U.S. Navy Begins Blocking Ships Going to Iranian Ports in the Persian Gulf

What Happened?

On Monday, the U.S. Navy began imposing a blockade on the Persian Gulf intended to block all ships heading to Iranian ports. The move by the Trump Administration was announced after peace talks in Islamabad, Pakistan, between the U.S. and Iran failed to bring an end to the now two-month-old war. 

Iran had already been preventing ships not heading to its ports from entering the Persian Gulf, and an Iranian spokesman called the blockade by the U.S. ‘piracy.’ China called the new naval blockade dangerous, and two ships reportedly from China continued through the Strait of Hormuz to Iranian ports after the announcement of the U.S. blockade. 

Why it Matters

The idea behind the U.S. naval blockade of the Persian Gulf is twofold: first, to demonstrate to Iran that the strategic waterway belongs to the international community, not any one country. The second reason is to impose an economic cost on Iran for refusing to agree to U.S. peace terms in Islamabad. Iran’s government derives most of its operating revenue from oil exports, and the prevention of future oil sales could cut into funding.

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Iran also has a considerable amount of oil that has already been exported but not yet sold, much of it waiting offshore in several different locations around the world. If new exports are prevented due to the U.S. blockade, Iran could probably continue to bring in revenue for several months from selling oil it has already sent abroad. That means the U.S. blockade could have a long-term impact on Iran’s ability to generate income, but not an immediate effect. 

At issue is freedom of navigation, which is a cornerstone of the global economy. Freedom of navigation means commercial ships have the right under international law to unimpeded access to waterways that do not belong to any single country, such as routes across remote areas of the world’s oceans. Without such access, shipping goods such as oil and liquid natural gas would not be possible, and the world’s economy would come to a standstill.

The move by the Trump Administration to block ships headed to Iran is in response to Iran’s blocking of ships heading to non-Iranian ports, but the combined effect means that commercial ships no longer enjoy freedom of navigation in the Persian Gulf. Twenty percent of the world’s oil supply passes through the Strait of Hormuz each year, and the combined blocking of ships will further reduce the amount of fuel that can be transported through the region, which will in turn reduce the oil supply and drive up prices.

How it Affects You

Oil prices rose on the news that the U.S. had begun its blockade of the Persian Gulf, going back up above $100 per barrel after briefly decreasing at the beginning of peace talks between the U.S. and Iran. The dual blockade has put U.S. and Iranian naval forces in close proximity to each other, which increases the likelihood of a new round of conflict breaking out. 

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