During the June 2025 war, Iran's parliament voted to authorise closing the Strait of Hormuz — the economic doomsday option — yet Iran's leadership never pulled the trigger. Examining why, and what closure would actually mean, reveals how the worst-case scenario for the world economy really works.
Scenario 1 — Harassment (The Historical Norm)
What Iran has actually done, from the Tanker War to recent years: mine scares, drone shadowing, GPS jamming, occasional tanker seizures. Effect: insurance and freight rates rise, some owners reroute or pause, oil gains a few dollars of risk premium. Disruptive, deniable, survivable — for everyone.
Scenario 2 — Partial Interdiction
Selective attacks on tankers serving specific countries, or mining that halts traffic for days until cleared. Analysts' estimates during the 2025 crisis clustered around oil spiking into the $100–120 range, with insurers withdrawing coverage doing as much damage as weapons. The 1980s precedent suggests convoys and escorts restore flow within weeks — at permanently higher cost.
Scenario 3 — Full Closure Attempt
Comprehensive mining plus missile and swarm attacks on transiting ships. Consensus estimates ran from $120 to well above $150 per barrel in the initial shock — territory associated with global recession: this single strait carries ~20% of world oil and LNG supply, and strategic reserves cover only weeks. Gas-importing economies in Europe and Asia would face simultaneous energy shocks. The inflation mechanics are detailed here.
Why Iran Didn't Do It in 2025
- It would sanction itself. Iran's own exports — its fiscal lifeline — transit Hormuz to China.
- China said no. Beijing, buyer of the vast majority of Iranian crude and dependent on Gulf energy, made its opposition clear. Iran cannot afford to lose its only major partner.
- It invites the war Iran avoided. Closure converts a limited air campaign into an open-ended US naval war against every Iranian coastal capability — with international legitimacy attached.
- The threat is worth more than the act. An open strait with a credible threat generates leverage forever; a closed strait spends the card once, at maximum cost.
The Assessment
Closure is Iran's true "break glass" option — rational only if the regime believes it is facing destruction anyway. That is precisely why markets can never fully dismiss it: the scenario's probability is low, but it rises exactly when crises deepen, and its impact is world-historical. The practical risk in most confrontations is Scenario 1 bleeding into Scenario 2 through miscalculation — a mine that hits the wrong hull, an intercept that kills sailors — escalation by accident rather than decision. That risk pathway features prominently in our predictions.
This article is part of a 20-part analysis series on the Iran–USA conflict covering the complete history, the June 2025 war, the Strait of Hormuz, oil markets, global inflation and future scenarios. Facts reflect the situation as of early 2026.
