Iran’s military may be decimated, but it’s winning the energy war as it controls who gets cargoes through the Strait of Hormuz |
Iran’s military may be decimated, but it’s winning the energy war as it controls who gets cargoes through the Strait of Hormuz
The U.S. may continue to “obliterate” Iran militarily over the coming weeks—as President Trump repeatedly threatens—but Iran’s likelihood of maintaining some control over energy flows through the Strait of Hormuz chokepoint increases daily and could ultimately equate to a “major victory” in the war.
That potential win for Iran, and for its allies Russia and China, would result in higher oil and gas prices—and greater inflation—longer term, leaving the world notably worse off than before the U.S. and Israel initiated the war, energy and geopolitical experts told Fortune.
“Seizing the strait and controlling traffic through it—even if that control is imperfect—is a major victory for a regime that has no other successes to celebrate besides survival,” said Matt Reed, vice president of geopolitical and energy consultancy Foreign Reports. “Iran is confident that it will exert some control, and it will insist on collecting tolls to legitimize its role and pay for post-war reconstruction.”
The alternatives are the U.S. intensifying the military pressure—including by putting troops on the ground—or the current stalemate dragging on for longer. Trump has said attacks will escalate for two or three weeks, but he’s also telling other countries that they should get their own oil and that the U.S. doesn’t need to control the strait.
Iran already is picking winners and losers from an energy standpoint, allowing a trickle of shipments to trek to China, Vietnam, Malaysia, and the Philippines—a group that includes the neediest Asian nations—but these shipments are being individually negotiated. Overall vessel traffic from the Persian Gulf in March plunged to just 5% of February levels, according to S&P Global Commodities at Sea, and volumes have increased only slightly in April thus far.
“Economies around the world will break if this drags on too long. Cracks are........