Nobody was ready for a scenario in which the Strait of Hormuz is blocked for an indefinite period of time. The Iranians think that they will eventually get what they want by holding commercial traffic through the Strait of Hormuz hostage and causing as much pain for the global economy as possible. The Trump administration believes that if Iran’s oil revenue is cut off the regime in Tehran will eventually be forced to give in to their demands. Both sides are engaged in an extremely high stakes game of chicken, and both sides are making tragic miscalculations. There is no way that the world economy is going to be able to handle a shutdown of the Strait of Hormuz that lasts for months. We will see shortages, rationing, panic, riots and market collapses. This is the greatest threat to the world economy that I have seen in my entire lifetime so far, and the truth is that this crisis is just getting started.
On Monday, the Trump administration commenced a naval blockade of the Strait of Hormuz.
According to the Wall Street Journal, more than 15 U.S. Navy warships are involved…
A U.S. military blockade of the Strait of Hormuz was under way on Monday after peace talks broke down, and President Trump warned that any Iranian fast-attack ships that came near the blockade would be destroyed.
More than 15 U.S. warships are in place to support the operation, according to a senior official. An advisory to mariners from U.K. Maritime Trade Operations, which is affiliated with Britain’s Royal Navy, said maritime-access restrictions were being enforced for Iranian ports and coastal areas along the Persian Gulf, Gulf of Oman and parts of the Arabian Sea.
Trump threatened drug-boat-style strikes on Iranian ships, saying in a social-media post that they would be targeted “using the same system of kill that we use against the drug dealers on boats at Sea.”
Iran was only allowing a very limited number of vessels through the Strait in recent weeks.
Now that we also have a U.S. blockade on top of that, traffic through the Strait of Hormuz will virtually be entirely shut down.
Shortly after the blockade began, two oil tankers that were heading through the waterway were forced to reverse course…
At least two oil/chemical tankers turned away from the Strait of Hormuz on Monday after the U.S. began its blockade of the waterway.
Rich Starry, a ship laden with oil that had said its destination was China, turned back from the Strait about 20 minutes after the blockade began, according to MarineTraffic, a maritime analytics provider. The ship’s flag was Malawi, which is a landlocked country, so it is a false flag.
Meanwhile, Ostria, a false-flagged Chinese oil/chemical tanker that was partially laden with oil, turned back from the Strait, according to MarineTraffic. The ship is sailing under the flag of Botswana, which is a landlocked African country.
The Chinese warned the Trump administration not to do this.
But the Trump administration did it anyway.
Now the Chinese are furious, and they are warning that there could be consequences…
The tanker U-turns follows unconfirmed reports that China has warned the US not to block/intercept Chinese ships/tankers, or face consequences that could potentially include military provocations.
China’s Defense Minister Dong Jun reportedly sent a message to the Trump administration and the U.S. Navy emphasizing Beijing’s intent to continue operating in the Strait of Hormuz and uphold its agreements with Iran. “Our ships are moving in and out of the waters of the Strait of Hormuz. We have trade and energy agreements with Iran. We will respect and honor those agreements and expect others not to interfere in our affairs” adding that “Iran controls the Strait of Hormuz and it is open for us.”
I don’t expect a military confrontation between the U.S. and China yet.
The Chinese will probably give diplomacy a chance to work.
But if the Strait of Hormuz remains blocked for an extended period of time, China will eventually do something about it.
As I discussed yesterday, China purchases more natural gas from the Middle East than anyone else.
China also purchases more oil from Saudi Arabia than anyone else.
And approximately 90 percent of Iran’s oil exports go to China.
A lot of people out there simply do not understand that this crisis really could lead to a major showdown with China.
Of course the entire world is going to experience a tremendous amount of pain if this crisis goes on for long enough.
The New York Times is reporting that as oil prices rise “some companies say they are planning for $175 a barrel”…
If no Iranian oil gets through the strait, prices could keep rising over time — some companies say they are planning for $175 a barrel. The Iranians understand the potential political effects of continued inflation in the United States less than seven months before midterm elections.
“Soon you’ll be nostalgic for $4 to $5 gas,” Iran’s top negotiator and the speaker of its Parliament, Mohammad Bagher Ghalibaf, warned American consumers after the failure of the talks he led with Mr. Vance.
The Iranians intend to be in control of the Strait of Hormuz both now and in the future.
And they are warning that if the U.S. or anyone else attempts to interfere with their control of the waterway there will be serious consequences…
“Iran, based on clear and logical principles, is responsible for the security and management of the Strait of Hormuz,” Gen. Reza Talaei-Nik, spokesperson for Iran’s Defense Ministry, told the state-owned organization Press TV.
He said Iran “will not allow any interference or aggression by U.S. or other foreign forces” and will not hesitate to respond decisively “to any aggressor, including Israel and the United States, in the Strait of Hormuz and elsewhere.”
Now that a U.S. blockade has started, it is probably just a matter of time before more fighting erupts.
There is also a very strong possibility that the Houthis could soon shut down commercial traffic through the Bab al-Mandeb Strait…
Iran could retaliate against a U.S. naval blockade of the Strait of Hormuz by directing its Houthi allies to disrupt another critical global shipping route, a senior Middle East analyst warned Sunday.
The Bab al-Mandeb — a narrow chokepoint linking the Red Sea to the Gulf of Aden — carries roughly 12% of global oil shipments and serves as a vital trade corridor between Asia and Europe, making it a strategic target for escalation that could further strain global energy markets.
If that happens, that will make this crisis a whole lot worse.
But even if the war ended tomorrow and commercial traffic in the Middle East was fully reopened, we would still be facing a global energy crisis for an extended period of time because oil production in the region is way down due to all of the damage that has already been inflicted by the conflict…
Crude oil production in the major Gulf Arab exporters plunged in March due to the Iran war, according to data released by OPEC on Monday.
Iraq took the biggest hit with production collapsing 61% from 4.2 million barrels per day in February to 1.6 million bpd in March, according to OPEC’s monthly report. Output plunged 53% in Kuwait and 44% in the United Arab Emirates month over month, the data showed.
Production in Saudi Arabia, OPEC’s biggest producer, dropped 23% from 10.1 million bpd to 7.8 million bpd. The Saudis are relying on a crucial East-West pipeline to reroute barrels from the Persian Gulf to the Red Sea for export.
We have a real nightmare on our hands.
Next to nothing has been able to get through the Strait of Hormuz for over a month, and a prominent political scientist is warning that we are facing “a system-wide supply shock”…
Global markets could begin running short of “critical goods” within a few days, following the breakdown in peace negotiations between Iran and the U.S. and the now double-edged blockade on the vital Hormuz Strait.
This is according to political scientist and security scholar Robert Pape, who on Sunday warned that the supply chain impacts of the conflict could soon extend far beyond the current pressures on global energy costs.
“Everyone is still talking about oil prices. That’s already outdated,” Pape posted to X on Sunday. “This is no longer a price shock—It is the early stage of a system-wide supply shock.”
He is right, and the damage to global supply chains is only going to get worse with each passing day.
But this crisis is not going to end any time soon, because both sides are waiting for the other to give in…
President Trump’s decision to blockade all Iranian shipments out of or into the Strait of Hormuz starting Monday morning sets up the next great test in the Iran war: Which side can endure more economic pain, Tehran’s new leadership or Mr. Trump himself?
The Iranians clearly think that they have the upper hand.
But the pain that the U.S. naval blockade is going to cause for their economy will be immense…
The U.S. naval blockade of the Strait of Hormuz would cost Iran approximately $276M/day in lost exports and disrupt $159M/day in imports, a combined economic damage of ~$435M/day, or $13B/month.
Over 90% of Iran’s $109.7B in annual trade transits the Persian Gulf. Oil/gas accounts for 80% of government export earnings and 23.7% of GDP. Kharg Island alone generates ~$53B/year, or as I noted to @TIME, “$78 billion a year in energy revenue.
How long can they hold out?
How long can we hold out?
For now, President Trump is insisting that he is willing to go for as long as it takes…
President Donald Trump said Iran is “in very bad shape” and vowed it “will not have a nuclear weapon” as he signaled indifference to renewed negotiations, saying he “doesn’t care” if Tehran returns to talks, while confirming a U.S. blockade of Iranian oil flows set to take effect Monday morning.
Speaking late Sunday after returning to Washington from Florida, Trump underscored his posture following the collapse of U.S.-Iran talks, stating plainly, “I don’t care if they come back or not. If they don’t come back, I’m fine.”
If there is no quick resolution to this crisis, things are going to get really bad.
I am not talking about just a few minor inconveniences.
I am talking about major shortages all over the globe in just a matter of months.
If the Strait of Hormuz stays closed for an extended period of time, there will be extreme hunger in impoverished countries.
At this stage, it already appears that we will not be able to salvage the spring planting season in the northern hemisphere.
Farmers that have enough fertilizer will be able to grow their crops normally, but those that don’t will be out of luck.
Most people out there simply do not have a frame of reference for a crisis of this magnitude.
But unless a miracle happens, a few months from now people all over the world will be freaking out about how painful things have become.
Michael’s new book entitled “10 Prophetic Events That Are Coming Next” is available in paperback and for the Kindle on Amazon.com, and you can subscribe to his Substack newsletter at michaeltsnyder.substack.com.
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