The Iran war has transformed two strategic waterways into instruments of economic warfare, threatening energy security, household incomes, global commerce and the existing geopolitical order.
President Donald Trump once described US military involvement in Iran as a “little excursion”. Yet the conflict that began on February 28, 2026, has expanded far beyond the battlefields of Iran, Israel and the Persian Gulf. It now threatens the movement of oil, gas, diesel, fertilisers, food and commercial goods across shipping routes responsible for more than one-quarter of the world’s seaborne oil trade.
The war’s most consequential front may not be on land or in the air. It is developing at sea — particularly around the Strait of Hormuz and Bab el-Mandeb, two waterways linking the Persian Gulf and Red Sea to Asian and European markets.
These waterways are critical arteries of the global economy. Before the war, approximately 21.6 million barrels of petroleum liquids passed through the Strait of Hormuz each day. That figure fell to 4.9m barrels per day during the second quarter of 2026 — a decline of 77 per cent. Hormuz also normally carries about 20pc of worldwide LNG trade, including approximately 10 billion cubic feet per day from Qatar and the UAE.
By August 11, daily traffic through the Strait of Hormuz had reportedly fallen to just six vessels, compared with a pre-war average of approximately 130 to 140. At the same time, Bab el-Mandeb, which connects the Red Sea with the Gulf of Aden, came under pressure from Houthi attacks. In one August incident, a missile strike killed four crew members and two rescuers, demonstrating that the threat to commercial shipping was no longer theoretical.
When the Strait of Hormuz became unsafe, Saudi Arabia redirected crude through its five-million-barrel-per-day East-West pipeline to Yanbu on the Red Sea. The UAE also has a 1.8m-barrel-per-day pipeline to Fujairah. However, the US Energy Information Administration estimates that only about 2.6m barrels per day of unused bypass capacity is readily available — barely one-eighth of normal Hormuz traffic.
If Bab el-Mandeb also becomes severely restricted, tankers departing Yanbu for Asia would have to travel around the Cape of Good Hope. A voyage from Yanbu to Taiwan normally takes approximately 19 days; circumnavigating Africa can add nearly a month and about $2.5m to a tanker’s operating costs. War-risk insurance premiums around Bab el-Mandeb have previously risen from about 0.07pc to between 0.5pc and 0.7pc of a vessel’s value.
The Iran war is therefore no longer merely a military confrontation among Iran, the United States and Israel. It has become an international economic crisis. The EIA estimated that regional production shutdowns reached 5.5m barrels per day in July — more than 5pc of global consumption — while inventories declined by an average of 4.2m barrels per day during the second quarter.
A prolonged disruption would produce a negative supply shock. Oil is relatively inexpensive to extract in Saudi Arabia, where historical median production costs were approximately $5.40 per barrel. But extraction is only one component of the retail price. Refining, transportation, storage, financing, insurance, security and taxation all determine what consumers ultimately pay.
When shipping routes become longer and more dangerous, every stage of the supply chain becomes more expensive. Analysts have estimated that a major disruption in the Red Sea could push crude above $115-$120 per barrel. Higher oil prices then transmit the shock to gasoline, diesel, aviation fuel, electricity and petrochemicals. Agriculture is also exposed because diesel powers machinery and trucks, while natural gas is the principal feedstock for nitrogen fertiliser.
The world has numerous strategic waterways, including the Bosporus, Malacca Strait, Danish Straits, Panama Canal and Suez Canal. Some artificial canals already levy formal fees. Panama Canal transit-slot auctions, for example, reportedly reached an average of $1.1m in August 2026 amid congestion. Natural international straits, however, operate under a different legal framework.
Nevertheless, wars frequently create precedents through power before law. Compulsory escorts, security charges, negotiated passage payments and war-risk premiums could produce much the same economic result as a formal toll. An insurance charge of 0.5pc on a tanker valued at $100m alone amounts to $500,000 for a single voyage.
If armed control over international waterways becomes normalised, commerce could shift from protected navigation towards a fragmented system in which regional powers impose political or financial conditions. Since maritime transport carries more than 80pc of global merchandise trade by volume, even relatively small recurring charges would accumulate across food, energy and manufactured goods.
The danger is compounded by disruption elsewhere. Ukrainian attacks on Russian refineries have threatened another major source of petroleum products, while Russia historically accounted for approximately 11pc of internationally traded diesel. Houthi activity now threatens the Red Sea, while the Iran conflict restricts traffic through the Persian Gulf, causing previously separate energy crises to reinforce one another.
Strategic reserves can temporarily soften shortages, but they cannot replace continuous production. The United States consumes approximately 20m barrels of petroleum daily. Consequently, even 300m barrels in the Strategic Petroleum Reserve would equal only about 15 days of total national consumption, although the reserve is designed to supplement rather than replace commercial supply.
Even after a ceasefire, tanker operators are unlikely to return immediately. Insurers will demand evidence of sustained security, while damaged ports, pipelines and refineries may take months or years to repair. The EIA expects around 600,000 barrels per day of regional production to remain offline through 2027, demonstrating how the economic damage could outlast the fighting.
Paradoxically, the crisis could accelerate a positive transformation. Countries dependent on imported oil will increasingly treat that dependence as a national-security vulnerability. Global investment in the electricity sector was already projected at $1.5 trillion in 2025 — 50pc more than spending on bringing oil, gas and coal to market.
Governments may intensify investment in solar, wind, hydroelectricity, nuclear power, batteries and public transportation. Solar investment alone reached an estimated $450bn in 2025, while spending on power storage approached $66bn. Pakistan’s import of approximately 19 gigawatts of solar panels in 2024 illustrates how quickly energy insecurity can encourage decentralised alternatives.
Electric vehicles could gain momentum for economic as well as environmental reasons. EVs displaced approximately 1.3m barrels of oil per day in 2024, and the International Energy Agency projects that figure to exceed 5m barrels per day by 2030. Yet aviation, shipping, heavy trucking and petrochemical production will remain dependent on liquid fuels for years.
Trump’s “little excursion” may therefore have initiated a chain reaction extending far beyond its original objectives. Hormuz traffic has already fallen by more than three-quarters, 5.5m barrels of production were shut in during July, and rerouting can add a month and millions of dollars to individual voyages.
The deepest legacy of the Iran war may not be measured by territory captured or weapons destroyed. It may be measured by a world more suspicious of imported energy, more protective of strategic waterways and more determined to reduce its dependence on oil.
What began as a limited military excursion could ultimately change the world economically, financially, technologically and geopolitically — and its consequences may endure long after the war itself has ended.
