In 1956, a narrow waterway humbled a fading empire. Egypt’s nationalisation of the Suez Canal triggered a military response from Britain, France, and Israel that succeeded on the battlefield but collapsed politically and economically. Within weeks, Britain faced a run on the pound, American opposition, and the stark realisation that raw military power could not overcome geography and economic reality. The Suez Crisis did not merely accelerate Britain’s decline - it announced it.

Today, a different chokepoint threatens to deliver a similar verdict on the United States.

The Strait of Hormuz is one of the most critical arteries of the global economy. Nearly twenty per cent of the world’s traded oil passes through this narrow stretch of water between Iran and Oman. Control it, or even credibly threaten it, and you hold leverage that no amount of aircraft carriers or precision strikes can easily neutralise.

The current crisis - marked by Iranian pressure on the strait and the recent American decision to impose its own blockade on top - is not simply another chapter in Middle East tensions. It is a stress test of American power in an era when geography, debt, and shifting economic alliances are reshaping the limits of military dominance.

The lessons of 1956 remain instructive. Britain and France believed their military superiority would force Nasser to yield. They achieved tactical victories but ignored the deeper reality: the canal was not merely a trade route but an instrument of leverage. When the United States refused to support the operation and the pound came under pressure, the illusion of imperial reach evaporated.

America faces a parallel dilemma today, though the scale is larger. Even with overwhelming air and naval superiority, sustaining a prolonged confrontation over Hormuz carries costs that extend far beyond the battlefield. A serious disruption - whether through Iranian mining, missile strikes, or effective control - would send oil prices surging towards $150 or even $200 per barrel. The immediate victims would be the Global South and import-dependent economies. Yet the deeper pain would be felt by the Gulf states themselves.

These countries earn vast revenues from oil exports, but they also rely heavily on imports for food and necessities. A prolonged closure would force them not only to seek costly alternative routes but to draw down their substantial financial reserves simply to maintain stability.

Suez did not destroy Britain overnight, but it made clear that the old order could no longer be maintained by force alone

Suez did not destroy Britain overnight, but it made clear that the old order could no longer be maintained by force alone

A significant portion of those reserves - estimated at around $800 billion - sits in liquid US assets, including Treasuries and stocks. Liquidating such holdings to survive would not be cost-free. It would send tremors through American financial markets and accelerate the very erosion of confidence in the dollar that Washington seeks to prevent.

Iran has demonstrated a clear understanding of this leverage. Reports suggest it is selectively allowing passage to tankers whose oil is sold in Chinese yuan rather than dollars. Should this practice expand and solidify, it would represent more than a symbolic challenge. It would mark a tangible step towards weakening the petrodollar system established in the 1970s, when Saudi Arabia and other Gulf producers agreed to price oil in dollars in exchange for American security guarantees.

That arrangement has underpinned American financial primacy for half a century. Its gradual unravelling would not require a dramatic battlefield defeat. It would happen through the steady logic of realpolitik: nations protecting their interests by exploiting chokepoints and seeking alternative settlement currencies.

China’s quiet but consistent push to internationalise the yuan in oil trade adds another layer. Beijing has little interest in a chaotic collapse of global energy markets, but it has every incentive to reduce its dependence on dollar-denominated trade. A prolonged Hormuz crisis provides both motive and opportunity.

American strategists may argue that superior technology and rapid strike capabilities can neutralise Iranian threats. History, however, suggests caution. Military success does not always translate into strategic victory when the adversary controls the terrain and the economic narrative. In a Hobbesian international system, states do not submit to ultimatums when they possess asymmetric leverage. They adapt, endure, and exploit vulnerabilities.

Niall Ferguson’s observation about imperial decline is relevant here. When the cost of servicing debt begins to rival or exceed military spending, the structural foundations of power start to shift. The United States carries significant debt, and any sustained oil shock would add inflationary pressure and higher borrowing costs. The question is not whether America can win a short, sharp conflict. It is whether it can sustain the economic and political consequences of a long one.

Empires do not usually end with a single decisive battle. They adjust, retrench, or fade when the gap between their ambitions and their structural capacity becomes unsustainable. Suez did not destroy Britain overnight, but it made clear that the old order could no longer be maintained by force alone.

The Strait of Hormuz may yet play a similar role for the United States. In an era of great power competition, where economic sovereignty and control over critical chokepoints matter as much as aircraft carriers, geography retains its ancient veto. Nations that understand this reality - and act accordingly - often outlast those that rely primarily on demonstrations of military reach.

Whether the current crisis leads to de-escalation or prolonged tension, one conclusion is hard to avoid: the age when a superpower could dictate terms through naval presence alone is drawing to a close. The real test of American power in the coming years will not be its ability to project force, but its capacity to adapt to a world in which leverage flows through narrow straits and alternative currencies.

© The Friday Times