Axios: Trump Has the Upper Hand in Hormuz

Fact check: True ... ish?

Last month, Donald Trump stopped chasing deals with the IRGC to resolve the Hormuz crisis. Instead, Trump let the naval blockade of Iran do the real work of undermining the military junta and the economy it largely controls. Iran continued to fire on shipping in the Strait, and rather than taking that bait, Trump and Scott Bessent moved to intensify the economic war while insisting that traffic through the Strait had begun to recover. 

The mainstream media looked skeptically on that claim, but as it turns out, oil investors did not. Oil prices are still above pre-war levels, but as of this morning are below $90 a barrel and still declining, both overall and for Brent crude. Regime officials have resorted to cheap shots at Bessent's sexuality and claims of prosperity while leaked videos show massive lines for gasoline in oil-rich Iran. Whatever leverage the IRGC thinks it has in the Strait is dissipating more rapidly than the Iranian rial on currency markets, as Al Jazeera laments:

Before the war, 2 million rials could buy about 4kg of tomatoes, half a kilo of chicken and a little less than a litre of cooking oil.

Today, the same amount buys about half as much, with the average price of tomatoes increasing by 71 percent, chicken by 74 percent and cooking oil by 177 percent.

The price of insulin, the baseline survival for diabetics, has shot up by 642 percent, while essential medicine like paracetamol has become dearer by 93 percent, and baby formula, largely subsidised by the government, has become costlier by 95 percent. ...

While the falling rial has pushed up the cost of goods, sanctions have restricted Iran’s access to international markets. At the same time, wages have failed to keep pace.

The government-approved minimum wage for the current Iranian calendar year ending in March 2027 is 166 million rials ($82). With government assistance and benefits, the figure comes to less than 220 million rials ($108).

When bombs are falling, people will endure this out of national solidarity. However, when nothing improves when the bombs stop falling, this kind of economic crisis makes authoritarian regimes sweat. And the existential crisis can accelerate when people see regime enforcers get preferential treatment, as reports from the Iranian gas lines indicated yesterday, with Basiji jumping the lines to gas up and get first crack at severely rationed supply. 

The IRGC is attempting to find ways around this, but as Axios' Barak Ravid reports this morning, Trump has largely checkmated the regime by standing pat on the Hormuz blockade. Trump told Ravid that "the sucker is open," and that the IRGC has run out of options:

The Strait of Hormuz has been Iran's most powerful card since the start of the war in late February. But over the past two months, U.S. officials say the American military has steadily eroded Iran's leverage over the crucial waterway.

Why it matters: What began six months ago with the goal of degrading Iran's missile capabilities and destroying what remained of its nuclear program has evolved into an open-ended fight over the world's most important energy chokepoint.

• U.S. officials say they've turned the tide in the strait and believe it could be a watershed moment in the war that brings not only gradual relief to the world economy, but also a better deal with Iran.
• "That sucker is open. The Iranian response is very mild. They don't want us to go back at them. That's the whole ball game. The rest doesn't matter," President Trump told Axios in a phone interview on Thursday.

Is the sucker open? Not fully, but at least sufficiently. Ravid passes along some interesting data from US and Israeli sources about the reality in the Strait:

• Iran is still firing at ships but its ability to target them accurately is limited. Only 2% of the ships that transited through the strait over the last month were hit, a U.S. official said.
• More than 200 mine-like objects have been swept from the main lane of the strait. U.S. officials say only 11 of them were actual mines and just a few were properly deployed.
• In recent weeks, traffic through the southern channel has grown to 20 to 30 tankers every night, carrying an average of 9 to 10 million barrels, per U.S. officials. That's roughly half the pre-war volume.

Some observers are scoffing at these claims, but investors clearly are not. Oil prices have stabilized in the low $80 range, still up from pre-war levels but far below the peak in the $120 range from April. Some of the price pressure likely involves Russian output that has been damaged by the war in Ukraine as well as the economic war on the black-market fleet used to sell it at below-market prices. Trump would like oil prices to get back to the $70 range to ease inflation pressure, but the US can live with $80-bbl oil for a lot longer than the IRGC can live with the rial's free-fall and zero oil income.

The question is this: Is Trump looking for a deal, or is he looking for a victory over the IRGC? For months, he pursued a deal that no one believed the IRGC would honor in any instance. The IRGC kept welching on its commitments even with temporary deals meant to get overall negotiations started. Trump still talks about a deal, but he's not listening to the IRGC or its feckless interlocutors in the region any longer. He shrugged off a reported deal between Iran and Oman as irrelevant even before the IRGC backtracked on the claim. 

Maybe this time, Trump has decided to go for the jugular, and let the Iranian people finally do the rest. 

Editor's Note: For decades, former presidents have been all talk and no action. Now, Donald Trump is eliminating the threat from Iran once and for all.

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