Iran's Blockade Trilemma: Endure, Escalate, or Negotiate

Nearly six months into the US-Iran war, Tehran is facing a trilemma: endure the blockade, escalate the conflict, or negotiate a resolution. The status quo is becoming increasingly expensive for Iran, with the renewed US blockade affecting crude and petrochemical export revenues, production shut-ins, imports, aviation, gasoline balances, and government subsidies.

The blockade has reversed the relationship between Iranian and non-Iranian oil exports through the Strait of Hormuz. While Iran's crude exports reached 1.85 mbd in Mar-Apr, non-Iranian flows fell to 300 kbd. In August, Iranian oil loadings plummeted to 248 kbd.

Tehran is stuck while its neighbors are recovering from the war. Regional producers have exported around 65% of pre-war volumes. The blockade has also become harder to circumvent, with US Navy warnings issued to ballast vessels approaching Iranian terminals.