A toll booth in the middle of the ocean. That is, stripped of all military language, what Iran has been running in the Strait of Hormuz since late February. Ships wanting to pass through one of the world's most critical waterways have reportedly been charged upwards of $1 million per vessel. Meanwhile, 20% of the world's seaborne oil trade - a flow that took decades and hundreds of billions of dollars of infrastructure to build - has been effectively held hostage.

The air war that the US and Israel launched on February 28, 2026, was supposed to end this in weeks. Destroy the leadership, shock the system, force a surrender. It did not work. Now, according to Professor Jiang, a geopolitical analyst who correctly predicted both the start of the conflict and the failure of the initial air campaign, the US has moved into a different phase entirely - one built around economic strangulation, ethnic destabilization, and a blockade of the blockade. And the reason this matters far beyond the Middle East is simple: wherever this goes next, the bill lands on everyone's energy bills, grocery prices, and government balance sheets.

The Background

To understand why air power alone could not end this, it helps to understand what Iran built specifically to survive it.

After watching the United States topple Saddam Hussein in 2003 - a centralized military hierarchy that crumbled almost immediately once its leadership was removed - Iran drew a lesson and spent the next two decades building the opposite. The result is what military analysts call the Mosaic Defense doctrine, officially outlined in 2005 by IRGC Brigadier General Mohammad Ali Jafari and restructured in 2008 into 31 provincial commands - one for each of Iran's provinces. Each command has its own leadership, its own weapons stockpile, its own intelligence structure. The idea is that even if Tehran is destroyed, the war continues.

The IRGC - Iran's Islamic Revolutionary Guard Corps, a parallel military structure loyal specifically to the country's religious leadership rather than its civilian government - is the force running this system. It is not the same as the regular Iranian army. The IRGC operates on a religious mandate. Its commanders view this conflict not as a geopolitical dispute but as a holy war against what they call the "great Satan," a term used internally for the United States. This framing matters because it is not rhetorical. It shapes the incentive structure: a negotiated peace with the great Satan is, by definition, a betrayal of the cause.

Iran also has two distinct economic lifelines that have been funding the conflict. The first is oil exports. Iran is OPEC's third-largest producer, and roughly 90% of its crude oil moves through Kharg Island - a small island in the Persian Gulf - before being shipped almost entirely to China. The second lifeline, newer and more improvised, is the toll income collected from ships transiting the Strait of Hormuz. When Iran controls who passes and at what price, the strait becomes a revenue mechanism, not just a military position.

Cut off both of these, and you cut off the war machine's fuel supply. That is now the strategy.

What Is Actually Happening

The war has moved through identifiable phases. Phase one, starting February 28, was what the US military calls shock and awe - concentrated strikes designed to decapitate the Iranian leadership and force a rapid surrender. The Supreme Leader, Ayatollah Ali Khamenei, was killed in the opening hours. Dozens of senior IRGC commanders were eliminated. By any traditional military logic, this should have ended the conflict.

It did not. Provincial commands activated under pre-delegated authority, precisely as the Mosaic Defense doctrine was designed for. Iran retaliated with missile and drone strikes on US bases throughout the Gulf Cooperation Council - the group of wealthy Arab states hosting American military infrastructure - and closed the Strait of Hormuz. Phase two was not surrender but escalation.

Phase three, where things stand today, is the blockade. On April 13, after the Islamabad ceasefire talks collapsed, the US Navy began blockading Iranian ports directly - a move described by analysts as a "blockade of the blockade." Iran had been using the strait as leverage; the US response was to cut off Iran's ability to export anything.

The economic impact has been immediate and severe. Brent crude surged to around $80-82 per barrel within days of the war starting in late February, and later spiked past $120 as the full strait closure took hold. Dutch TTF gas prices - the benchmark for European natural gas - nearly doubled to over 60 euros per megawatt-hour by mid-March. US gas prices have risen by $1.16 a gallon since the war began, with fears of $5 per gallon if the strait remains closed.

Iran's war chest has been larger than many expected. According to trade intelligence firm Kpler, Iran was still exporting 1.71 million barrels per day in April, and had earned at least $4.97 billion from oil in the month prior to the blockade tightening. Crucially, Kenneth Katzman, a former Iran analyst at the Congressional Research Service, estimates Tehran has between 160 and 170 million barrels of crude "afloat" on tankers around the world - pre-positioned supply that generates revenue regardless of the blockade. That buffer could last until August, meaning the economic pressure has not yet become existential for Iran.

The Money Trail

Follow the money and the strategy becomes clearer.

Iran's two revenue streams - Kharg Island oil exports and strait tolls - are not incidental to the conflict. They are the conflict's financial engine. As long as China keeps buying Iranian oil and tankers keep paying for passage, Iran can finance a prolonged war. The US Naval blockade is therefore not primarily a military maneuver. It is an attempt to bankrupt a fighting force.

But this creates its own economic problem. When you close a strait that carries 20% of the world's seaborne oil trade, you are not just hurting Iran. You are raising fuel costs in Germany, food prices in Bangladesh, and shipping surcharges in the United States. The International Energy Agency has described the current situation as the greatest global energy security challenge in history. That is not rhetorical. The strait is also the route for over 30% of globally traded urea - a fertilizer made from natural gas - and roughly 20% of global LNG. Disruption there feeds into crop production costs, which feeds into grocery prices, which feeds into inflation in countries nowhere near the Persian Gulf.

Europe is particularly exposed. Gas storage levels entering the conflict were already at just 30% capacity following a harsh winter, and the ECB has now postponed planned interest rate cuts - meaning borrowing costs in Europe, already elevated, stay higher for longer. UK inflation is expected to breach 5% this year.

Then there is China. Around 90% of Iran's oil exports go to Chinese buyers. The US blockade is, in effect, also a message to Beijing: we can restrict your energy supply. China has so far not visibly backed down, and analysts including Frederic Schneider at the Middle East Council on Global Affairs believe the US is unlikely to seize or sink Chinese-bound tankers- which would represent a direct confrontation with a nuclear power. That constraint limits the blockade's practical effectiveness, which is why the three-pronged strategy described in Professor Jiang's analysis adds two more pressure points: internal destabilization and civilian strangulation.

The ethnic insurgency piece follows a familiar Cold War playbook: arm and finance minority groups in the border regions - specifically the Baluchi population near the Pakistani border and the Kurdish population in the northwest - to stretch the Iranian military across multiple internal fronts. If IRGC forces move to suppress rebellions, American air power has something to target. If they don't move, the insurgencies grow. It is a trap that costs money to run on both sides.

The third prong - cutting water, electricity, and food to Tehran, a city of 10 million - is the most economically blunt. A population under existential pressure demands political resolution. But it is also the approach most likely to produce the kind of humanitarian cost that erodes international support for the campaign.

What People Are Doing About It

The immediate response has been logistical. Airlines have rerouted flights to avoid Middle Eastern airspace, adding hours to journeys from Europe to Asia and driving jet fuel costs up 95% in North America since the war began. Major shipping carriers have imposed fuel surcharges. USPS, Amazon, and FedEx have all implemented additional fees. QatarEnergy declared force majeure - a legal mechanism that allows a party to abandon contractual obligations due to events beyond its control - on all LNG export contracts in early March, sending European buyers scrambling.

Gulf states dependent on food imports through the strait have faced a different kind of crisis. Countries in the GCC import over 80% of their caloric intake through the strait. By mid-March, 70% of the region's food imports were disrupted, forcing retailers to airlift supplies at costs that make normal supply chain economics irrelevant.

South American oil exporters - Brazil and Venezuela among them - have been collecting the windfall of elevated crude prices. For oil-importing nations in the same region, the inverse is true: inflation, transport disruption, and in some cases, social unrest.

Financial markets have been pricing in a prolonged conflict. The 10-year US bond yield jumped to 4.46% on March 27, its highest level since July 2025. Mortgage rates climbed to 6.38% in the same period. For households already stretched by post-pandemic inflation cycles, the war in the Gulf is arriving as higher prices at the pump, at the checkout, and on monthly mortgage statements.

The Bottom Line

Iran built its military specifically to survive the thing the US does best: decisive air strikes that remove leadership and collapse command structures. That strategy is working. The war has moved from shock and awe to economic attrition, and the attrition cuts both ways. Iran can potentially fund its resistance until August on pre-positioned oil reserves. The US blockade is squeezing Iranian revenues but also raising energy costs globally - hitting European households, Asian manufacturers, and American consumers along the way. The Strait of Hormuz was always a chokepoint. What this war has confirmed is that closing it hurts everyone, including the side doing the closing.

Timeline

Summary

Who: The United States and Israel (attacking), Iran and its IRGC (defending), with China, Russia, and Gulf states as major economic stakeholders.

What: A three-phase military and economic campaign against Iran, currently centered on a US naval blockade of Iranian oil exports and the Strait of Hormuz, following the failure of an initial air campaign to force regime collapse.

When: Active since February 28, 2026; the naval blockade phase began April 13, 2026.

Where: The Strait of Hormuz and Persian Gulf, with economic effects radiating globally into European gas markets, Asian supply chains, and North American fuel prices.

Why: The US aimed to eliminate Iran's nuclear program and force a political settlement, but Iran's decentralized Mosaic Defense doctrine and dual war-financing system - oil exports and strait tolls - have sustained the conflict through three phases, turning a military confrontation into an economic war with global consequences.