Numbers first, reasoning after.

Where we actually stand

Transit through the strait has collapsed from 21.6 to 4.9 million barrels a day between Q4 2025 and Q2 2026 — a 77% reduction. Brent crossed $100 on 9 September, US diesel hit a record $5.90 a gallon, and Goldman warns that persistently low Gulf flows could push Brent past $120. The EIA does not expect Middle East production to approach pre-conflict levels until early 2027.

But the number that matters most is one almost nobody puts at the center of the analysis: a New York Times study of flows between the start of the war and 8 May found that the biggest beneficiaries were the United States (roughly $50bn in additional export revenue) and Russia (over $15bn), while Iran — which retained access to the strait — saw its revenues increase. Iraq, Kuwait, Qatar and the UAE were the ones that lost.

That is the honest starting point: the current equilibrium pays Iran to keep going. Every day of crisis Tehran collects a higher price on its own barrels, tolls in yuan through the Persian Gulf Strait Authority, and the economic wrecking of its Gulf rivals. Any strategy that doesn’t invert that incentive is, by construction, a strategy that finances its own adversary.

The three structural errors in Washington’s approach

1. The strait isn’t closed by the IRGC. It’s closed by Lloyd’s.

P&I insurance was withdrawn from 5 March, making the economic risk unbearable for shipowners; the strait remained legally open but effectively shut. The historical comparison is decisive: in the 1980s Tanker War over 400 ships were hit and traffic never stopped, because the insurance market could price the risk. Today the toll is 20 dead across 68 incidents in six months — a statistically low loss rate. Traffic stopped not because the risk is intolerable but because it is unpriceable: mines of unknown position, arbitrary Iranian rules of engagement.

Hence the error. Naval escort cannot manufacture actuarial certainty. Underwriters price the tail of the distribution, not the mean. Iran doesn’t need to close the strait — it only needs to supply variance. One successful attack a month is enough to keep 70% of the world fleet out. Against that, six carrier groups accomplish nothing.

2. You cannot disarm the threat that is your adversary’s last life insurance policy.

The United States destroyed Iran’s nuclear program and killed Khamenei. From Tehran’s chair, Hormuz is what remains of the deterrent. Having eliminated the first, Washington made the second non-negotiable. That is why every agreement has collapsed: the April truce, the Islamabad Memorandum of 17 June, the resumption of fighting on 8 July. Three failures in six months is not bad luck, it’s a pattern. Each deal asked Iran to surrender its only remaining card in exchange for promises.

3. Withdrawn ultimatums carry a cumulative price.

On 22 March came the threat to “obliterate” Iranian power plants within 48 hours; on 23 March the postponement; on 4 April a fresh 48-hour ultimatum; then an extension to 7 April. Every retraction taught Tehran that American deadlines are free. Credibility is capital that depletes, and Washington burned it before it needed it.

The solution: don’t reopen the strait — devalue it

The wrong framing is “how do we reopen Hormuz.” The right framing is “how do we make Hormuz matter less than Iran believes it does.” Four moves, in this order — sequence matters more than content.

Phase 1 (weeks 0–4): the sovereign insurance backstop

First, and requiring no Iranian consent: build a war-risk reinsurance facility backed by sovereign balance sheets — US, Japan, Korea, India, EU — offering coverage for Hormuz transits at a fixed, published premium, absorbing tail risk.

The precedent exists and was offered by Kyiv: on 30 March Zelensky proposed Ukraine’s expertise, which kept Black Sea ports open under heavier fire by sharing insurance costs with providers. Washington ignored it. That was the most expensive mistake of the crisis.

This move converts uncertainty into price. Traffic returns to 50–60% within weeks, the geopolitical premium on Brent deflates, and — not a trivial detail on the midterm calendar — diesel comes down. Cost to Treasury: single-digit billions. Cost of the current air campaign: considerably more, for worse results.

Political corollary: the coalition must be Asian-led, not Atlantic-led. Germany, Italy, Spain and the UK ruled out military involvement; Japan and Australia declined to send ships; only India acted, escorting effectively under Operation Sankalp. Some 84% of crude moving through the strait was bound for Asia. The victims should lead; the United States should hold the top of the escalation ladder.

Phase 2 (months 1–3): make the asset visibly depreciate

Bypass capacity today is insufficient: Saudi Arabia’s Petroline is pumping at its full 7 million barrels a day, the UAE’s ADCOP tops out near 1.8, and total alternative pipeline capacity is around nine million against the strait’s twenty.

The missing piece almost nobody names: IPSA. The Iraq–Saudi pipeline to Yanbu, roughly 1.65 mb/d, mothballed since 1990 and expropriated by Riyadh in 2001. It is the highest-leverage stretch of steel on earth right now, because the right-of-way already exists: reactivation in 12–18 months, not a five-year greenfield build. Add a Kuwaiti spur into Petroline, acceleration of the Emirati West-East 1, and storage at Duqm and Salalah.

Financing is the creative part: Bypass Bonds repaid out of the spread between discounted Gulf crude and Brent. The infrastructure pays for itself with the very differential it eliminates.

But the real effect is immediate and psychological. Oil prices on expectations. A funded, dated, published program devalues the strait before the first weld. For the first time Tehran would watch its asset depreciate on a visible schedule — and that, not airstrikes, is the pressure instrument. Whoever owns a wasting asset is in a hurry to sell it.

Phase 3 (months 3–6): turn Iran’s veto into an Iranian annuity

Here is the move military strategists don’t propose because it sounds like a concession. It isn’t. It’s an inversion of incentives.

UNCLOS permits a coastal state to charge for services actually rendered, provided the charges are transparent and non-discriminatory. Iran and Oman have already agreed a temporary corridor and are negotiating the permanent arrangement within 30–60 days. Muscat is openly discussing a mechanism for information-sharing, traffic management and navigational and security services. The architecture already exists — take it and flip it.

Hormuz Transit Authority: Iran, Oman, and a neutral technical operator under IMO charter. Joint VTS, low published non-discriminatory toll — call it $0.15–0.25 a barrel, roughly $1–1.4bn a year at full flow. Models: Montreux for the Turkish Straits, the Danish Sound Dues as historical precedent.

The decisive mechanism: all proceeds flow into escrow at the BIS or the World Bank. Iran’s share is released quarterly, conditional on two measured metrics — transited volume above a threshold, incidents below a threshold. If Iran closes the strait, Iranian income goes to zero automatically: no vote, no coalition, no Security Council veto.

Today, closing the strait costs Iran nothing and costs everyone else enormously. Under this design, closing the strait becomes the single most expensive thing Iran can do. And it is self-executing: it needs no American warships, no Chinese consent, no European unanimity. It needs an escrow agent and a meter.

Then the counterintuitive part: China should be named co-guarantor, not excluded. Xi has already stated publicly that the strait should remain open to normal navigation as a matter of common regional and international interest. Beijing buys the Iranian oil, pays the tolls in yuan, and takes a third of its crude through that channel. The instinctive American objection — “this legitimizes a Chinese presence in the Gulf” — is exactly backwards: if China guarantees the flow, China owns Iranian behavior. Converting a free-rider into a hostage of its own commitment is worth more strategically than the strait itself. Note that while the US was consumed by Hormuz, China moved to block Scarborough Shoal. Whoever declines to bind Beijing to an obligation hands it a free hand elsewhere.

Phase 4: the price nobody wants to pay

None of this holds if Tehran believes reopening is the prelude to regime destruction. The condition for a permanent settlement is a non-attack undertaking — survival of the state, not endorsement of the regime — paired with a legal export channel through the recognized corridor. This isn’t generosity. It’s recognition that you are asking an adversary to hand over its only deterrent, and no state does that in exchange for a verbal promise already broken three times in six months.

What I would stop doing, immediately

• Stop demanding “complete and immediate reopening.” It has failed four times, and each failure raises the price of the next demand.
• Drop the rhetoric of “controlling” the strait and the renaming proposals. They convert a technical navigation problem into a sovereignty war Iran cannot afford to lose domestically — and therefore will not lose.
• Issue no further ultimatums you aren’t prepared to execute. A narrow, published, always-applied retaliation rule beats a grand threat postponed twice.
• Reduce the military role to what it’s genuinely good at: mine clearance — over 100 mines identified by underwater drones and neutralized — and targeted deterrence.

Where my plan can break

Three fragile points, stated without varnish.

First: the escrow requires Iran to accept being paid for verifiable behavior, which means accepting verification. The IRGC may prefer leverage to rent for ideological rather than economic reasons — in which case rational calculation doesn’t bite.

Second: the insurance backstop works only while losses stay in the current order of magnitude. A deliberate mass attack on facility-covered vessels would turn the US Treasury into a direct economic target.

Third, and most serious: Phase 2 makes Iran less relevant over the medium term, which gives Tehran an incentive to maximize damage now, while the card still has value. A credible bypass program is pressure — but pressure also accelerates desperate decisions. That is why Phase 1 must precede Phase 2: you have to stabilize flows before you announce to Tehran that its asset has an expiry date.

The summary, in one line: the United States has spent six months trying to militarily reopen a 34-kilometre channel. That channel does not open with warships. It opens with a published insurance premium, a reactivated pipeline in Iraq, and an escrow account in Switzerland.