From Easy Victory to Oil Price Strangle:
How the US Lost Leverage in the Strait of Hormuz

The US entered the Iran conflict aiming for a swift victory.
Two months later, it’s trapped in a stalemate—military power has failed to translate into negotiating power, and oil prices remain stubbornly high.

1. The Illusion of a Quick Victory

On February 28, 2026, the US and Israel launched a devastating military campaign against Iran, bombing its nuclear facilities, military bases, and economic infrastructure. The operation, dubbed "Operation Epic Fury," was framed as a decisive strike to cripple Iran’s nuclear ambitions and force a swift capitulation. US President Donald Trump and his administration spoke confidently of "victory"—a rapid, overwhelming defeat of Iran that would restore stability to the region and assert American dominance.

The killing of Iran’s Supreme Leader, Ayatollah Khomeini, in the initial strikes only reinforced this narrative. The US expected Iran to fold under the pressure, its leadership decimated and its economy in ruins. But victory was not to be. Instead, the US found itself ensnared in a paradox: its unmatched military might could not break Iran’s asymmetric grip on the Strait of Hormuz—or the global oil market.

2. Hormuz: The Warned-but-Ignored Chokepoint

2.1 Pre-War Warnings and the Closure

Analysts, allies, and even US intelligence had long warned that Iran could weaponize the Strait of Hormuz—a narrow, strategically vital waterway through which 20% of the world’s oil flows. Yet, the US underestimated Iran’s willingness to act on this threat. When the US-Israeli strikes began, Iran’s response was immediate and brutal: it closed the Strait of Hormuz, stranding over 900 commercial vessels and choking off a critical artery of global trade.

By early March, the closure sent shockwaves through global energy markets. Oil prices, which had hovered around $60 per barrel before the conflict, surged to $114–$119 per barrel—a 50–60% increase in just weeks. The disruption was not just economic; it was geopolitical. The US, which had expected a quick resolution, suddenly found itself reacting to Iran’s moves rather than dictating them.

2.2 Global and Domestic Liabilities

The closure of Hormuz created a dual crisis for the US:

Global Liability
The oil price spike threatened recession risks in Europe and Asia, where economies were already grappling with inflation and supply chain disruptions. The International Energy Agency called it the "largest supply disruption in the history of the global oil market".
Domestic Liability
In the US, gasoline prices soared to $4.46 per gallon—up from $2.98 before the war—becoming a political time bomb ahead of the 2026 midterm elections. Treasury Secretary Scott Bessent acknowledged the severity: "Their economy is in freefall, but so is the global oil market".

2.3 Timeline of Key Events (Feb–May 2026):

Feb 28: US-Israel launch strikes on Iran; Khomeini killed.
Early March: Iran closes Strait of Hormuz; oil prices surge to $114–$119/barrel.
April 8: US and Iran agree to a two-week ceasefire; Hormuz temporarily reopens, but Iran imposes alternative routes due to sea mines.
April 17: Iran declares Hormuz "completely open" during ceasefire, but no normalization of shipping occurs; oil prices remain volatile.
May 4: US launches "Project Freedom" to escort ships through Hormuz; Iran denies any commercial vessels passed.
May 5: US pauses Project Freedom after 24 hours, citing mediation efforts.
May 6–10: Oil prices fluctuate wildly ($100–$115/barrel) as tensions persist; US extends ceasefire indefinitely.

3. Countermeasures That Failed

3.1 Military Threats and Escalation

The US responded to Iran’s closure of Hormuz with further military threats and actions:

Operation Midnight Hammer: A bombing campaign targeting Iran’s nuclear sites, aimed at destroying or burying its 440 kg stockpile of highly enriched uranium (60% purity, near weapons-grade).
Blockade of Iranian Ports: The US imposed a naval blockade to pressure Iran economically, but this backfired—Iran retaliated by keeping Hormuz closed, turning the blockade into a two-way stranglehold on global oil flows.

Yet, these measures did not lower oil prices. Instead, they exacerbated the crisis. Iran’s Revolutionary Guards warned that conditions in Hormuz "will never return to its former status, especially for the US and Israel".

3.2 Project Freedom: A Symbolic but Flawed Effort

On May 4, 2026, President Trump announced "Project Freedom", a US military operation to escort commercial ships through Hormuz under US protection. The operation was framed as a "humanitarian" mission to assist stranded crews running low on supplies.

But Project Freedom lasted just 24 hours. By May 5, Trump paused the operation, citing requests from mediators (including Pakistan) and the need to avoid jeopardizing negotiations. The US claimed two US-flagged vessels had safely transited, but Iran denied any commercial ships had passed and continued to enforce its blockade.

3.3 Why They Failed

Limited Impact: Only a handful of ships benefited, and attacks on vessels continued (e.g., a French ship was hit on May 6).
Iran’s Defiance: Tehran viewed the operation as a violation of the ceasefire and threatened to respond with force.
Market Skepticism: Oil prices remained high, as traders doubted the US could sustainably reopen the strait.

3.4 Diplomatic Stalemate

The US extended ceasefires and paused military operations to keep negotiations alive, but progress remained elusive. Iran’s demands were non-negotiable:

Ending the war permanently.
Lifting the US blockade of its ports.
Retaining its uranium stockpile (despite US demands for its transfer).

The US, meanwhile, found itself dependent on mediators like Pakistan and Oman, with no clear path to force Iran’s hand.

4. The Paradox: Military Power ≠ Negotiating Power

4.1 Iran’s Asymmetric Advantage

Iran’s leverage in the conflict stems from its control over Hormuz and its refusal to concede on core demands:

Hormuz as a Weapon: Iran established a new Persian Gulf Strait Authority to impose tolls and regulate shipping, signaling its intent to formalize control over the waterway even after the war. It also announced alternative routes for ships, citing sea mines in the main channel—though these were not a substitute for full reopening.
Uranium Red Line: Iran repeatedly rejected US demands to hand over its 440 kg of enriched uranium, calling it a "red line." Trump’s claims that Iran had agreed to transfer the material were denied by Tehran and lacked verification.

4.2 US’s Limited Options

The US faces a trilemma in its response to Iran:

Military Escalation:
FurtherFurther bombing (e.g., Trump’s ultimatum to resume strikes "at a much higher level") risks global backlash (from China, Russia, and EU allies) and further oil price spikes
Example: On May 6, the US intercepted Iranian attacks on three Navy ships in Hormuz, but avoided retaliation to prevent escalation.
Diplomatic Pressure:
The US is reliant on mediators (Pakistan, Oman) and ceasefire extensions, with no direct leverage over Iran.
Example: Trump’s decision to pause Project Freedom after just one day underscored the US’s dependency on Iran’s cooperation
Economic Tools:
Sanctions have hurt Iran’s economy, but its allies (China, Russia) provide lifelines through trade and oil purchases.
The global oil deficit (8–10 million barrels/day) means prices remain high regardless of US actions

Key Insight:

The US’s military power has not translated into negotiating power. Iran’s control over Hormuz and its unwillingness to concede on uranium or sanctions relief mean the US is reacting to Iran’s moves, not shaping them.

5. Outlook: High Prices and Extended Negotiations

5.1 Short-Term: Oil Prices Remain Elevated

As of May 10, 2026, oil prices continue to hover above $90/barrel, with no sign of sustained relief. Even if a deal is reached, analysts warn it could take months for shipments to normalize due to:

Backlogged traffic: Over 900 vessels remain stranded in the Gulf.
Shipowner caution: War-risk insurance premiums have risen 4–5x, deterring shipping companies from risking the strait.
Infrastructure damage: Ports, pipelines, and tankers have suffered war-related disruptions that will take time to repair.

5.2 Market Psychology:

Oil prices now react to headlines—spiking on drone attacks or missed deadlines, and dipping on hopes of a deal—rather than fundamentals. This volatility is the new normal until a lasting agreement is struck.

5.3 Long-Term: Structural Shifts and Geopolitical Risks

Energy Transition Acceleration:
Prolonged closure of Hormuz could accelerate the global shift toward renewables and alternative energy sources (e.g., LNG, hydrogen).
Gulf oil dominance may decline, as importers diversify supplies to avoid future disruptions.
Geopolitical Emboldening:
The US’s failure to force a solution in Hormuz may encourage adversaries to test its resolve elsewhere:
- China in the South China Sea.
- Russia in Ukraine.
Example: France and the UK are preparing their own Hormuz security mission, signaling declining confidence in US leadership.
Domestic Pressure in the US:
High oil prices ($4.46/gallon gasoline) are a political liability for the Trump administration ahead of the 2026 midterms.
The longer the stalemate persists, the greater the risk of economic instability (inflation, recession) and public backlash.

5.4 Iran’s Calculus: Prolong the Stalemate

Iran has little incentive to concede quickly. Its strategy relies on:

Economic resilience: Trade with China and Russia (e.g., discounted oil sales) mitigates US sanctions.
Military deterrence: Drone attacks, sea mines, and the threat of further escalation deter US military action.
Negotiation leverage: Iran’s 14-point plan focuses on sanctions relief, war termination, and compensation—demands the US is unlikely to meet in full.

5.5 Iran’s Red Lines:

No uranium transfer: Tehran has repeatedly rejected US demands to hand over its enriched uranium stockpile.
Sovereignty over Hormuz: Iran’s new Persian Gulf Strait Authority signals its intent to control the waterway post-war.

Conclusion: A New Phase of US Foreign Policy

The US entered the Iran conflict with confidence in its military superiority.
Two months later, it finds itself trapped in a paradox: its power has not translated into victory or even negotiating leverage. Instead, the US is reacting to Iran’s moves, its options limited by the economic and geopolitical costs of prolonged conflict.

The Strait of Hormuz remains closed, oil prices stay high, and the US is dependent on Iran’s willingness to negotiate. The question now is not whether the US can win—but whether it can accept a bad deal or risk economic collapse by walking away.

Reflecting

If the US cannot break Iran’s grip on Hormuz, what does this mean for its ability to deter China in the South China Sea, or Russia in Ukraine? The answer may define the next chapter of global order.

Sunday, May 10, 2026