Iran's Strait Leverage Is Shrinking — But Don't Call It Won Yet

Oil Is Flowing Again. That Doesn’t Mean Iran Has Lost.

Traffic through the Strait of Hormuz is climbing back toward normal. Kpler estimates crude exports from the Middle East reached 16.3 million barrels per day in September — roughly 80 percent of pre-war levels. Saudi Arabia alone bounced from 2.4 million bpd in August to 5.4 million in September. For a waterway that collapsed to as few as two tankers a day at the conflict’s peak, that is a dramatic recovery.

The market read it immediately. Brent crude fell 2.6 percent to $102.59 a barrel as traders priced in the improving flows. But the broader September gain for Brent still sits near 13 percent. That gap tells the real story: prices are coming down, but not because the risk is gone.

Iran’s ability to disrupt the strait has long been its primary lever against US and Western pressure. The logic was straightforward — choke the chokepoint and watch the world come begging. If oil keeps flowing while Iran remains blockaded, that leverage appears to be bleeding away. That is the narrative Washington would like to believe.

It would be a mistake to follow it all the way.

The Premium Is Still There

Insurance costs for tankers operating through Hormuz remain elevated. Christopher Beauchamp at IG noted that markets are only slowly incorporating the recovery evidence into pricing, and the fall from recent highs is likely to continue — but cautiously. Susannah Streeter at Wealth Club put it bluntly: flows are not yet secure or guaranteed while the wider conflict remains unresolved.

There are other dimensions to the disruption that crude export numbers alone do not capture. Refined fuels — diesel and petrol — remain constrained. Infrastructure damage has created friction along energy supply chains that is not yet visible in the headline barrel figures. Countries including the United States have been drawing down strategic reserves to cushion the disruption, and those stockpiles are now significantly thinner. A second shock would hit harder than the first.

Iran has not stopped shooting. The UK Maritime Trade Operations centre reported unknown projectiles striking three ships in the waterway, including a crude tanker. IRGC spokesperson Hossein Mohebbi confirmed the pattern explicitly — the military conflict in the strait is ongoing, and Tehran has been targeting smaller vessels for extended periods with little measurable response from Washington.

The Real Cost Is Domestic

The war is hurting the United States too, and the political math is already shaping Washington’s posture. Diesel prices in the US hit a record $6.53 a gallon this month — more than 70 percent above pre-war levels. The Trump administration is discussing restrictions on diesel exports to ease prices ahead of November’s midterm elections. The Federal Reserve raised interest rates by 25 basis points this month, the first increase in three years, with higher energy costs feeding inflation. Trump’s approval rating sits at 32 percent, with just 17 percent approving of his handling of living costs, according to a Reuters/Ipsos poll.

Iran’s leadership has not ignored these pressures. Parliament Speaker Mohammad Bagher Ghalibaf recently used a simple mathematical framing to suggest that Tehran’s capacity to disrupt energy supplies is directly influencing US monetary policy. Analysts dismissed the claim as exaggerated, but the underlying observation has merit: energy costs are transmitting through the American economy and into the electoral calculation.

That is Iran’s leverage, even if the strait itself is partially open. It operates on a different axis — not control of traffic, but the ability to spike costs and uncertainty whenever the political climate in Washington allows.

Iran’s Economy Is Bleeding

There is no question that economic pressure on Iran is intensifying. Official data shows GDP contracting 10.1 percent year on year between late March and mid-June. The oil and gas sector shrank 26.4 percent over the same period. Inflation reached 69.9 percent in early September. The rial fell beyond 2.2 million to the dollar. Twelve months of US blockade activity have constrained oil exports and petrochemical revenues simultaneously.

Mohammad Eslami, a research fellow at the University of Tehran, described the situation as an economic war waged alongside the military conflict. The US blockade affects not only crude but the full range of Iranian export earnings. Yet he cautioned against reading the exchange rate as the sole indicator — Iran has survived five decades of economic pressure and has demonstrated a high tolerance for pain that Western analysts sometimes underestimate.

Negar Mortazavi, a political analyst and host of The Iran Podcast, agreed that the blockade imposes enormous pressure but rejected the assumption that Tehran will fold. She noted that Iran has shown repeatedly that it is prepared to endure considerable economic hardship rather than negotiate entirely on Washington’s terms.

The Negotiation Gap

Indirect talks between the US and Iran resumed at the UN General Assembly, where special envoys Steve Witkoff and Jared Kushner met Iranian Foreign Minister Abbas Araghchi for three hours. Trump called the encounter very good and very productive. Iran then floated a seven-day roadmap that would reopen the strait and restore normal maritime traffic if Washington ended the naval blockade, eased sanctions, and released frozen Iranian funds. Trump rejected the proposal outright.

But something shifted shortly after. Reuters reported that Araghchi received US feedback on the Iranian proposal through Qatari mediators. An official briefed on the talks said the main disagreement now centres on sequencing rather than the components of the plan itself.

That is a meaningful distinction. If both sides agree on the steps but cannot agree on the order, there is still a path. The question is whether either side can make the first move without appearing to capitulate. Mortazavi warned that Iran’s willingness to compromise should not be misread as weakness — doing so could prolong the war instead of ending it.

Who Wins If the Strait Stays Open

If oil continues flowing through Hormuz while Iran remains blockaded, the immediate beneficiary is the global consumer and the US political establishment looking at midterms. Higher volumes keep a floor under prices that would otherwise spike. Thin strategic reserves, however, mean the buffer is fragile.

Iran loses tactical leverage in the short term but retains the capacity to disrupt again. The infrastructure damage, the insurance premiums, and the refined-fuel constraints all point to a conflict that is not settled simply because tankers are moving again. The real test will come if another disruption hits while stockpiles are low and geopolitical risk premiums are already baked into prices.

Washington faces its own vulnerability: the US economy is feeling the war’s cost in ways that could shape the midterm elections. A sudden price spike or supply shock before November could change the calculus entirely. That is the leverage Iran still holds — not over the strait itself, but over the political timelines that govern how long the current recovery can be sustained without triggering domestic pressure back in the United States.

The Strait of Hormuz is reopening. The war is not over.