Geopolitics

Many analysts believe that Iran’s grip on the Strait of Hormuz is only temporary. A widespread expectation is that U.S. and allied naval forces will soon stabilize the situation and that oil flows will resume along familiar lines.

That expectation is flawed. It assumes that to continue to control the strait, Iran must physically close it off. But as we have already seen, you can control the strait without closing it. Today, the strait remains open to tankers. Traffic has dropped by over 90 percent since the war began, though, not because Iran has been sinking every vessel that entered the strait but because, given the credible threat of an attack, insurers withdrew or repriced war-risk coverage. Hitting a cargo ship every few days was more than enough to make the risk unacceptable.