Renewed hostilities in the Middle East this week have underscored Iran's ability to control shipping through the Strait of Hormuz, a crucial chokepoint for global energy supplies. However, analysts suggest Iran may be overplaying its hand, potentially overestimating the power of this leverage and its capacity to deter adversaries.
The conflict, which began in March 2026, initially focused on Iran's nuclear program, its treatment of protesters, its threat to Israel, its missile program, and its support for regional proxies. Now, the primary contention has shifted to Iran's control over maritime traffic in the Strait, through which approximately one-fifth of the world's oil and gas normally transits.
Iranian leaders now view de facto control of the Strait as a key deterrent against future attacks and a potential source of revenue. They have described it as a "golden weapon" and a "divine blessing," while U.S. Secretary of State Marco Rubio has termed it Iran's "economic nuclear weapon."
Escalation in the Gulf
This week's flare-up saw Iran launch missiles at three ships transiting the Strait. These vessels were traveling in a corridor near Oman's coast, following recommendations from the UN's International Maritime Organization, and had not coordinated with Iranian authorities. The attacks triggered the most significant exchange of fire between the U.S. and Iran since an interim ceasefire agreement in June. The U.S. responded by bombing more than 80 targets in Iran, while Iranian forces launched missiles at U.S. targets in Kuwait and Bahrain. President Donald Trump also declared the ceasefire over and reimposed sanctions on Iranian oil sales.
The dispute centers on a clause within a Memorandum of Understanding (MOU) signed on June 17. U.S. officials interpreted the agreement as restoring free navigation through the strait, while Iran's interpretation grants it control over which ships can pass. This ambiguity has now fueled a new phase of the conflict.
Following the MOU, oil shipments through the Strait had returned to roughly half of pre-war levels, though many operated at night with identification systems disabled and under U.S. Navy escort. Iran perceived this situation as a threat to a new status quo it believed it had established, one that allowed it a say in maritime passage. Tehran also appears to believe that President Trump is hesitant to return to full-scale war, leading to the calculation that this week's attacks were a calculated risk.
"Because they believe that the U.S. is deterred from resuming full-scale hostilities, there is scope for pushing the envelope, for pushing their luck and seeing how much they can extract in the Strait," said Gregory Brew, an Iran and energy analyst at Eurasia Group. This, however, may prove to be a miscalculation.
A Limited Weapon?
Iran's strategy of using the Strait as a deterrent might be less effective against President Trump than against a more conventional politician. The ongoing war with Iran is unpopular, and the Republican party faces pressure regarding high gas prices ahead of midterm elections. However, Trump has shown a tendency to prioritize his political projects, including the Iran conflict, over his party's electoral prospects.
Beyond Trump's specific approach, the ability to close Hormuz may not be the potent tool of disruption many initially believed. While crude oil prices surged as high as $126 per barrel during the war, they often hovered closer to $100, falling short of the $200 predictions made at the war's outset. This relative manageability is attributed to increased production from non-Middle Eastern countries like the U.S. and China's ability to significantly reduce its oil imports. Furthermore, the growing adoption of electric vehicles and renewable energy sources has reduced oil's centrality to the global economy.
While the crisis is contributing to a slow-moving food crisis in many developing nations, it has not resulted in widespread gas shortages or the kind of supply chain disruptions seen during the COVID-19 pandemic.
"The closure of the Strait of Hormuz was always understood to be this massively destabilizing black swan event," Brew noted. "And it turns out to have been more manageable."
Despite spikes in oil prices during periods of fighting, markets have quickly stabilized during lulls. Energy markets appear to be factoring in the expectation that any return to hostilities will be short-lived. Even during this week's conflict, oil prices rose to around $80 before receding as fighting subsided.
While Iran's leaders may feel confident that Trump is unlikely to commit ground troops or pursue a costly regime-change operation, the cost to the U.S. of periodic, lower-intensity strikes is relatively low. Recent U.S. strikes on Iranian bridges, targeting civilian infrastructure, suggest Trump's tolerance for escalation might be higher than Iran anticipated.
A Diminishing Asset?
Iran's current moment of maximum leverage may be fleeting. Regional oil producers are investing in alternative pipelines and routes to bypass the Strait. Increased Iranian attacks on shipping will likely accelerate these investments. The crisis is also spurring demand for electric vehicles globally, further incentivizing a reduction in dependence on Strait-bound oil.
Nate Swanson, an analyst at the Atlantic Council, argued in a recent article for Foreign Affairs that Iran faces a contradiction between its goals of deterrence and economic extraction from the Strait. While Iran has demonstrated its ability to disrupt shipping and target energy infrastructure, further actions could prove counterproductive.
As Tehran attempts to exert economic pressure through tolls or creates chaos through attacks, the cost-benefit analysis for the U.S. and regional countries may shift back towards military intervention. Some in Iran may deem this price acceptable, viewing control of Hormuz as integral to a new regional order they hope to shape. However, this stance risks prolonging the suffering of a population already exhausted by war and economic hardship. Additionally, Iran has not yet received promised frozen assets, and this remains unlikely as long as tankers in the Strait face attacks.
The initial phase of the war, launched by the U.S. and Israel, was marked by an overconfidence in the power of overwhelming force. In this current, lower-intensity phase, Iran may be exhibiting a similar overconfidence in its geographical advantage to coerce its rivals. Its predecessors believed missile forces and proxies, along with a nascent nuclear program, would provide deterrence and leverage. The failure of those strategies led to significant loss of life. Their successors believe they have found a more effective path, but as history has shown, it carries substantial risks.