President Trump, celebrating Tehran’s declaration that the Strait of Hormuz would reopen to commercial shipping, posted on Truth Social on April 17, “IRAN HAS JUST ANNOUNCED THAT THE STRAIT OF IRAN IS FULLY OPEN AND READY FOR FULL PASSAGE.” The opening didn’t last. But, in his haste, Trump had inadvertently spelled out possibly the most consequential result of his eight-week war: The Strait of Hormuz now looks, in practice, like the “Strait of Iran.”
Although none of the Trump administration’s goals—an end to Iran’s nuclear ambitions, destroying Iran’s missile capability, neutralizing proxy forces, regime change—has been fulfilled, the war has led to enduring changes. Two sweeping conclusions—one short-term, one longer—have become clear, experts in defense, diplomacy, business, and economics told us.
Short-term, despite an indefinite cease-fire that kicked in last week following an initial two-week pause in hostilities, a durable end to the war isn’t coming anytime soon. The disparity in U.S. and Iranian demands for how negotiations should proceed along with blockades by their respective forces in the strait have locked the two sides in a stalemate. Many Americans still expect a quick end to the war’s economic strain. But that’s unlikely. At a Vanderbilt University panel discussion on warfare this week, the moderator asked when the effects of the war might end. A retired general, a retired CIA analyst, and an energy industry executive said anywhere from two to nine months, prompting a collective intake of breath from the audience.
Meanwhile, the economic geography of the Persian Gulf is likely changed forever. Iran now has greater authority over the strait than before the war began and stands to benefit from its closure. Iran might start charging exorbitant tolls for all ships that cross the strait. Or a consortium of nations, including Iran, might manage the waterway and split the profits. And if Tehran is willing to formally return the Strait of Hormuz to an international waterway, free and open for all, the regime has proved that it can close the strait at will, despite being confronted by the world’s most powerful military. “Even if Iran does not have explicit control, there is now always an implicit measure of control,” Richard Haass, a former high-ranking State Department official under President George W. Bush, told us. “Because they have shut it once, now they know they can do it again.”
That gives Iran extraordinary leverage over the roughly 20 percent of global oil and liquefied-natural-gas supplies that used to pass through the strait. In response, energy companies and shippers are exploring alternatives that could involve billions of dollars in investment in new pipelines, port expansions, and alternative (though hardly fail-safe) routes through the Red Sea. Such a rewiring of global trade routes—akin to supply-chain changes made after the coronavirus pandemic—could ultimately render passage through the Strait of Hormuz unnecessary. But any such result is likely years away.
In the meantime, the grip Iran has on the strait is expected to disrupt business, keep global energy and fertilizer prices elevated for years, exacerbate inflation—and make it much harder for Trump to claim a win in the war he started.
On Tuesday, Trump asserted on Truth Social that Iran was in a “State of Collapse” and wanted to soon open the strait, which Tehran also relies on to export its oil and gas. But Iran has shown no inclination to abandon its leverage and no further negotiations are scheduled.
Trump has appeared reluctant to resume hostilities, though that option remains available. Vice President Vance and some Pentagon officials have privately expressed concern about the rate at which the U.S. military burned through weapons supplies in the first two months of the war. An Iranian suggestion on Sunday to delay dealing with the future of its nuclear program while the two sides figure out how to handle the strait seems like a nonstarter. That leaves the two countries in a test of who can endure more economic pain.
Trump-administration officials have been surprised at Iran’s resilience after U.S. forces struck more than 13,000 targets. But they told us they believe that the U.S. naval blockade, over time, will apply pressure on Iran’s economy too great for the regime to withstand. Or Iran will run out of oil storage, which would seriously crimp its ability to export. Either scenario might force a return to the negotiating table and, eventually, the reopening of the strait, U.S. officials believe. The Foundation for Defense of Democracies, a Washington think tank, estimates that Iran has absorbed roughly $144 billion in economic damage—about 40 percent of its prewar GDP—since the war began. Even before that, the country was under economic duress.
Yet Iran may be reluctant to abandon its hold over the Strait of Hormuz, precisely because the waterway holds the potential to replenish its coffers through tolls. (Trump had previously seemed willing to accept this, though the White House, under pressure from Gulf states, has since cooled to the idea.) And pushing Iran to the point of yielding could take months or even years, potentially tying up U.S. military resources to enforce the blockade, respond to disruptions, and enforce the terms of any peace settlement.
At least 21 U.S. ships are now in the region—a level not seen since the 2003 invasion of Iraq. That size of force may become a new baseline for the U.S. presence in the Gulf, at least in the near term, heightening the challenge of responding to other global hot spots and driving up the already steep cost of the war. Acting Pentagon Comptroller Jules Hurst told Congress yesterday that the conflict so far had cost $25 billion. During the same hearing, Representative Ro Khanna of California claimed that the war will cost the average American household $5,000 a year in increased gas and food prices. Trump may face his own imperative to make concessions, given those costs and what the war has done to his popularity: A Reuters/Ipsos poll released this week found that the president’s approval rating stood at 34 percent.
The White House has heard from unhappy Gulf and European allies about the strait’s closure and the unwelcome prospect of future Iranian control. China, whose economy was already struggling, depends heavily on the strait and has urged its reopening. A senior White House official told us that Trump is concerned that the issue could complicate his summit with Xi Jinping in Beijing in a little over two weeks. Yet there are no signs of a quick resolution.
The global economic damage from the first two months of war has been stark. Traffic through the Strait of Hormuz has been reduced by about 90%, from some 120 to 150 daily transits to a handful, according to a new dashboard by the United Nations Conference on Trade and Development. This week, Brent crude reached its highest levels in four years, at $126 a barrel. The gas-station billboards that line so many American roads reflect the increase: The average price of a gallon of gas hit $4.18. Trump met with American energy executives at the White House Tuesday to warn them that the blockade may persist for weeks or more. Prices of other goods, such as pharmaceuticals, have also spiked. The World Bank forecasts a 16% rise in food-commodity prices this year, driven by increased transport costs and the supply squeeze on the fertilizer industry, which relies on exports from the Gulf. The International Energy Agency has said that the world is on the brink of “the biggest energy security threat in history.”
Shippers, energy producers, and the governments of the Gulf petrostates are planning to recalibrate by holding excess supplies in case of shocks rather than squeezing efficiencies from just-in-time supply chains. Existing infrastructure might help, at least in part, but comes with its own risks.
Two major pipelines cross Saudi Arabia to the Red Sea. Both are already running at capacity—and the Red Sea is vulnerable to disruption by Houthi militias supported by Iran. The Habshan–Fujairah pipeline brings oil from a major field in the United Arab Emirates to the port of Fujairah, which sits on the other side of the strait from Iran, and the UAE government could expand facilities there. An Iraqi-Turkish pipeline can move oil to the Mediterranean but that would add miles and time to shipping routes.
Various discussions are under way about building new pipelines across Saudi Arabia to ports in Oman, or across Iraq for export to the wider world. Pipeline operators may also employ more incremental remedies, such as moving oil faster through the pipelines by injecting drag-reducing agents or increasing the number of pump stations.
The prevailing question facing those whose economic survival relies on Gulf exports is no longer when the Strait of Hormuz will reopen, but what role the strait will play in the postwar marketplace. Perhaps in anticipation of the disruptions to come, the UAE announced Tuesday that it was leaving OPEC, which it has long threatened to do, allowing the small country to chart its own course outside of OPEC quotas.
Before investing billions, Gulf nations and companies are likely to want some reassurance that those new investments won’t become Iranian targets. In addition to shutting down traffic in the Strait of Hormuz, Iran in the past two months has hit energy infrastructure in neighboring countries. In Saudi Arabia alone, daily oil output is down by 600,000 barrels because of Iranian strikes, a Saudi state news agency said earlier this month. The Fujairah port, a potential new alternative, also has been targeted by Iranian forces.
“All these solutions don’t solve the problem that Iran is a bad actor that can threaten ships or oil infrastructure around the region,” one senior oil trader who was not authorized to speak on behalf of his company told us. “None of these solutions take away Iran’s ability to strike the oil infrastructure that supplies the global marketplace.”
One diplomat from the Middle East stressed to us that anything other than a return to the strait’s prewar status of being free and open would be unacceptable. But other observers aren’t sure how feasible that is, noting that countries dependent on the strait may decide to work with Tehran instead. “The longer this goes on, the higher the likelihood that countries will look to protect their own economic interests and cut deals with the Iranians, even if that triggers the wrath of the U.S.,” Richard Nephew, a former U.S. deputy special envoy for Iran, told us.
Anna Kelly, a White House spokesperson, told us in a statement that “the blockade will continue until Iran makes an agreement that is acceptable to the United States. The Strait is international water, and we are not going to let Iran toll the Strait.”
A multinational consortium to administer the waterway, perhaps charging a modest toll, might be the least bad option, Haass, the former State Department official, told us. But that also would not preclude Iran from, someday, moving to shut the strait again. “One of the ironies of this war is that Iran discovered that it had this weapon,” he said. “There was so much talk about nuclear ability, but they have the strait.”
Such a solution could itself set a dangerous example to the rest of the world. If Iran were allowed to effectively charge a toll for use of the Strait of Hormuz, other nations could seek to do the same for other busy shipping lanes such as the Strait of Malacca, which connects the Pacific and Indian oceans, or the Taiwan Strait, which carries exports from China.
“We need to demonstrate we’re actually not prepared to leave the strait that way,” Fred Kagan, a senior fellow at the American Enterprise Institute, told us of the Strait of Hormuz. And U.S. adversaries need to hear that “if they are going to try to close a critical waterway or a critical choke point, they are going to pay a price, one they ultimately find unacceptable.” Secretary of State Marco Rubio said in a Monday appearance on Fox News that the U.S. would not tolerate Iran “trying to normalize” its control of the strait.
How the U.S. and its Gulf allies might avoid that reality is a question that will linger long after the fighting has ended.
