The main reason to be pessimistic about the war between Iran versus the United States and Israel is the lack of path towards peace. The United States does not have a plan that is remotely viable, since there is little sign that the Iranian regime will collapse. On the Iranian side, the plan appears straightforward: strangle traffic through the Strait of Hormuz until the damage forces third countries to move in directions favourable to Iran (e.g., expel American bases).
The only mitigating factor right now is that Iran is allowing some cargos to pass the Strait (mainly their own). To the extent that countries ignore the Americans and cut deals with the Iranians, there would be lessening of the strain on the global economy. However, flows are likely to be negligible until the end of the hostilities.
The only quick solution is that the United States and Israel stop bombing, and somehow convince the Iranians to stop shooting missiles and drones at ships. The issue is that Iran has no reason to believe that the bombing strikes are permanently finished. It appears that the Strait has not yet been mined to any extent — as that would end Iran’s ability to export. Mining would be an escalatory step that is likely to be taken if Iran’s ability to export oil is lost.
Military solutions are unlikely to open the strait within months. It would be necessary to occupy the cost around the strait and drive inland, and there are insufficient ground forces nearby to do that. Such a long stoppage puts us on a path to $200/barrel oil (with other resources like fertilizer also being squeezed). The global economy is staring at yet another recession initially caused by disrupted production chains.
The failure to get an international coalition to bail out President Trump was completely unsurprising. The help of NATO allies would not be minor — the U.S. pushed de-mining responsibilities to other allies (mainly those on the North and Baltic Seas, where Russian might hypothetically mine the waters). However, nobody is going to put their minesweepers in the path of Iranian missiles in the strait, so any such cooperation would only show up after there is a peace treaty (or the U.S. has occupied the coast).
This morning, Trump put out yet another post, this time threatening to abandon the war, leaving other countries the job of keeping it open. In other words, leaving Iran to dictate terms to other countries using the Strait. Saying this aloud is not going to help American credibility in the region.
Also on the news front this morning, the Producer Price Index was higher than expected. The White House’s hopes for rate cuts are about to run into considerable resistance. The rate cuts could materialise — if there are signs that activity has stopped dead.
Email subscription: Go to https://bondeconomics.substack.com/
(c) Brian Romanchuk 2026
