Iran may be losing militarily, but it still knows how to punish the world…and the U.S. Then again, Trump still has a few cards left to play.

There is a tendency in war coverage to reduce everything to the battlefield scoreboard: Who blew up more targets. Who lost more launchers. Who controls the air. Who looks “strong” on cable news. 

But Iran does not have to win this war in any conventional sense to make the world pay dearly for it. That is the trap: Even a catastrophically weakened Iran still knows exactly where to hurt the global economy, and that place is the Strait of Hormuz.

The Strait is not some abstract: It is the narrow sea exit for the oil and gas producers of the Gulf. Roughly 20% of the world’s oil and liquefied natural gas normally flows through it at any given time. Other essential goods pass through as well, including about a third of the world’s fertilizers, including sulphur and ammonia. So when Hormuz seizes up, this is not just a problem for traders and tanker owners. It is a problem for electricity, food prices, transportation, inflation, and political stability from Asia to Europe to the United States.

What makes this so maddening is that Iran can do enormous damage there even while taking military punishment elsewhere. Most news outlets are reporting that Iran’s conventional navy has been badly degraded, but the Revolutionary Guards still have plenty of ugly options: fast-attack craft, mini submarines, naval mines, drone attacks, even suicide-style operations. 

The shipping lanes are only two nautical miles wide in places, and ships have to make a turn opposite Iranian islands and mountainous coastline that gives Iranian forces cover. In other words, this is not a big open ocean where American power can simply spread out and dominate the scene. 

It is a chokepoint.

That is why this war has hit confidence as much as infrastructure. The markets are already spooked.

Even before a ship was sunk or a refinery was set ablaze, owners, insurers, traders and governments were already behaving as though disaster is around the corner. And that behavior becomes its own kind of economic weapon. Insurance gets repriced. Cargoes get delayed. Tankers sit idle. Buyers panic. Politicians start calling emergency meetings. That is how a regional war becomes a global inflation story.

The psychology here matters almost as much as the missiles.

The United States and Israel may be able to decide when they have done enough bombing. But that does not mean they get to decide when the energy markets calm down. Some industry officials do not believe naval convoys alone will normalize traffic unless Tehran itself stops threatening shipping — which might be never. If Iran wants to prove it was not truly defeated, it can keep making the water look dangerous long after any declaration of “mission accomplished.”

And the damage radiates outward fast. The wider shock has already pushed governments around the world to consider fuel subsidies, tax relief, emergency reserve releases, energy vouchers, and other stopgap measures to shield households. As we saw during the Biden Administration and the punishing oil and gas prices of 2021 and 2022: Oil and gas price spikes do not stay politely confined to energy desks. They bleed into groceries, freight, fertilizer, electricity, and politics. The Strait of Hormuz is not just a maritime passage. It is a pressure point in the globalized economy.

That said, the United States is not exactly powerless here, and it would be wrong to write this as though Washington is just standing helplessly on the shoreline. President Trump has reportedly put together a maritime reinsurance backstop of up to about $20 billion through the Development Finance Corporation, with Chubb Insurance as the lead private-sector partner, in an effort to coax commercial shipping back into the Gulf. 

The International Energy Agency has also announced an unprecedented 400 million-barrel emergency stock release, with the U.S. contributing 172 million barrels from the Strategic Petroleum Reserve. Those are not trivial moves. They are real attempts to keep markets from spiraling into full panic.

And it might work.

Nor is military leverage absent. American officials seem to believe that short-term escorts are feasible, though sustaining them for months would require major resources and more allied participation than Washington has so far received. 

The United States has already struck more than 90 Iranian military targets on Kharg Island while sparing the oil infrastructure there, and Trump has openly threatened to go after the island’s export facilities if Tehran keeps attacking shipping. Kharg handles 90% of Iran’s oil exports.

So yes, Iran is losing militarily in a broad sense. Its air defenses have been battered. Its conventional naval capacity has been mauled. Its ability to launch large attacks is greatly reduced. But none of that changes the essential truth of Hormuz: a cornered regime with fewer good options will often lean harder on the options it still has. And Iran still has the ability to frighten insurers, disrupt shipping, snarl energy flows, and remind the world that a chokepoint does not care who is “winning” the war in the grand strategic sense.

That is the Strait trap. Tehran may not be able to beat the United States head-on. It may not even be able to save itself in the long run. But it can still make victory expensive, messy, and globally painful. 

The good news, if there is any, is that Washington still has tools: insurance backstops, reserve releases, convoy planning, military pressure on Iran’s own export lifelines, and the ability to assemble a broader response if allies stop sulking and start acting. 

The bad news is that none of those tools is magic. 

Hormuz is not just a battlefield problem. It is a confidence problem. And confidence, once shattered, is much harder to convoy back into existence.

(Contributing writer, Brooke Bell)