By threatening the Strait of Hormuz, Iran turns geography into a global economic weapon
Following US-Israeli strikes against Iran, Tehran has threatened to attack any vessel that passes through the Strait of Hormuz. Though no formal blockade is in place, the warning has effectively shut down one of the world’s busiest energy shipping lanes.
This disruption adds to existing security pressures on key maritime corridors in the region, including cargo routes through the Red Sea and the Suez Canal, where Houthi attacks have forced many operators to reroute and driven up insurance and freight costs.
Beyond the immediate economic fallout, however, Iran’s de facto blockade highlights a broader strategic challenge: it shows how a single country can hold critical shipping lanes hostage and exert geopolitical pressure at relatively low cost.
Tehran’s chokehold on global trade
Iran has long understood its unique geographical position and the critical importance of maritime trade. Over several decades, the Iranian government and industry have utilized aspects of the maritime sector to protect economic security and circumvent sanctions. This includes the longstanding use of shadow fleets, the manipulation of Automatic Identification Systems (AIS) data, and a general disregard for established maritime law and regulations.
Now, Iran is turning its geographic advantage into a lever for global economic pressure. Following the Iranian threat against vessels in the Strait of Hormuz, major shipping companies—including Maersk, Hapag-Lloyd, and CMA CGM—have halted their routes through the strait. Last week, this was further compounded by Maersk’s decision to completely suspend its FM1 service, connecting the Far East to the Middle East, and its ME11 service, which runs from Europe to India via the Suez Canal and the Red Sea. The ME11 had only recently been relaunched and was advertised as significantly reducing transit times.
Iran is now utilizing its de facto control over shipping lanes and its years of experience in evading sanctions through maritime trade to escalate the conflict into a potential global economic turning point.
Insurance is technically available for vessels in the area, but likely prohibitively expensive even for firms willing to take the risk. As a result, vessels are weighing anchor in regional ports, hoping to avoid the worst.
The most immediate impact is on energy pricing, as Middle Eastern oil and gas can no longer be safely transported via these routes. Waiting in port may allow operators time to reassess the situation, but given the scale of the conflict, it could still leave vessels vulnerable.
Oil tankers aren’t the only vessels in the area, however. Many operators utilize this route for Asia-Europe trade, providing additional port calls and refueling opportunities.
Energy prices are just the tip of the iceberg
From a maritime perspective, solutions are few and far between. Vessels caught on either side of the Strait of Hormuz when the conflict began are now waiting in nearby ports for safe passage.
Vessel routes are determined far in advance—often several months ahead—making it difficult to redirect and find suitable berths to either unload or wait out the conflict, further compounding logistical pressures. Ports are now congested as vessels overstay their scheduled berth bookings, while additional ships weigh anchor, hoping for a swift resolution and reopening of the strait.
Safety remains a major concern for vessels—not just due to missiles or drones, but also due to GPS jamming, which disrupts navigation systems. Though the source of the jamming remains uncertain, the impacts are direct, with vessels unable to accurately broadcast their location. Combined with ships intentionally “going dark” by turning off AIS, it is increasingly difficult for vessels to track each other.
This creates risks not only for vessels in transit but for all ships operating in the area. The large vessels utilized for transport in the Middle East cannot quickly change direction. Being unable to accurately locate other ships dramatically increases the risk of collision—and considering many vessels in the area transport petroleum or chemical products, an accident could trigger a major ecological disaster.
Redirection creates additional challenges
As other routes are utilized, there will be longer delivery delays and higher costs for transport and insurance.
The “solution” for many shipping firms has been to redirect vessels around the Cape of Good Hope. This adds not only additional transit times but also higher fuel costs due to longer periods at sea and more challenging weather and sea conditions.
Depending on how long the conflict lasts, additional bookings will create a crunch. Vessel numbers and capacity are limited, and many capable ships are already committed months in advance. Redirecting ships already en route will take time, energy, and money.
The closure of Middle Eastern shipping routes has a particularly acute impact on Europe, as these corridors serve many of the continent’s major ports. The already high costs of detours and delays are compounded by the fact that the European Union has been working to lower maritime emissions by including them in its Emissions Trading System, adding another layer of cost.
Longer detours around the region further drive up transport expenses, and even a swift end to the conflict would offer little relief. These costs are already baked in, with the ripple effects of rerouted shipping, repriced services, and recalculated insurance premiums well underway.
A playbook for creating economic havoc
The larger issue this raises is the continued demonstration of how a single country can shut down critical shipping routes traversing its territory.
Despite severe bombardment and decades of sanctions that have crippled its economy, Iran can effectively hold the Strait of Hormuz hostage. Maritime traffic has virtually halted without the need for an intensive naval presence or significant additional military expenditure.
The Strait of Hormuz is only one of several major shipping line chokepoints. Similar congestion points exist naturally, such as the Strait of Malacca, while others—like the Panama Canal and the Suez Canal—are major feats of engineering.
With over 80 percent of the world’s trade conducted via ship, halting even one of these routes for a short period can create economic shocks—and a prolonged closure could easily trigger sustained global disorder at best, and a major crisis at worst.
Iran is demonstrating that mass-produced drones, limited firepower, and credible threats may be enough for any country positioned along a critical maritime chokepoint to shut down major shipping lanes. The consequences could be far more severe if such leverage were wielded by a nation with a stable economy or a state-of-the-art navy.
The ability to hold and maintain control of shipping lanes creates immense economic pressure with few practical countermeasures, quickly turning global trade into a geopolitical hostage situation, not just for those directly involved in the conflict, but for the global economy at large.
The damage has already been done
This disruption comes at the same time that European countries face increased energy costs due to the ongoing Russian invasion of Ukraine. The United Kingdom, for instance, is expected to see a sharp increase in inflation figures, which will be further exacerbated as energy prices rise. Alongside increasing oil prices, the cost of transporting goods via ship will also increase.
From the operating side, how vessel owners and operators act in the coming weeks will be telling. In the immediate term, vessels could increasingly “go dark” and attempt to maneuver their way around the conflict. This has been done before but is a risky approach, considering it obscures visibility not only for hostile actors but also for other vessels in a high-traffic area.
If the conflict drags on, vessel flagging could become more important. Vessels have been using Chinese designations, for instance, to dodge Houthi attacks in the Red Sea. It is possible this will become necessary for traversing the Strait of Hormuz as well. However, changing flags also comes with its own complications: it alters the regulatory and legal regime for the vessel, as well as the flagging countries’ protection obligations.
Regardless of how long the Iran war lasts, the economic damage has already been done. Oil prices continue to push above $100 per barrel, vessels remain stranded, and shipping costs remain high. Iran has shown how easily a strategically positioned country can create global economic shocks. The geopolitical genie is out of the bottle: by capitalizing on geography to disrupt global trade, countries can strengthen their strategic position at relatively low cost.
Alex Mills is an international trade expert specializing in financial services, maritime law, and ESG. They have a decade of experience across the private and public sector, including in UK and US government.
Image: Map Strait of Hormuz and Persian gulf countries. Source: iStock