Iran Does Not Need to Close Hormuz. It Only Needs to Make Oil Expensive Enough

 

Seven Ships Through Hormuz

I looked at the shipping numbers from Karachi on Thursday morning and stopped at one figure: seven. Only seven vessels were recorded passing through the Strait of Hormuz on Wednesday, 9 September. Four sailed out and three entered. Some ships may have crossed with their transponders switched off, so the number cannot tell us everything.

Yet it tells us enough to ask a different question about Iran.

For years, analysts have debated whether Tehran can close the Strait of Hormuz. The question usually produces maps, naval inventories and estimates of how quickly the United States could clear mines or destroy Iranian missile batteries. I think the events of September 2026 expose a weakness in that debate. Iran does not need to seal the waterway with an iron gate.

It needs to make passage frightening and expensive.

Brent crude was trading around $101 a barrel early on 10 September, nearly 30 percent above its early-August lows. Oil flows through Hormuz remained far below their pre-war level after another escalation between Iran and the United States.

A strait can therefore remain geographically open while becoming commercially semi-closed.

That distinction matters far beyond the Gulf. I see it from Karachi, an oil-importing city in an oil-importing country where a crisis several hundred kilometres away can reach the economy through an invoice before most people see its effect at a petrol pump.

The Wrong Question About Hormuz

Hormuz is one of the world's most important energy chokepoints. Before the current war, roughly a fifth of global oil and gas supplies moved through the waterway. That concentration has always made the strait central to calculations about a confrontation with Iran.

The conventional military question sounds straightforward: can Iran close it?

Probably not permanently against overwhelming American naval power. A physical blockade would invite an enormous military response, while Gulf exporters have spent years developing alternatives. Saudi Arabia can move some crude westward. Other producers have also adjusted routes, and ship-to-ship transfers outside Hormuz have helped keep barrels moving.

But permanent closure sets an unnecessarily high test for Iranian leverage.

The oil market does not wait for admirals to declare a waterway officially closed. A shipowner must decide whether a voyage is worth the danger. An insurer has to put a price on a tanker and its cargo. Traders then calculate how much crude will actually arrive, not how much could theoretically pass through a channel on a naval chart.

Iran can exert pressure inside those calculations.

Recent events show the mechanism. Flows through Hormuz had recovered to roughly 8 million to 9 million barrels a day in the week before fighting resumed on 30 August. Rystad Energy's chief economist later estimated that flows had fallen as low as 2 million barrels a day after renewed escalation.

Hormuz was not sealed.

The economic effect was still severe.

Insurance Has Become Part of the Battlefield

One figure from the APPEC energy conference in Singapore deserves more attention than another diagram of Iranian missile ranges.

Paul Bradshaw, a director at Emirates National Oil Company, said cargo insurance could now reach 5 to 6 percent of the cargo's value. Additional war-risk premiums for transit, once effectively zero, could reach 10 percent. He put the resulting transit costs in a range of roughly $10 million to $20 million.

Some market participants have reportedly considered sailing without insurance.

Read those numbers as strategic information, not merely shipping statistics. A naval commander measures whether a vessel can physically cross a waterway. The commercial world asks another question: at what price?

That difference gives Iran leverage even when the U.S. Navy remains militarily superior.

An American warship can escort a tanker. It can attack a launch site that threatens shipping. American forces can also respond to Iranian attacks at sea, as the latest exchange has demonstrated.

But a destroyer cannot order an insurer to classify the Gulf as safe.

Nor can naval power compel a private shipowner to accept a voyage whose risk-adjusted return no longer makes commercial sense. Once insurers demand huge premiums and owners hesitate to enter the area, military insecurity becomes an economic restriction.

The market starts doing part of the coercive work.

Iran Does Not Control the Strait

Iranian leverage should not be exaggerated.

Oil is still moving. Some vessels appear to be making crossings without broadcasting their positions, which means visible tracking data understates actual traffic. The market has also begun adapting to prolonged disruption.

Gulf producers have found other outlets for some crude. Iraq's exports recovered in August, while shipments through Egypt's Sidi Kerir increased sharply. Higher production outside the Gulf has also softened part of the shock.

Those adjustments explain something that might otherwise appear strange. With such severe disruption in the Middle East, why is Brent only around $100 instead of exploding much higher?

Because Iran does not possess a monopoly over global oil supply.

The United States, Canada and Guyana have added non-OPEC production. China has reduced seaborne crude imports and holds substantial reserves. Meanwhile, alternative Gulf routes continue to carry part of the missing supply.

None of those facts destroys the Iranian strategy. They define its limits.

Tehran does not need total control to impose costs. It needs enough uncertainty to reduce throughput and alter commercial behaviour. Prices then carry the shock outward.

The causal chain is surprisingly short:

risk → insurance → shipping behaviour → constrained supply → price

No permanent blockade is required.

Karachi Receives the Shock Through a Bank Account

Sitting in Karachi, I find the shipping-versus-closure distinction more useful than the usual military debate because Pakistan experiences Hormuz as an economic system.

Pakistan does not need to lose a tanker for the crisis to hurt us. An importer buying energy faces a higher international price. Freight becomes more expensive when ships take longer routes or owners demand compensation for danger. Foreign currency requirements rise with the import bill.

Then the pressure moves through the financial system.

My work with cross-border payments has taught me to look beyond the vessel. A tanker voyage sits inside a chain of commercial contracts. Banks handle payments and documentary requirements. Insurers price risk, while compliance departments examine counterparties and sanctions exposure.

A barrel of oil is therefore also a financial transaction.

When war changes the risk surrounding that barrel, the effects travel through payment systems before they become visible to a motorist in Karachi. The geopolitical crisis enters balance sheets, import costs and eventually domestic prices.

Brent above $100 does not prove that Iran has achieved a predetermined price target. Tehran cannot simply dial the world oil price upward.

The distinction matters.

Oil prices reflect global demand and additional production as well as war. Alternative routes also restrain the price. Iran influences one powerful variable inside a much larger market: the perceived danger of moving Gulf energy to its buyers.

At present, that variable is powerful enough to matter.

America Can Keep Hormuz Open and Still Pay the Price

The latest confrontation exposes an uncomfortable paradox in American power.

The United States can remain the dominant naval force in the Gulf. It can destroy Iranian vessels and protect shipping corridors. Yet military dominance does not automatically restore commercial confidence after repeated attacks on merchant shipping.

On 9 September, Iran said it had attacked ten ships near Hormuz after the United States sank five Iranian oil tankers. At least one seafarer was reported killed, while another was missing. The exchange represented the largest wave of attacks on shipping since the current war began.

Brent moved above $100.

Seven tracked vessels crossed Hormuz the following day.

Those facts do not prove Iranian control. They show something subtler: the difference between keeping a sea lane militarily open and making it commercially usable at normal cost.

The distinction may become more important if the confrontation persists.

Washington can attack the instruments Iran uses to threaten shipping. Gulf producers can build bypasses, traders can find replacement barrels, and markets eventually adapt. We can already see some of that adaptation in marine fuel markets and alternative export routes.

Yet adaptation has a price.

Somebody pays the higher insurance premium. Somebody absorbs the longer voyage. An importer eventually receives the more expensive invoice.

In Karachi, that last part interests me most.

For decades, the strategic debate asked whether Iran could close Hormuz. September 2026 suggests a less dramatic question may be more useful.

How dangerous does Iran need to make the strait before keeping it technically open stops feeling like victory?