What is happening on board ships in the Persian Gulf? | Update on Strait | Trump Admin Acts
Quick Read
Summary
Takeaways
- ❖Approximately 20,000 seafarers on 3,200 vessels are stranded in the Persian Gulf due to the Strait of Hormuz closure.
- ❖Ships are running out of water, food, and fuel, with port requests for resupply often denied due to security concerns.
- ❖Iran has established a 'safe shipping corridor' for vessels that register and pay, often through Iran-linked intermediaries, with at least nine vessels already using it.
- ❖Iran's attacks have damaged Qatar's LNG export capacity, reducing it by 17% and causing an estimated $20 billion in annual revenue loss.
- ❖Container spot rates have risen, especially on Trans-Pacific routes, and fuel surcharges have been added by major carriers.
- ❖At least 15 vehicle carriers are stranded, disrupting the automotive supply chain as the Middle East is a key export destination for Asian automakers.
- ❖The US administration plans to unsanction 140 million barrels of Iranian oil and 130 million barrels of Russian oil to lower global prices, a move the host calls illogical given ongoing military actions against Iran.
- ❖A 60-day waiver of the Jones Act has been approved, allowing foreign-flagged, foreign-built, foreign-owned, and foreign-crewed ships to operate in US coastal trade, ostensibly to mitigate energy disruptions.
- ❖Maritime unions strongly oppose the Jones Act waiver, arguing it undermines national security, hurts American maritime workers, and will not significantly lower fuel prices.
Insights
1Humanitarian Crisis for Trapped Mariners
Roughly 20,000 seafarers on 3,200 vessels are stranded in the Persian Gulf, facing severe shortages of water, food, and fuel. A firsthand report details a ship being denied water by port control. These vessels are unable to pull into port due to security risks, and limited resources prevent assistance from reaching all ships, creating a rapidly escalating humanitarian disaster for the crews.
IMO estimates 20,000 seafarers across 3,200 vessels remain stuck. A merchant mariner reported a ship at anchorage was denied water by port control, and their own ship was overdue for stores and fuel, rationing supplies.
2Iran's 'Toll Gate' for Strait Transit
Despite the crisis, Iran has established a system allowing 'approved and paid' ships to transit the Strait of Hormuz. This involves a vetting process by the Islamic Revolutionary Guard Corps (IRGC), often requiring extensive disclosure of vessel ownership and cargo via Iran-linked intermediaries. This creates a controlled, two-tiered system where some vessels can pass while others remain trapped or are targeted.
Lloyd's list reports Iran established a 'safe shipping corridor for approved and paid transit.' India, Pakistan, Iraq, Malaysia, and China are in direct talks. At least nine vessels have used the corridor, routed near Lark Island for visual checks.
3Significant Impact on Global Energy and Supply Chains
The conflict has severely impacted key sectors. Iran's attacks wiped out 17% of Qatar's LNG export capacity, costing an estimated $20 billion annually. Container spot rates have increased, and fuel surcharges are being added globally. The automotive sector faces disruption with 15 vehicle carriers stranded, affecting Asian automakers' exports to the Middle East. Oil loading risks have risen at Yanbu, with many crude carriers loitering.
Iran attacked Qatar's LNG capacity, damaging two of 14 LG trains and one gas-to-liquids facility, sidelining 12.8 million tons per year for 3-5 years. Drury World Index shows container rates up 2%, with Shanghai-New York jumping 7%. At least 15 vehicle carriers are stranded. Crude exports from Yanbu jumped to 3.4 million barrels per day, with 33 VLCCs and Suezmaxes loitering.
4Contradictory US Policy: Unsanctioning Iranian and Russian Oil
The US administration announced plans to unsanction 140 million barrels of Iranian oil and 130 million barrels of Russian oil, currently stranded on tankers, to increase global supply and reduce prices. The host frames this as illogical and contradictory, given the US is simultaneously bombing Iran and has sanctioned Russian oil for years. He argues this action will provide funds to adversaries and does not address the core issue of oil trapped in the Persian Gulf.
US Treasury Secretary Scott Bessett stated, 'In the coming days, we may unsanction the Iranian oil that's on the water. It's about 140 million barrels.' He also mentioned a similar step for 130 million barrels of sanctioned Russian oil. The host states, 'We are bombing Iran... yet we are allowing Iran to load tankers, sail them... into the market.'
5Controversial US Policy: Jones Act Waiver
The Trump administration issued a 60-day waiver for the Jones Act, a 106-year-old law requiring US-flagged, built, owned, and crewed ships for domestic trade. This waiver, pushed by National Economic Council Director Kevin Hassid, aims to mitigate short-term disruptions in fuel and fertilizer markets. However, maritime unions and the host argue it will not significantly lower gas prices (estimated at less than a penny per gallon), will benefit foreign carriers, and undermines US national security and maritime workforce, especially while American mariners are targeted abroad.
The White House approved a 60-day Jones Act waiver. Energy Secretary Chris Wright stated it ensures 'oil and other energy resources flow to Americans.' Maritime unions penned a letter stating it 'will undermine national security and hurt the American maritime workforce' and 'will not lower gas prices.' A Nagatus Consulting Group study estimated savings of less than a penny per gallon.
Bottom Line
The US administration's current policy responses to the Strait of Hormuz crisis—unsanctioning adversary oil and waiving domestic maritime laws—suggest a reactive, scrambling approach rather than a coherent, long-term strategy to restore global trade flow.
This lack of a clear plan could prolong the crisis's economic impact, undermine US geopolitical objectives by empowering sanctioned regimes, and weaken critical domestic industries like the US Merchant Marine, creating vulnerabilities.
For businesses, this signals continued volatility in shipping costs and supply chain reliability. It also highlights the potential for new, albeit controversial, arbitrage opportunities in oil and shipping if these waivers are extended or expanded, but also increased risk due to policy uncertainty and geopolitical instability.
The Jones Act waiver, while framed as a solution for fuel prices, is primarily enabling 'lifts of opportunity' for foreign carriers to exploit regional price differences and supply gaps, rather than directly addressing a domestic fuel shortage.
This means the waiver's benefits are unlikely to reach the average consumer in the form of lower gas prices, as the host suggests. Instead, it re-routes existing fuel supplies to more profitable international markets, potentially exacerbating domestic supply issues in the long run if not managed carefully.
Foreign shipping companies can capitalize on lucrative routes previously restricted to US vessels, potentially increasing their market share and profits in specific US coastal trades. However, this is a short-term opportunity contingent on the waiver's duration and political backing.
Key Concepts
The Jones Act Dilemma
The Jones Act (Merchant Marine Act of 1920) mandates that goods shipped between US ports must be carried on US-flagged, US-built, US-owned, and US-crewed vessels. Its purpose is to maintain a domestic shipbuilding and maritime industry for national security. Critics argue it raises costs and limits capacity, while proponents (like the host) contend its repeal would dismantle the US maritime industry, transferring vital coastal trade to foreign hands without guaranteed economic benefits.
Lessons
- Monitor global shipping rates and fuel surcharges, as Middle East tensions will continue to underpin pricing across all sectors, not just those directly impacted.
- Evaluate supply chain resilience against potential disruptions in critical maritime choke points, considering alternative routes or diversified sourcing strategies to mitigate risks.
- Engage with policymakers regarding maritime legislation like the Jones Act, understanding its national security implications versus perceived economic inefficiencies, especially during global crises.
Notable Moments
The host reads a firsthand report from a merchant mariner stuck in the Persian Gulf, detailing critical shortages of water and food, and denied port access for essential supplies.
This personal account humanizes the abstract geopolitical crisis, highlighting the dire humanitarian situation faced by thousands of seafarers and underscoring the urgency and severity of the conflict's impact on individuals.
The host expresses profound confusion and frustration over the US administration's decision to unsanction Iranian and Russian oil while simultaneously bombing Iran and maintaining a military presence in the region.
This moment reveals a deep perceived contradiction in US foreign policy, where military action is seemingly undermined by economic concessions, raising questions about the coherence and effectiveness of the overall strategy.
Quotes
"The request was denied. Start multiplying stuff like that by the number of vessels stranded, add stores and bunkers to the mix, and you have an issue well beyond the energy crisis for the folks trapped here."
"We are bombing Iran. We've been bombing Iran since February 28th. We are trying to destroy the regime and destroy its leadership and its military power. Yet we are allowing Iran to load tankers, sail them through the straight of Hormuz out into the market."
"Get the oil that's on ships loaded already in the Persian Gulf out and not depend on Iranian oil, which by the way, they're going to get the money for and use it to buy, I don't know, more weapons and nuclear development."
"This sweeping waiver will undermine national security and hurt the American maritime workforce during a volatile time for our country. We know this decision will not lower gas prices or benefit consumers and will instead benefit foreign flagged carriers."
"You are unsanctioning Iranian oil. Russian oil and opening the US for foreign ships to come in. This does not tell me you know what you're doing. This makes me wonder whether or not there's a plan."
Q&A
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