The World Economy Will 'Explode' Before Iran's Oil Wells
Trump is prolonging the blockade of the Strait of Hormuz on a series of questionable assumptions about Tehran
Nobody should want the Strait of Hormuz to stay closed. The blockades by Iran and the U.S. of the vital waterway have caused global oil prices to rise to their highest levels since just after Russia’s full-scale invasion of Ukraine began in February 2022. About 20 percent of the world’s oil and significant amounts of liquified natural gas and fertilizer flowed through the strait before the U.S. and Israel began the war on February 28; now, traffic is down to a trickle. The U.N. estimates that an additional 32.5 million people could be plunged into poverty as a result of energy and food price shocks; according to one of the biggest fertilizer producers, shortages could result in up to 10 billion fewer meals produced per week; and average U.S. gas prices have risen 44% since the war to $4.30/gallon, according to AAA. The International Monetary Fund has warned of a global recession if energy price shocks are not contained by the middle of the year.
Fortunately, the solution to this problem requires no negotiations and no deal: both sides could just drop their blockades. How this would happen seems clear: nine days after the April 8 cease-fire, Iran unilaterally announced that the strait was open. Oil futures dropped from triple digits to around $90/barrel. However, U.S. President Donald Trump said that Washington’s blockade would “remain in full force” until the two sides reached a peace deal. Tehran then reimposed its blockade.
On May 1, Trump rejected Tehran’s proposal to discuss conditions for opening the Strait of Hormuz at the same time as the U.S. would guarantee to unwind its blockade of Iranian ports. The plan then called for discussing Tehran’s nuclear program in exchange for sanctions relief -- the same formula that produced the nuclear deal under President Barack Obama. While it’s reasonable to be skeptical of Iran’s cunning negotiation tactics, it seems sensible to discuss the strait first and the nuclear issue second.
Trump’s refusal is grounded in the belief that Tehran will unconditionally surrender -- which he demanded in a March 6 all-caps social media post -- after the U.S. blockade inflicts enough pain on Iran. On April 29, Trump said the war would end after his “genius” blockade inflicted enough economic pain on Iran that it would “cry uncle.” Three days before, he told Fox News that Iran’s oil wells would “explode” in “three days” because Iran couldn’t export its oil. April 29 came and went and there were no reports of explosions.
