The ongoing crisis in the Strait of Hormuz continues to disrupt global energy supply chains, bringing renewed attention to its impact on Taiwan’s energy security. Although the United States and Iran have preliminarily announced an agreement, the months-long disruption to energy supply chains may have a chance to ease. Still, the crisis has once again highlighted key questions regarding Taiwan’s energy security and maritime transport resilience.
Angela Glowacki, Policy Analyst of the Energy Resilience Team at the Research Institute for Democracy, Society, and Emerging Technology (DSET), published an op-ed in The Diplomat last week, reflecting on what the crisis teaches Taiwan. She pointed out that while Taiwan has secured its near-term energy supply through spot market purchases and long-term supply contracts, the real challenge lies not only in “securing the fuel,” but also in “ensuring it can arrive in Taiwan.” Once a vital maritime corridor comes under pressure, marine insurance markets may quickly splinter, war risk premiums may surge, and energy carriers may be affected in whether they are willing or able to continue sailing.
Glowacki notes that the Hormuz crisis has been described as one of the largest disruptions to world energy supplies since the 1970s. Although the Strait of Hormuz and the Taiwan Strait differ in geography and geopolitical context — the former is roughly 29 nautical miles wide at its narrowest point, while the Taiwan Strait spans an average of 96 nautical miles — the crisis still offers a valuable, real-time stress test of how energy chokepoints may affect shipping, insurance, and supply chain stability under pressure.
The article points out that around 81.3 percent of Taiwan’s electricity generation relies on imported fuels, while liquefied natural gas (LNG) accounts for nearly 50 percent of Taiwan’s total electricity generation. Following the Hormuz crisis, Taiwan has secured additional spot market purchases, primarily from Australia and the United States to ensure near-term supply through September,. . It has also signed a long-term LNG supply agreement with Cheniere Energy to further strengthen energy security. In addition, the Ministry of Economic Affairs has directed the state-owned Taiwan Power Company to prepare and activate auxiliary coal-fired units in order to reduce natural gas consumption and ease pressure on LNG carrier scheduling. According to DSET’s estimates, if the available coal-fired units are fully utilized, daily gas consumption could be reduced by around 20 percent, trimming the need for up to 5 to 5.5 LNG shipments per month.
However, Glowacki stresses that energy procurement contracts cannot fully address maritime transport risks. Following the Hormuz crisis, insurers at one point withdrew from the market, and war risk premiums rose from 0.25 percent pre-conflict to between 3.5 percent and 7.5 percent per voyage. Although insurance coverage did not disappear entirely, elevated premiums and underlying physical risks have led some shipowners to avoid the area, creating a dilemma in which “the market existed, but was failing to actually facilitate movement.”
In response, the United States, India, and South Korea have each unveiled government-backed reinsurance or insurance backstop mechanisms, using public financial support as a buffer against anticipated losses while working with private insurers to expand overall coverage capacity. Glowacki argues that these cases offer an important lesson for Taiwan: if a crisis were to occur in the Taiwan Strait, building a similar facility from scratch under pressure would be extremely difficult. Taiwan should therefore move early and prepare contingency plans, rather than waiting until a crisis forces it to respond.
The article also mentions the Taiwan Energy Security and Anti-Embargo Act, introduced by U.S. Senators Chris Coons and Pete Ricketts. The bill has brought Taiwan’s energy vulnerabilities into policy discussion and authorizes the U.S. Department of Transportation to provide insurance coverage for commercial ships carrying food or fuel to Taiwan.
Glowacki emphasizes that the Hormuz crisis demonstrates that energy security is not only about diversifying supply sources, but also about shipping coordination, marine insurance, government backstops, and cross-national cooperation under crisis conditions. As Taiwan’s LNG imports from the United States are likely to increase in the coming years, American vessel operators will also take on a growing role in Taiwan’s energy supply chain. Taiwan should work with like-minded partners to discuss insurance frameworks, shipping arrangements, and necessary protection measures in advance, strengthening the resilience of Taiwan’s energy supply chain under high-risk scenarios. She notes that the Taiwan Strait has not yet been tested the way the Strait of Hormuz has, and that this is precisely why the window for Taiwan to prepare remains open.
