Iran's Control of Strait of Hormuz: A Stable Oil Market and a Weakened US Diplomatic Effort

The Strait of Hormuz is a crucial waterway connecting the Persian Gulf to the Arabian Sea. Its control has significant implications for global oil prices and the US economy.

If Iran were to gain control over the Strait, it would have two options: allowing only Iranian oil out or charging tolls to all oil producers. The first option would be counterproductive as Iran's oil exports make up only 2% of global production.

A more likely scenario is that Iran would charge tolls, which would be a combination of money and political loyalty. This could result in reduced net proceeds for non-Iranian oil producers, but world prices would remain nearly unchanged at around $80 per barrel.

The other Gulf countries would eventually respond by increasing pipeline capacity to alternative ports or beefing up their naval and air forces. A coalition of Gulf countries might acquire enough military power to threaten Iranian transits, leading to negotiations for free transit.

In this scenario, the US economy remains stable, with oil prices not triggering a recession. The US could claim some diplomatic victories, but its goal of preventing Iran's nuclear development would likely remain unachieved.