In Dire Strait, The Battle for Hormuz and the Global Economic War No One Planned For
It is Week 3 of the US-Israeli war on Iran, and President Donald Trump’s biggest challenge is no longer just about bombing military targets or eliminating the Iranian leadership. His challenge has narrowed to a single, crucial waterway: the Strait of Hormuz. His goal is to Make the Strait of Hormuz Great Again—free of Iranian mines and missiles, flowing once more to its old rhythms. He wants help. But no one, it seems, is coming.
The US-Israeli bombing campaign, now in its 18th day, has come down to a face-off at this narrow, vital chokepoint. Iran has laid mines and threatened to launch drones at tankers belonging to hostile powers. The message is clear and unambiguous: not one litre of oil can go through without Iranian military approval. For the world’s largest oil importers, for the global economy, this is a nightmare scenario.
The numbers are staggering. The Strait of Hormuz accounts for one-fifth, or about 20 per cent, of global oil flows. In 2023, an average of 20 million barrels of oil moved through this waterway every single day. Also critical is the flow of fertilisers, since a third of global trade in these essential agricultural inputs passes through the strait. The sowing season for many crops begins next month. India, the world’s largest importer of urea, has already been forced to ask China, the largest producer, to ease its export restrictions on the fertiliser. The global food supply chain is already being squeezed.
In short, a blocked Hormuz is a calamity unlocked, with global economic impact of the kind the US war president and the Israeli (perpetually-at-war) prime minister clearly did not plan for. Now, the mighty must defend a waterway that is 150 kilometres long, but only 24 kilometres wide at its narrowest, most vulnerable point. The strategic importance of this passage is not new. Going back in history, the Mughal emperor Babur recognised its vast importance and wrote about how trading almonds meant carrying them from distant Central Asia to Hormuz to reach lucrative markets.
But the mighty are finding that they cannot do it alone. Trump spent the weekend personally calling European allies, asking them to send warships to the strait, which currently looks like “Gurgaon-on-sea at rush hour”—tankers and ships lined up and waiting to exit, unable to move. Several leaders he asked have either refused outright or developed an acute case of hesitation. Italy’s Giorgia Meloni had distanced herself from her friend before he even got a chance to ask. As things currently stand: Japan is obfuscating, Britain is pondering (although conservatives in both countries want their governments to help, as they see logic in Trump’s claim that they are more dependent on oil coming through Hormuz than he is). France will help only in defensive operations. China is mum, and Russia is smiling. Germany said a hard “nein,” with Defence Minister Boris Pistorius spelling it out: “This is not our war; we have not started it… [Besides], what can a handful or two handfuls of European frigates do in the Strait of Hormuz that the powerful US Navy cannot do?” Ouch.
For the record, the US Navy was the first to refuse to get in the line of Iranian drones. It announced last week it was not ready to escort ships through the strait. A premature declaration from Energy Secretary Chris Wright last Thursday that the US Navy would soon escort oil tankers was shot down by the White House faster than you could say “Hormuz.” The administration is flailing.
Iran’s weaponisation of the waterway is a textbook example of asymmetric warfare—a strategy that any competent war gamer would have envisioned. Iran’s new/old leaders have declared that the US and its allies will not be allowed peaceful passage through the Hormuz. Everyone else is welcome to sail through—provided there is a good quid pro quo for Tehran in the shape of desperately needed supplies. So far, two Indian vessels, one Pakistani, and one Turkish vessel have been cleared. Tehran’s tactics are proving effective. For now.
But Iran’s real vulnerability may turn out to be American public opinion, if the Democrats can galvanise their constituencies. So far, the Democrats’ message is all over the place, almost as scattered as Trump’s own. Even conservative analysts insist they see method in the madness of the Trump administration. They see an arc from Venezuela to Iran to Cuba bending towards China in terms of reducing Beijing’s presence from the western hemisphere to West Asia. Trump did say on Monday he believed he would have “the honour” of taking Cuba. “Whether I free it, take it. Think I can do anything I want with it.” The statement is significant since the US and Cuba are in talks aimed at reaching an accommodation after decades of hostility. That accommodation means the removal of President Miguel Diaz-Canel from office. Cuba is squeezed with no oil and electricity. And it cannot do a Hormuz.
How high will the price of crude oil rise? The answer depends on another question: how long will this war last? And the answer to that second question depends on a third: how long can Donald Trump continue the war without worrying about its repercussions on the forthcoming mid-term elections? The longer the conflict continues, the tighter the global supply of oil and gas will become, and the higher prices will climb, and the greater would become Trump’s chances of losing the House or Senate to Democrats.
In the first three weeks of the war, crude prices have already risen by roughly 50 per cent from their pre-war levels. That is a sharp increase, but still modest compared with earlier oil shocks in West Asia. During the first oil crisis in October 1973, when Opec imposed an embargo on countries that supported Israel during the Yom Kippur War, crude prices quadrupled. The second oil shock followed the 1979 Iranian Revolution, when oil prices surged roughly two-and-a-half times. Disruption in oil supplies after Saddam Hussein’s 1991 invasion of Kuwait nearly doubled the price of crude. History suggests that oil prices could rise far beyond what we have seen so far.
The risk of natural gas price increase is much higher, because it is more difficult to store and transport. Goldman Sachs analysts have projected that if LNG flows through the Strait of Hormuz are completely halted for a month, Dutch natural gas, or TTF (Title Transfer Facility), could approach €74/MWh, an increase of 136 per cent. If the disruption lasts two months, European natural gas prices could rise to more than €100/MWh.
Ironically, perhaps the only thing that can push Trump to end the war is the price of gas and oil. Having launched the war, he faces enormous pressure to continue it until he can claim a clear victory—either by dismantling Iran’s capacity to build a nuclear weapon or by engineering regime change in Tehran. The latter goal appears unrealistic. Achieving the former would likely require several more weeks, if not months, of sustained military operations. So, Trump finds himself fighting the war while watching two indicators closely: global oil price and the performance of the US stock market.
What is truly striking is that Washington did not foresee this most predictable of retaliations. Did the US think it could bomb the hell out of Iran, and Iran would do nothing in response? Trump has repeatedly argued that higher oil prices benefit the US because the country is now a net energy exporter. That claim is partly true. Yet, oil prices are set in the global market. A disruption in supply anywhere in the world pushes prices up everywhere, including at US gas stations.
If current market forecasts prove correct, the political cost of rising energy prices could quickly outweigh the strategic gains of continuing the war. In that case, Trump may find it difficult to sustain the conflict for more than a few weeks. US voters are acutely sensitive to gasoline prices. Trump won his second term in part by promising to bring inflation under control. Since the war began, gas prices in the US have increased by roughly 20 per cent, and diesel prices by about 37 per cent. Higher diesel prices ripple through the entire economy, especially the food supply chain, because fruit, vegetables, and other goods must be transported long distances. Rising transportation costs inevitably translate into higher food prices for consumers.
Trump has “demanded” other countries come forward to protect vessels in the Strait of Hormuz. So far, US allies he had earlier rebuffed through Trump tariffs and jibes against NATO members have stayed away. As expected, Trump is quite unhappy with this raft of refusals. He has threatened that NATO faces “a very bad future.” The US may be able to wage the war militarily. But it may struggle to sustain it politically—both abroad and at home. If oil prices continue their upward march, and American voters begin to feel the pain at pumps and grocery stores, pressure on the White House will intensify. In the end, the trajectory of the war may be determined less by events on the battlefield than by the numbers flashing on gas station signs across the United States.
Questions and Answers
Q1: What is the strategic significance of the Strait of Hormuz, and how has Iran weaponised it?
A1: The Strait of Hormuz is a narrow waterway through which about 20% of global oil flows (20 million barrels per day) and a third of global fertiliser trade passes. Iran has weaponised it by laying mines and threatening drone attacks on tankers, effectively blockading it. Iran has declared that US and allied vessels will not be allowed peaceful passage, while others may pass with a “quid pro quo.”
Q2: How have US allies responded to Trump’s request for naval support in the Strait of Hormuz?
A2: The response has been overwhelmingly negative. Germany said a hard “nein,” with its defence minister questioning what European frigates could do that the US Navy cannot. France will only help defensively. Japan is obfuscating, Britain is pondering, and Italy’s leader distanced herself. China is silent, and Russia is watching with satisfaction. The US Navy itself initially refused to escort ships.
Q3: What historical oil shocks does the article cite to suggest that current price increases could be far worse?
A3: The article cites:
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1973: The first oil crisis, when crude prices quadrupled.
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1979: The Iranian Revolution, when oil prices surged two-and-a-half times.
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1991: Saddam Hussein’s invasion of Kuwait, which nearly doubled crude prices.
The current 50% increase is modest by these historical standards.
Q4: According to the article, what might ultimately force Trump to end the war?
A4: The article argues that rising oil and gas prices and their political consequences may force Trump to end the war. US voters are acutely sensitive to gasoline prices. Since the war began, gas prices have risen 20% and diesel 37%, rippling through the economy. Trump won his second term partly by promising to control inflation. The political cost of rising energy prices may outweigh the strategic gains of continuing the war.
Q5: What is the significance of the US Navy’s initial refusal to escort ships, and what does it reveal about the administration’s planning?
A5: The US Navy’s refusal to escort ships, followed by a contradictory statement from the Energy Secretary that was quickly shot down by the White House, reveals a lack of coherent planning. The article argues that Washington “did not foresee this most predictable of retaliations,” suggesting that the administration launched the war without adequately preparing for the obvious Iranian response of blockading the Strait of Hormuz.
