President Donald Trump on Saturday threatened to destroy Iran’s oil processing infrastructure if the country continues to block the Strait of Hormuz, a critical shipping lane for global oil supplies. The ultimatum came after roughly two weeks of escalating conflict following U.S. And Israeli strikes against Iranian military targets, effectively closing the strait to most commercial traffic.
“Hopefully China, France, Japan, South Korea, the UK, and others, that are affected by this artificial constraint, will send Ships to the area so that the Hormuz Strait will no longer be a threat by a Nation that has been totally decapitated,” Trump said in a statement, referring to the recent killing of Ayatollah Ali Khamenei, Iran’s longtime leader. The statement, released hours after U.S. Forces bombed areas key to Iran’s oil industry, signaled a hardening of the administration’s stance.
The closure of the strait has already sent shockwaves through energy markets. Oil prices have surged from $71 to over $100 a barrel in the past two weeks, as tanker traffic has dwindled from an average of 100-150 vessels per day to single digits on some days. Approximately 20 million barrels of oil and liquefied natural gas transit the strait daily, representing nearly one-fifth of global supplies. Eighteen ships have been struck by military attacks in or near the strait, according to reports.
The Pentagon and National Security Council underestimated Iran’s willingness to disrupt the Strait of Hormuz in response to U.S. Military action, multiple sources familiar with the matter have revealed. The agency analysis and forecasts that would typically inform decision-making were given secondary consideration during the planning stages of the operation, according to the sources. While officials from the Departments of Energy and Treasury were present at planning meetings, the administration reportedly relied on a tight circle of close advisors, sidelining broader interagency debate over potential economic fallout.
Treasury Secretary Scott Bessent and Energy Secretary Chris Wright have been involved in both the planning and execution of the conflict, but the administration’s preference for a limited advisory circle hampered a comprehensive assessment of the risks. The administration now anticipates it may take weeks for its efforts to alleviate the economic fallout to take effect, including high-risk naval escorts of oil tankers, which the Pentagon currently deems too dangerous to conduct.
The U.S. Has already taken several steps to mitigate the disruption. The administration has sunk 16 mine-laying ships near the Strait of Hormuz after reports of mines being deployed, and issued a waiver allowing India and other countries to purchase sanctioned Russian oil without repercussions until April 11. The White House is also considering temporarily waiving the Jones Act, which requires the use of American ships for domestic cargo transport.
Despite these measures, global shipping analysts express skepticism about their effectiveness. Insurance is not the primary concern for shipping companies; rather, they are unwilling to accept the risk of ship destruction. Even with naval escorts, the narrowness of the strait – less than 25 miles wide at its narrowest point, with shipping confined to two lanes – leaves vessels vulnerable to attack from surrounding high ground, a tactic previously employed by Houthi rebels in Yemen.
The International Energy Agency announced Wednesday that member states would release up to 400 million barrels of oil from their strategic reserves, the largest single release ever. However, analysts believe that only 2-3 million barrels per day will come online, partially offsetting the loss of approximately 15 million barrels per day due to the strait’s closure. Markets, they argue, are still underpricing oil based on the expectation of a swift resolution to the conflict.
The impact is being felt globally. In the United States, the average price of a gallon of gas has risen to $3.54, a 19 percent increase since late February. However, the U.S. Is a major energy exporter and relies primarily on Canadian pipeline imports, lessening the impact compared to other nations. Countries heavily reliant on Middle Eastern oil and gas, such as India, Pakistan, Bangladesh, and Myanmar, have been forced to implement austerity measures, including school closures and rationing.
The conflict also threatens fertilizer production, potentially leading to agricultural supply shortages as the Northern Hemisphere planting season begins. Swing suppliers like Saudi Arabia and the United Arab Emirates are diverting exports to avoid the strait, with Saudi Arabia rerouting shipments through the Red Sea, but even this effort is expected to only reach 70 percent of previous export levels. Qatar halted LNG production last week following military attacks on its facilities.
U.S. President Trump has also indicated he is considering the possibility of the United States taking control of the Strait of Hormuz, a move that raises questions about its legality under international law. He has claimed the military campaign against Iran is progressing faster than expected, stating, “They have no navy, no communications, they’ve got no Air Force,” but the continued disruption to global oil supplies suggests otherwise.
The Trump administration has signaled a willingness to provide up to $20 billion in reinsurance to back tankers traveling through the strait, but the fundamental risk remains. The administration’s previous decisions to curtail renewable energy infrastructure development and incentives for electric vehicle purchases have, according to critics, increased the vulnerability of the U.S. Economy to disruptions in global energy supplies.
