Iran’s military may be decimated, but it’s winning the energy war as it controls who gets cargoes through the Strait of Hormuz

As the conflict between the United States and Iran intensifies, the stakes for global energy markets and geopolitical influence are rising. Despite potential military setbacks, Iran's ability to control the Strait of Hormuz could result in a significant victory for the country, with far-reaching consequences for the world economy.

The Strait of Hormuz is a critical chokepoint for global oil and gas shipments, with approximately 30% of the world's daily oil supply passing through it. Iran has long maintained a strategic interest in this region, and its control over the strait has been a point of contention between Tehran and Western powers, particularly the United States.

In recent weeks, tensions have escalated as the U.S. and Israel have targeted Iranian assets, with President Trump repeatedly threatening further military action. However, despite potential military pressure, Iran's capacity to exert influence over the strait is not diminishing. In fact, its ability to control energy flows through this crucial waterway could ultimately be seen as a major victory, particularly if the U.S. decides to withdraw without securing full control of the region.

This potential win for Iran would have significant implications for global energy markets. With Iran controlling the strait, even imperfectly, oil and gas prices are likely to rise, leading to increased inflation worldwide. The consequences of such a scenario would be felt by economies around the globe, with many already experiencing the initial cracks of this strain.

Matt Reed, vice president of geopolitical and energy consultancy Foreign Reports, explained that seizing and controlling the strait is a major victory for Iran, a regime that has few other successes to celebrate. Iran is confident in its ability to exert some control over the strait and will insist on collecting tolls to legitimize its role and fund postwar reconstruction.

The alternatives for the U.S. are to intensify military pressure, potentially involving ground troops, or to allow the current stalemate to persist. Trump has indicated that attacks will escalate for two or three weeks, but he has also encouraged other countries to seek their own oil supplies, suggesting a possible shift in U.S. priorities.

Iran is already beginning to pick winners and losers in the energy arena, allowing a trickle of shipments to countries such as China, Vietnam, Malaysia, and the Philippines. These nations, which include some of the neediest in Asia, are being individually negotiated with by Iran.

Overall, vessel traffic from the Persian Gulf has plummeted in recent months, with March levels dropping to just 5% of February levels, according to S&P Global Commodities at Sea. Volumes have only slightly increased in April. Reed warned that economies around the world will suffer if this situation drags on, as the initial cracks in global economies begin to widen.

In conclusion, the conflict between the U.S. and Iran could result in a major victory for Iran if it maintains control over the Strait of Hormuz. This scenario would have significant implications for global energy markets, leading to higher prices and increased inflation. The world's economies would be left worse off than before the conflict began, with the stakes for global stability and economic stability rising as the situation continues to unfold.