A Monthlong Closure of Hormuz Will Bankrupt Countries (w/ Sal Mercogliano)

TL;DR

A monthlong Strait of Hormuz closure would bankrupt Gulf nations and restructure global trade, as Iran now controls who passes through.

Key Points

• 1.Iran has effectively seized control of the Strait of Hormuz. Traffic dropped from ~135 ships/day to single digits; ships now route through Iranian territorial waters between two islands, reportedly paying up to $2 million per vessel for passage.
• 2.Iran uses drone swarms, not missiles, to paralyze shipping. Shahed UAVs and remote-controlled speedboat bombs have attacked over 20 ships since March 1st, killing at least 8 merchant mariners — a 'horde of gnats' the US Navy cannot fully intercept.
• 3.The US military's 99% interception rate is commercially useless. Shipping operators hear '1% chance of catastrophe,' and on an LNG carrier at -250°F, a single hit means a floating bomb — making insurance and risk calculus impossible.
• 4.An estimated 3,200 ships and 20,000 seafarers are trapped in the Persian Gulf. Crews are running out of food, water, and fuel; some have begun calling themselves 'the yellow fleet,' referencing ships stranded in the Suez Canal for years after 1967.
• 5.US policy is contradictory: seizing Venezuelan oil while welcoming Iranian oil. Treasury Secretary Bessant asked for Iranian oil on global markets to offset shortfalls caused by Iran's own blockade, while Iranian tankers load freely at Kharg Island.
• 6.Even a best-case resolution today would take months to normalize. The Ever Given's 6-day Suez closure took 6 weeks to 3 months to clear backlogs; at 21 days into this crisis, Mercogliano estimates roughly 21 weeks of downstream disruption.
• 7.A monthlong-plus closure risks bankrupting Bahrain, Qatar, Kuwait, and crippling Saudi Arabia. It would cut 20% of global oil, 17% of LNG, and a third of global fertilizer supply — a scale of trade restructuring historically only seen during world wars.