Trump's Naval Blockade Thwarts Iran's Oil Strategy

The strategy behind Iran's war in the Strait of Hormuz was simple and straightforward. The mullahs believed that if they could choke off the strait, Americans would feel the pain at the gas pump and Washington would lose its nerve before the midterms.

Brent crude spiked to over $107 a barrel this month, and Iranian-aligned militias sent drones into Saudi Arabia's East-West pipeline, shutting it down for more than a week. Tehran was betting that economic pressure would break the US before its own economy broke.

However, President Trump deserves immense credit for thwarting this plan. Crude exports from the Persian Gulf are back at pre-war levels, with JPMorgan estimating 17.5 million barrels per day, which is 98 percent of where it stood before the war.

Goldman Sachs estimates the region exported 19 million barrels a day over the past week. Brent has come off its highs to about $103, and West Texas crude is trading around $90.

Before the war, 83 percent of Gulf crude had to cross the Strait of Hormuz. In September, about 60 percent crossed the strait, and 23 percent went through a UAE pipeline to the Gulf of Oman. 17 percent flowed through a Saudi pipeline to the Red Sea.

Iran is now the one country in the region whose oil is not moving. Before the war, it exported roughly 1.7 million barrels a day. In September, satellite data showed no Iranian crude leaving by sea at all, thanks to the American naval blockade reimposed in July.

Last week, Iran offered to reopen the strait within seven days, but its price was the release of frozen funds, an end to sanctions, and an end to the blockade. The president said no, recognizing that a regime on the brink would not be begging for its money back.