The Strait of Hormuz is now between the Iranian and US calculus | US-Israel War on Iran

On Tuesday, two tanks were attacked while passing through the Strait of Hormuz through the Omani waterway. The Gulf countries responded by strongly condemning the protests and blaming Iran. The United States then launched attacks on Iranian territory, to which Tehran responded by attacking Bahrain and Kuwait. US President Donald Trump has now said that the Memorandum of Understanding (MoU) signed by Iran and the US is null and void.

This recent increase shows how the Strait of Hormuz has become a major issue in the US-Israel war with Iran that began on February 28. The disagreement on the future of the strait has proven to be very difficult to resolve US-Iranian negotiations, as questions about Iran’s nuclear program have been put aside.

The traffic jam in the Strait of Hormuz has a recent and high price, for Iran, for its Gulf neighbors, and for the global economy that has spent four and a half months suffering the biggest oil shock in the history of the modern market.

Iran’s power is its responsibility

For Tehran, the strait is its strongest card – which is also its most expensive. Since the start of the war, the Iranian military has mined, attacked ships, and slowed traffic through the route. 95 percent. This has led to what Fatih Birol of the International Energy Agency called “the biggest disruption in the history of the global oil market”.

The power is real: about one-fifth of the world’s oil and one-fifth of the world’s liquefied natural gas (LNG) usually pass through Hormuz, and no amount of Gulf pipelines can replace it.

But Iran has been messing up its escape route along with everyone else. Iran’s oil, which previously sold for $3 a barrel less than other countries, is now on the market. 20 percent discount. The country’s oil exports fell by 90 percent in May as the US military clamped down on its fleet.

Even before the start of the war, the World Bank said that Iran’s economy will be consolidated in 2026. The consequences of the collapse of the oil trade will be very large due to the blockade.

A 60-day waiver by the US Treasury was granted on June 22, allowing Iran to sell oil at full market prices until August 21, but has now been revoked following Tuesday’s threats.

This is the economic status of Iran’s efforts to cooperate with them on the transit route and the system of handling tolls or “service fees” for the passage of ships. Washington has made it clear that Iran cannot levy taxes in international waters governed by the right of passage under the Law of the Sea.

For Tehran, the dispute is not about remittances, which may be small compared to their income; it is about to establish control and control over the chokepoint which is the real place that will benefit from it unless it negotiates the removal of sanctions and the release of the frozen product.

The latter is disputed: Iran wants half of the $25bn in immediate reserves, while the US has refused. The special $300bn reconstruction fund that was floated in the MoU has already become a political point in Washington.

The Gulf is paying for a problem that never started

For the Gulf countries, the problem of the Strait of Hormuz has meant a change in geography. Saudi Arabia has also sent its nearly 1,200km (746-mile) east-west pipeline to the Red Sea port of Yanbu, and the UAE is leaning on the Habshan-to-Fujairah line to the Gulf of Oman.

Together, however, these pipelines carry a fraction of what Hormuz once did, a best of 7 million barrels per day for the Saudi pipeline and less than 1.8 million for the Emirati one, compared to about 20 million barrels per day before the war.

The two routes have come under attack: Iran’s strike cut off the output of the East and West pipelines by about 700,000 barrels a day in April, and a drone attack disrupted unloading in Fujairah. Exports from Gulf countries excluding Iran fell by almost half between February and March.

Qatar, which is hosting the talks between Iran and the US, has its biggest share: all of its LNG trade comes from the Strait of Hormuz, and it has been pushing hard for an end.

Oman, drawn into Iran’s jurisdiction to claim as co-owner of the strait water region, is caught between commercial interest decision and legal responsibility, as a signatory to the United Nations Convention on the Law of the Sea (UNCLOS) which openly rejects Iranian charges. Iraq, heavily dependent on its Gulf location, has quietly explored an export route to the north via Turkey.

None of these things are cheap, and all of them are political and commercial, which unites the economy of the Gulf capitals to stabilize between the US and Iran.

Globally: Insurance bills and inflation

Beyond this area, the problem has spread mainly through two channels: cost and insurance. High oil prices are attributed to various purchasing power and reduced growth. According to estimates, the world economy may drop to 2.8 percent in 2026 from 3.4 percent last year due to the closure of the strait.

Insurance on the Hormuz voyage, which cost about 0.25 percent of a vessel’s value before the war, has risen sharply to 8 percent, making one large tanker a $3m-to-$8m expense. Shipping lines including CMA CGM and Hapag-Lloyd have added $1,500 to $2,000 per twenty-foot equivalent unit (TEU). Washington’s International Development Finance Corporation has stepped in as, as an insurer of last resort, providing $40bn in reinsurance to keep ships afloat.

China has taken the biggest share of this pain: It takes about 40 percent of exports through the Strait of Hormuz and buys more than 80 percent of Iran’s oil exports, which makes it at the same time Tehran’s most important customer and one of the most visible people in the war. Japan, which exports 70 percent of its Middle Eastern food supply through the river, has already found a good supply chain.

For economies dependent on other countries in Asia and Europe as a whole, the future of the strait is not just about Middle East negotiations; it is directly reflected in the prices of fuel, goods and fertilizers.

Oil and gas dominate the headlines, but about 30 percent of the world’s fertilizer trade also passes through Hormuz.

The World Bank’s fertilizer prices rose more than 12 percent in the first quarter of 2026 and were the highest since October 2022, largely driven by the shutdown. The Food and Agriculture Organization has warned that shortages of urea and other nitrogenous substances will be reflected in lower yields in the 2026-2027 growing season, hitting export-dependent and already food-insecure countries in Africa and Asia.

Unlike rising oil prices, which bite hard at the tap, fertilizer shortages reach next year’s harvest, meaning the unresolved Hormuz conflict will have a slower but longer economic impact than just commodity prices.

That’s heavy math on both sides. A deal that reopens the Strait of Hormuz without eliminating those who control it could bring back the same instability that closed it in the first place; one that acknowledges that the Iranian regime is in the same danger as Washington and that the shipping nations cannot accept it. Until the arena is widened, the global economy is left with vulnerable prices that neither side can afford to close, or agree to reopen.

The views expressed in this article are those of the author and do not reflect Al Jazeera’s editorial policy.