The Strait of Hormuz is considered one of the world’s most vital geographic “chokepoints,” places where blockage can disrupt the world economy and create serious security issues.  As we have seen over the past month, with 20% of global oil and 20-25% of liquified natural gas supply being blocked from reaching dependent markets in the EU and Asia.  The blockage, in turn, is starting a cascading effect of disruptions, such as effects on fertiliser supply chains and helium needed to produce semiconductors which are supporting the AI boom.  Even with the limited damage so far produced, energy markets are likely to be disrupted for months or more, further sparking inflationary pressures and pushing us towards a recession.

If Iran and the US resume their conflict, things will only get worse as Iran has promised to retaliate upon Gulf energy targets.  Even if they agree upon a ceasefire, preliminary estimates suggest at least $270 billion in damage to the Iranian economy already.  The outcome of the war is an Iran even more motivated to reach for the security of a nuclear weapon, and more importantly, its newfound power to close the Strait.  Essentially, it has discovered asymmetric power from its “mosquito Navy,” including small fast boats with automatic weapons, RPGs, and minelaying equipment, disguised as civilian vessels and/or hidden in caverns along its coast, alongside underground and mobile missile launchers and cheap drones (both land- and sea-based), can create enough security concerns that even the world’s most powerful military is unable to stop.  Thus, it is no surprise that Iran’s 10 point peace plan includes control of the Strait and the ability to collect tolls from it.

The curious thing about the Strait problem is that there are clear alternatives.  While 20-30% more expensive........

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