the vessel’s value (approximately USD 7.5 million for a vessel valued at USD 200–300 million). In peacetime, this rate stands at 0.2–0.3%.

In fact, the increase in the aforementioned costs has become the main problem for shipowners. In other respects, carriers are well protected under maritime law, which traditionally safeguards the interests of shipowners. For example, under the Hague-Visby Rules, the carrier isn’t liable for loss or damage resulting from war, perils or accidents at sea, force majeure, delays in delivery of the cargo, arrests and the like. ■