U.S. Faces Dilemma Over Iran-Controlled Strait of Hormuz Amid Rising Oil Prices
Analysts say the Trump administration must choose between escalating military action or accepting Iranian control of the Strait of Hormuz, a move that could keep oil prices elevated.
The United States is confronting a strategic choice as Iran maintains control of the Strait of Hormuz, a chokepoint that handles roughly one-fifth of global oil shipments. Energy analysts told Fortune that the administration could either intensify military operations to reopen the waterway or negotiate a settlement that allows Iran to retain influence, potentially including fees for passage.
"I don’t think there’s any military option for reopening the Strait of Hormuz," said Gregory Brew, senior analyst for Iran and energy at Eurasia Group. "The Iranians have considerable leverage here. I don’t see them backing down and, honestly, time is probably on their side."
After a six-week interim cease-fire in mid-June, tanker traffic resumed at reduced levels and oil prices fell from a May peak of $124 per barrel to $68 in early July, before climbing back above $88 by mid-July. The U.S. Strategic Petroleum Reserve is at its lowest level in four decades, limiting the government’s flexibility as the November midterm elections approach.
U.S. forces have conducted nightly strikes against Iranian targets, while Iran has responded with attacks on regional infrastructure, including power grids in the United Arab Emirates, Kuwait and Bahrain. A proposed 20% toll on Hormuz traffic was quickly withdrawn, but analysts say an Iranian fee structure may be difficult to avoid.
"The Iranians felt that they won. They came out of the war believing they were entitled to a more permanent role in managing the Strait of Hormuz," Brew added.
Regional actors are accelerating alternative routes: the United Arab Emirates is expanding its West-East pipeline and planning a new Fujairah port, Iraq is building the Basra-Haditha pipeline, and Saudi Arabia is increasing Red Sea exports, though Houthi attacks in Yemen pose risks.
Oil forecaster Dan Pickering warned that dwindling strategic reserves leave the market with less cushion, while Claire Jungman of Vortexa emphasized that the primary concern is whether the strait remains reliably open, regardless of any tolls.
Analysts predict continued volatility, with possible short-term escalations before a more durable arrangement can be reached.