The Underwriter's War

How an Actuarial Calculation Closed the Strait of Hormuz

Nazem Alkudsi

06 Mar 2026 — 6 min read

How an Actuarial Calculation Closed the Strait of Hormuz

Nazem Alkudsi

March 6, 2026

Read this before the season turns.

It was late when the shipping magnate leaned back from dinner — a private room in Abu Dhabi, overlooking the Corniche, the kind of place where the waiters know not to clear the coffee. His fleet moved more dry bulk tonnage than most countries consume. Over the last cup, he told me about the Bengal famine pricing — how in the 1770s, decisions made in small offices on Leadenhall Street had determined who could ship rice out of Bengal and at what cost, how the textile trade that had made Bengal the richest province in the Mughal world was unwound not by conquest alone but by the re-pricing of risk on Indian-owned vessels until local merchants could no longer compete on their own waterways. The looms of Dhaka fell silent not because the weavers forgot their craft. They fell silent because the financial architecture was withdrawn, one policy at a time.

Then a senior marine insurance broker — he had flown in from London for the meeting — said something I wrote down on the back of a briefing sheet and have carried since.

“Gentlemen, a navy closes a strait for days. An underwriter closes it for months.”

Nobody reacted. The room moved on to the next slide.

I did not.

Ibn al-Muqaffa understood this twelve centuries ago. In the Kalila wa Dimna — the ancient book of fables he translated from the Pahlavi, itself drawn from the Sanskrit Panchatantra — a merchant’s ship approaches a river crossing. He fears bandits and pirates. Hires armed guards. Watches the horizon. And while he watches, the river pilot — quiet man, knows the depth of the water — simply refuses to board. The cargo never moves. Not violence. The one man who made the voyage possible decided the terms were no longer acceptable.

I thought of that fable in late 2023, when Houthi drone strikes sent war-risk premiums spiralling and Maersk, MSC, and Hapag-Lloyd all suspended Red Sea transits within seventy-two hours. Not because the Red Sea was impassable. Because the insurance market had decided it was uninsurable. The missiles made the news. The premium adjustment made the decision.

This week, war-risk premiums spiked from 0.25 percent to over one percent of vessel value overnight — a fourfold increase. The P&I clubs — twelve mutual insurers underwriting roughly ninety percent of the world’s ocean-going tonnage — adjusted coverage. The strait, physically open, became economically impassable. Governments could theoretically self-insure — sovereign war-risk pools have been tried before, during the Falklands, during the tanker wars — but nothing at this scale, nothing covering fertiliser volumes for a billion farmers. Rerouting via the Cape of Good Hope adds fourteen days and roughly three hundred thousand dollars in fuel per voyage. For oil, that math works. For low-margin bulk fertiliser with a biological deadline, it does not.

Every great maritime power understood this. Venice withdrew the commenda from specific routes to destroy specific competitors — not as general policy but as targeted economic warfare. The East India Company created a two-tier insurance system: Company ships sailed fully covered while Indian-owned vessels faced rates so ruinous that the competitive position of Bengal’s merchant class was dismantled over decades. Lloyd’s codified the principle into empire: a trade route that could not be insured was a trade route that did not exist.

Venice, the East India Company, Lloyd’s — and now Hormuz. Insurance withdrawal is not a side effect of conflict. It is the primary instrument of economic control.

Now follow the chain the markets are not watching.

One-third of globally traded fertiliser passes through Hormuz. India sources sixty-four percent of its urea imports from GCC suppliers — those imports doubled to nearly six million tonnes in the first half of last year. China imports roughly ten million tonnes of sulphur annually, fifty-six percent from the Middle East — feedstock for over half of China’s phosphoric acid production. When China suspended phosphate exports last year to secure its own food chain, the countries that had relied on Chinese phosphate as a backup discovered they had no backup at all.

Can Russia fill the gap? It cannot. Russia exports roughly forty-four million tonnes annually, but EU tariffs rising toward three hundred euros per tonne are redirecting Russian volumes into a contested scramble for Asian buyers. Black Sea ports face their own insurance premiums. Russia will gain share at the margins, but it cannot replace the volumes that transit Hormuz.

But the price is not the problem. The timing is. Nitrogen fertiliser is a physical input with a biological clock — the soil must receive it before the planting window opens. A shipment two weeks late does not produce a two-week delay. It produces an entire season of diminished yields. There is no strategic nitrogen reserve. Oil has the SPR. Fertiliser has nothing. The system was designed without a buffer because no one imagined the chokepoint would be closed by a spreadsheet.

Here is a number no one has published. If Hormuz closes during the pre-Kharif procurement window, India faces not merely a supply shortage but a fiscal detonation. In 2022–23, when urea prices tripled, India’s fertiliser subsidy bill hit ₹2.5 trillion. A prolonged Hormuz closure would push spot urea back to crisis levels — and the additional subsidy burden alone would add nearly a full percentage point to India’s fiscal deficit, pushing it into sovereign downgrade territory. For a five-acre farmer in Uttar Pradesh, the arithmetic is simpler and more brutal: the input cost increase from a single disrupted season can exceed the expected profit from his entire harvest.

Here is the cruel irony nobody in the commodity world discusses. Decades of synthetic nitrogen overuse have degraded the soil itself — depleted its organic carbon, killed the microbial communities that once made nutrients available naturally — so that the same field now requires more fertiliser each season to produce the same yield it once delivered with less. The soil becomes an addict, and the supply chain becomes its dealer. This is not a supply shock. It is a systems trap. The soil has been financialised into dependency on the very supply chain that just broke.

The transmission chain: fertiliser shortage, planting failure, grain spike, food insecurity, displacement, political instability, sovereign risk repricing. History is specific about what happens next. The 2007–08 food crisis, driven in part by fertiliser price spikes, triggered riots across thirty-seven countries — Haiti’s government fell, Egypt deployed the army to bake bread, Cameroon and Mozambique saw lethal street violence. In 2011, food prices helped ignite the Arab Spring — Tunisia, Libya, Egypt, Syria. Sub-Saharan Africa, where nations import the majority of their fertiliser and have the least fiscal capacity to absorb price shocks, remains the most exposed region on earth. The African Development Bank warned in 2022 that fertiliser shortages alone could cut continental food production by twenty percent. Allocators modelling Hormuz as an energy event are running the wrong scenario. This is a food-security event with an energy trigger. The timeline is not weeks. It is quarters.

The Mahabharata speaks of maya — the great illusion that what is visible is all there is. I was given all eighteen volumes by an old investor in Mumbai who had turned inward after forty years in markets. The ships are visible. The missiles are visible. But the actuarial calculation that closed the strait — made quietly, in an office that smells of carpet and old tea — is invisible.

Geopolitics loads the gun. The insurance market reads the trajectory. Underwriters are not the cause — they are the signal. The most transparent, most honest transmission mechanism the global economy has. But it is their signal, not the diplomat’s or the admiral’s, that determines whether ships sail.

The Venetians knew. The East India Company built an empire on it. Those who control the terms of trade control the fate of nations.

The question is why the rest of the world has forgotten that the most powerful weapon in maritime trade has never been the warship.

It has always been the ledger.

In a world where a chokepoint can be closed by an actuarial calculation rather than a military command, who underwrites the food supply of two billion people? And what happens when they decide the risk is no longer worth carrying?

I have looked for that question in allocation models. I have not found it.

That silence is the risk.

— Nazem

Commentary only — not investment advice. Author has no position in referenced instruments. Past data does not predict future performance.

Nazem Alkudsi, CFA, is the founder of @LongArcNews. A former CEO in the Abu Dhabi sovereign wealth ecosystem and four-decade veteran of institutional investing, he writes about capital, power, and civilisational patterns.