Iran Already Lost: Hormuz Matters Less Every Day

Hormuz matters less every day. For decades, the Iranian regime regarded the Strait of Hormuz as the ultimate choke point of the economy. That story still dominates headlines, but in practice the blackmail power Iran draws from Hormuz is eroding. Trade flows, energy technology, and risk management are changing faster than the inherited narrative.

In reality, almost 80% of the volumes that passed through the Strait have been re-routed or offset by US exports. The United States is the world’s energy superpower as the largest oil and gas producer, posting record oil and natural gas net exports as well as jet fuel and fertilizer international sales. Meanwhile, the Iranian economy depends almost exclusively on the Strait remaining open. 80% of all its exports, 60% of government revenues and 25% of its GDP depend on Strait flows.

Europe’s average gas price has climbed to $7.15 per gallon, more than 70% above the average U.S. The retail gasoline price is well above China’s national level of $5.5 per gallon, according to official figures. Meanwhile, European benchmark natural gas prices are up by 38% compared with one year ago, while U.S. natural gas prices are down significantly, almost 26%, according to the latest Bloomberg figures.

However, the problem is not just expensive energy; it is a structural burden on households and businesses in two regions where average salaries are also significantly lower than in the United States. These elevated energy taxes come on top of much higher wage, corporate, indirect, and environmental taxes. And no, it is not compensated with radically better public services.

As negotiations edge towards a ceasefire, Tehran is trying to blame the country’s economic collapse on the war and foreign pressure.

Yet the data tell a different story: Iran’s economy was already structurally broken before the war. Years of ideological policymaking, institutionalised corruption, and the militarisation of the economy have caused Iran’s economic ruin. 

Iran has been in a state of permanent economic emergency since at least 2018. Official inflation has remained above 40% year after year, destroying the country’s middle class.

World Bank estimates show average inflation in the high 30s for most of the 2018–2025 period, with spikes of up to 60%, driven by massive currency depreciation and the constant monetisation of fiscal deficits. 

For half a century, the Strait of Hormuz was Iran’s weapon. Today, it is its noose. The mathematics of energy have flipped, and with them the balance of coercive power in the Persian Gulf.

Iran’s implicit deterrent was geographic, spanning from the tanker wars of the 1980s to the sanctions standoffs of the 2010s. Almost 20% of global seaborne oil, and a similar share of liquefied natural gas, passes through the Strait. The formula was simple: any military confrontation that threatened the Tehran regime risked a closure that would halt trade supplies, spike crude prices, bleed Western consumers, and, above all, inflict pain on the United States, who was the world’s largest oil importer.