President Donald Trump’s blockade of Iran could deal a huge blow to the Iranian economy, including draining the cash flow needed to pay the troops and thugs the regime needs to stay in power.
The blockade officially began at 10:00 a.m. Eastern Time on Monday. The US military did not issue a formal public statement that the deadline had been reached, although the timing of the blockade was made clear by US Central Command (CENTCOM). statement On Sunday.
“The blockade will be impartially enforced against ships of all countries entering or departing from Iranian ports and coastal areas, including all Iranian ports on the Arabian Gulf and the Gulf of Oman,” the statement said.
“CENTCOM forces will not hinder freedom of navigation for ships transiting the Strait of Hormuz to non-Iranian ports,” the statement said.
CENTCOM advised all ships in the area to “monitor Notice to Mariners broadcasts while operating in the Gulf of Oman and the Strait of Hormuz and contact U.S. Naval Forces on bridge-to-bridge channel 16.”
President Donald Trump previously warned that the U.S. Navy would also “seek out and impose sanctions on every vessel in international waters that has paid tolls to Iran,” but that warning did not appear in CENTCOM’s statement. If the U.S. Navy tried to stop every international ship paying a ransom to Iran for safe passage through the Strait of Hormuz, the blockade would clearly become a much larger and more delicate operation.
UK Maritime Trade Operations (UKMTO) issued an alert to seafarers on Monday that access to Iran’s ports and oil terminals is now restricted to vessels under every flag, along the entire Iranian coastline, “including the Arabian Gulf, the Gulf of Oman and locations in the Arabian Sea east of the Strait of Hormuz.”
So the blockade would obviously include Jask, an alternative oil terminal built by Iran to bypass the Strait of Hormuz and Kharg Island, Iran’s key oil hub, on the coast of the Gulf of Oman. Despite the regime’s heavy investment in Tehran, JASK has never been able to handle more than a small portion of Iran’s oil exports.
“Transit routes through the Strait of Hormuz to or from non-Iranian destinations are not reported to be disrupted by these measures; however, vessels may encounter military presence, directed communications, or right-of-voyage procedures while in transit,” the bulletin said.
The “right to travel process” would traditionally involve the US Navy boarding a suspected ship to ensure it is not violating the Iran blockade.
The UKMTO said neutral ships currently docked at Iranian ports “have been given a limited grace period to depart.”
Foundation for Defense of Democracies (FDD) senior fellow Miyan Maleki, a strong supporter of President Trump’s military campaign whose family is from Iran, said on Sunday wrote Analysis of the potential impact of the blockade on Iran’s economy and military preparedness.
Maleki found that the blockade would “cause Iran to lose exports of about $276 million per day and disrupt imports of $159 million per day, for a total economic loss of about $435 million per day or $13 billion per month.”
They observed that Iran has no viable alternative land or pipeline routes to ship its oil and petrochemical products, and only 10 percent of its non-oil trade can realistically be shipped in ways that would avoid the US blockade. Iranian imports will also be drastically reduced, although he estimates that “humanitarian cargo” will be allowed.
Maleki pointed out that Iran’s fuel storage capacity is very limited, and about 60 percent of capacity is already full, so the regime would have to start shutting down its oil wells in about 13 days — and those wells would deteriorate much faster after being shut down due to water leaks.
He calculated, “A forced shut-in could permanently destroy 300,000 to 500,000 barrels of production capacity per day.” “$9 billion to $15 billion of revenue per year is gone forever.”
These losses could be devastating to Iran’s already weak economy. The January uprising, which was deadly suppressed by the regime in Tehran, was fueled by the collapse of the national currency, the rial, and the blockade is likely to push Iran into “terminal hyperinflation.” Maleki said Iran has issued the largest bank note in its history, a 10 million rial note – and it is worth only $7 in US currency.
He concluded, “The blockade makes continued resistance economically impossible.”
The loss of Iranian oil and other exports would certainly affect world markets, including a potential spike in gas prices and overall inflation for American consumers, but the impact for Americans would probably be less severe than allowing Iran to keep the Strait of Hormuz closed to Persian Gulf oil traffic. Reopening the strait to non-Iranian traffic would also help ease the shortage of much-needed fertilizer shipments to farmers around the world.
“Anything that takes more oil off the market than it currently does will drive up prices, which will result in further increases in gas prices,” Trita Parisi of the Quincy Institute for Responsible Statecraft told Al Jazeera News on Monday.
Parsi predicted that oil, which is currently hovering around $100 a barrel, could rise above $150 if the Houthis, Iran’s terrorist proxies in Yemen, repeat their 2024 strategy of attacking ships in the Red Sea and the Bab al-Mandeb strait.
Other malign analysts told Al Jazeera that international shipping would probably avoid the Strait of Hormuz, even if it was technically “reopened”, because they feared Iranian piracy would undercut the renewed profits of Persian Gulf oil exports.
Another complicating factor for analysts is that technically there are still nine days left in the US-Israel-Iran ceasefire, so it may be difficult to assess the full impact of the blockade on both Iran and the world economy until the end of April.
South Korean Chosun Ilbo It noted on Monday that Iran “secured massive war funds in a short period” after the US Treasury Department granted Iran a temporary license to sell crude oil stocks that had been awaiting shipment for at least 30 days.
The waiver was intended to mitigate the global economic damage caused by the closure of the Strait of Hormuz, and it released only 140 million barrels of oil onto the world market, not even enough to meet two days of worldwide demand – but it gave Iran a significant cash flow, as it sold its oil at premium prices to hungry buyers.
Chosun Ilbo calculated, “Considering Iran’s annual defense budget of US$8 billion to US$10 billion, revenues from oil exports during the relief from US sanctions are estimated at US$4 billion to US$5 billion, effectively half of its annual defense expenditure.”
