Losses to German aircraft and U-boats had been increasing, in May PQ-16 had lost seven ships, but PQ-17 was the largest and most valuable convoy to date with over $500 million of military equipment. There was some argument to postpone the convoy until the autumn or winter but political considerations over-ruled the caution and the convoy departed on June 27, 1942.
The merchant ships and escorts had assembled at Hvalfjordur, Iceland and were bound for Murmansk. There were 35 merchantmen and the escorts included four destroyers, ten corvettes or armed trawlers, two anti-aircraft auxiliaries and also five cruisers in a more distant anti-submarine role. As further protection the convoy was to be tracked at about 200 miles by the carriers USS Washington and HMS Victorious and their escorts until they were past North Cape. The route took the convoy close to Svalbard, north of Bear Island, and skirted the edge of the ice pack before turning south and following the coast of Novaya Zemlya before turning south-west across the Barents Sea and entering the White Sea almost due south.
One ship suffered mechanical failure just out of port and was forced to turn back, another turned back after ice damage. The convoy was sighted and tracked by U-456 shortly after it entered the open sea, this was augmented by Luftwaffe BV 136s from July 1. The Luftwaffe began its attacks during the evening of the next day. The first losses were not until July 4 when two ships were lost.
On the night of the 4th the fateful order to scatter the convoy was issued and the majority of the escorts were ordered to return to Scapa Flow, leaving only the anti-aircraft auxiliary and a few armed trawlers. The Admiralty had received intelligence that German capital ships, including the Tirpitz and the Prinz Eugen had left Trondheim to intercept the convoy.
The following day twelve vessels were lost, six were sunk by the Luftwaffe and four different U-boats sunk the remaining six. The Tirpitz and her escorts were not in fact heading for the convoy, the movement was merely a change of berth, although on July 5 the Tirpitz was ordered to sea. But with reports of the successes of the Luftwaffe and U-boats the Tirpitz was soon ordered to remain in harbour.
On July 6 two more ships were sunk, one by the Luftwaffe and one by U-255. On July 7-8 five more ships were sunk, two by U-255. The remaining escort vessels withdrew into the Arctic Ocean on July 9 but the merchant ships suffered no more that day. The last losses were two vessels on July 10. The Luftwaffe had flown 202 sorties against the convoy.
Two of the surviving ships made port at Archangel on July 10, another nine arrived there or at Murmansk over the following week. 142,500 tons of shipping had been sunk and 150 merchant men had perished, material losses included thousands of vehicles including 430 tanks, 210 bombers and around 100,000 tons of other cargo. One of the surviving ships was sunk on the return journey, she was the fifth victim of U-255.
Despite Soviet protests the sailing of PQ-18 was postponed until September. Despite having over fifty escorts, thirteen ships were sunk and all future convoys were suspended until the darkness of winter, PQ-19/JW-51 sailed in December.