Iran's Strategic Position in Global Trade
The Strait of Hormuz, a narrow waterway connecting the Persian Gulf to the Arabian Sea, has emerged as a critical chokepoint in international trade, particularly for energy and other vital commodities. Iran's geographical control over this strait grants it considerable leverage, which it has demonstrably used to influence geopolitical dynamics. Recent data from IMF PortWatch indicates a drastic reduction in commercial traffic through the strait, with daily vessel passages and estimated transit volumes plummeting by approximately 96% in the seven days ending August 2, compared to the same period in 2025. This sustained disruption, evident since late February, underscores Iran's capacity to significantly impede global maritime trade.
The concept of 'weaponised interdependence,' as articulated by political scientists Henry Farrell and Abraham Newman, provides a useful framework for understanding Iran's strategy. In this context, Iran's control over a physical, rather than financial or digital, node within international networks translates into coercive power. The profound global reliance on the Strait of Hormuz amplifies this leverage. In 2025, approximately 20 million barrels of crude oil and petroleum products, representing a quarter of global seaborne oil trade, transited through the strait daily. A substantial 80% of these flows were destined for Asia, with China and India alone receiving 44% of the crude oil. Furthermore, Qatar and the United Arab Emirates exported nearly one-fifth of the world's liquefied natural gas (LNG) through Hormuz, lacking viable alternative routes.
Economic Repercussions Beyond Direct Disruption
The economic impact of potential or actual disruptions extends beyond mere blockades. Even the threat of attacks from missiles, mines, drones, or vessel seizures can escalate insurance premiums, freight rates, and waiting times for shipping. Research highlights how disturbances at maritime chokepoints propagate economic losses through delays, rerouting, increased insurance costs, and interruptions to manufacturing processes. This allows Iran to exert pressure on multiple stakeholders simultaneously.
Gulf states face direct risks to their export revenues, ports, and logistical operations. Major Asian importers, such as India, confront the prospect of higher energy costs and potential supply shortages. While the United States imports relatively little oil through the Strait of Hormuz, it is not immune to the effects of elevated global energy prices and increased domestic fuel costs, alongside the military expenditures associated with safeguarding commercial navigation. Consequently, Iran's most potent leverage might stem from indirectly compelling Gulf governments and Asian importers to advocate for de-escalation with Washington.
The ramifications also touch upon less apparent sectors, including the burgeoning artificial intelligence (AI) industry. Gulf nations are investing heavily in data centers and computing infrastructure, aiming to leverage their access to affordable energy to become significant AI hubs. Disruptions at Hormuz, by increasing energy prices and risks to regional infrastructure, could elevate the cost of expanding AI capacity and undermine a key economic diversification strategy for the region.
Beyond oil and gas, the Strait of Hormuz is crucial for other commodities. A study published in Nature Food revealed that several major agricultural economies heavily depend on fertilizers exported via the Strait of Hormuz. India, for instance, sources approximately half of its imported ammonia and nitrogen fertilizers, totaling around nine million tonnes, from Gulf producers. A disruption would combine reduced fertilizer availability with higher natural gas and shipping costs, potentially increasing risks to crop yields and food prices, particularly in food-importing nations. Similarly, helium, essential for semiconductor production, medical imaging, and scientific research, is largely supplied by Qatar and the UAE through Hormuz. Analysis indicates that economies responsible for over 60% of global integrated-circuit exports are highly dependent on this helium supply, thereby linking regional security issues to advanced manufacturing and healthcare supply chains in Asia.
The Inherent Limits of Iran's Leverage
Despite its significant bargaining power, Iran's ability to weaponize the Strait of Hormuz is subject to inherent limitations. Firstly, disruption carries a cost for Iran itself. The country's petroleum exports, food imports, industrial inputs, and overall maritime trade are heavily reliant on its southern waterways. While Saudi Arabia and the UAE possess pipelines capable of rerouting an estimated 3.5 to 5.5 million barrels per day away from Hormuz, Iran's alternative Jask route remains largely non-operational. A prolonged interruption would therefore deprive Tehran of crucial export earnings, exacerbating inflation and domestic shortages. The ongoing US blockade of Iran’s southern ports further compounds this vulnerability. Approximately 94% of Iran's annual foreign trade, totaling around 160 million tonnes, passes through these southern ports, with northern Caspian Sea ports handling only a fraction of this volume, and their capacity for expansion being limited even in a crisis.
Secondly, while Iran can make navigation perilous, sustaining such disruption is resource-intensive. Assessments by the US Congressional Research Service suggest that while Iran can disrupt shipping using various means, US forces could eventually restore traffic, albeit over a period of days, weeks, or months. Iran's advantage lies more in imposing uncertainty and delays rather than outright control. However, this uncertainty also negatively impacts its own economy; a prolonged 'no war, no peace' scenario can deter investment, reduce government revenues, and diminish the fiscal capacity needed to maintain military pressure. Iran's military capabilities are also closely tied to public revenues, which have been constrained by sanctions. The Stockholm International Peace Research Institute (SIPRI) reported Iran's military spending in 2025 at about 2% of GDP, significantly lower than regional counterparts. Consequently, Iran can disrupt the waterway, but not indefinitely without incurring substantial economic and military costs.
Thirdly, the repeated use of the Strait of Hormuz as a weapon incentivizes adaptation. Just as Iran has adapted to sanctions, Gulf Cooperation Council (GCC) energy producers are increasingly motivated to bypass Hormuz by expanding pipelines to the Red Sea and the Gulf of Oman. Importing nations will seek to diversify their suppliers, invest in strategic reserves, and develop alternative sources for LNG, fertilizers, and critical materials. Companies will re-evaluate supply chains that are overly dependent on a single passage. The global response to Russia's invasion of Ukraine, particularly the European Union's increased focus on domestically generated renewable electricity as a security asset, exemplifies this adaptive behavior. The International Energy Agency subsequently raised its five-year forecast for global renewable capacity expansion by nearly 30%, partly due to increased policy support driven by energy insecurity.
The Trade-Off for Iran
While such adjustments will be gradual, and alternatives cannot immediately replace vital commodities, persistent insecurity strengthens the economic rationale for projects that reduce reliance on Hormuz. Iran thus faces a complex trade-off. Calibrated, limited disruption can elevate the costs of US military pressure, fragment opposing coalitions, and create diplomatic space for negotiations on sanctions and regional security. However, prolonged or indiscriminate disruption would harm Iran's own economy, alienate key Asian partners like China, and accelerate investments designed to diminish its future leverage.
In conclusion, the Strait of Hormuz is a powerful economic weapon due to current high dependence and limited short-term alternatives. Nevertheless, its effectiveness has an expiration date. The timing of this expiry will depend on technological advancements, available capital, political will, and critically, how aggressively Iran chooses to wield this weapon. Each time Iran weaponizes Hormuz to influence negotiations, it provides a stronger impetus for others to reduce their dependence on the strait. The more aggressively Iran employs this tool, the faster its potency may diminish.
