The failure of US-Iran peace talks leaves President Donald Trump with a set of unattractive options that are unlikely to hand him a decisive or swift victory.
But he’s doubling down with a plan to impose a blockade on the Strait of Hormuz that comes with its own risks of serious and unforeseen consequences.
The administration’s depiction of weekend talks in Islamabad, Pakistan, suggested it was hoping to win capitulation from Iran on demands including a promise not to seek nuclear weapons and the reopening of the strait.
But Iran is refusing to cede this critical leverage and doesn’t accept the US claim that it’s already lost the war. The result is a deadlock that challenges one of Trump’s core beliefs: that US military might will bend all adversaries to his will.
So Trump is now under pressure to narrow Iran’s options.
He told reporters Sunday evening that he ordered the US military to enforce a blockade on the strait from 10 a.m. ET. The idea is to strangle Iran’s oil revenues and collapse its economy. The measure is also designed to frustrate Tehran’s plan to raise revenues by charging safe passage for oil tankers in the vital waterway.
Trump’s plan could certainly be disastrous for Iran’s economy, already devastated by years of sanctions and the new war. But it also threatens to worsen the war’s economic impact on the US and global economies.
Oil prices immediately spiked again on news of the blockade, with the price of a barrel of Brent crude rising 8% to $104.
This reaction will test Trump’s resolve, since Americans are already frustrated by high prices for food and housing and are now paying more than $4 a gallon on average for gasoline. Rising oil prices helped spike the inflation rate up to 3.3% in March from 2.4% in February and are having a negative impact throughout the economy.
Trump acknowledged in an interview with Fox News’ Maria Bartiromo earlier Sunday that gas prices could be “the same or maybe a little bit higher” by the midterm elections.
The president also explained the blockade in his Fox News interview. But he did little to clarify how it would work. “It’s called all in, all out. Yes, it’s called all in and all out,” Trump said.
“There will be a time when we will have them all come in and all come out,” Trump added, referring to hundreds of oil tankers stranded in the Persian Gulf. “But it won’t be a percentage. It won’t be a friend of yours, like a country that’s your ally or a country that’s your friend. It’s all or nothing. And that won’t be in too long a distance.”
US Central Command said Sunday the blockade would be enforced on all traffic entering and exiting Iranian ports. “CENTCOM forces will not impede freedom of navigation for vessels transiting the Strait of Hormuz to and from non-Iranian ports,” it said in a post on X.
A lot of bad options
The United States and Iran each left their marathon talks in Pakistan accusing the other of inflexibility. The impasse immediately raised doubts about the durability of a two-week ceasefire that began last week. But Trump told reporters Sunday that it was “holding well.”
The plan to blockade the strait will bring its own risks. But Trump’s other options are bad.
The president could recommit to the relentless US and Israeli bombing campaign, but it’s unclear whether redoubling an onslaught that has already devastated Iran’s military and industrial complex will make its leaders more likely to cave. Should Trump follow through on a chilling threat to take out power plants and bridges, he could hurt the civilians he once vowed to help and risk Iranian reprisals against US allies, raising the war’s already-steep costs.
And any attempt by Trump to leave the region after declaring US military goals complete would be undermined by Iran’s stranglehold on the strait — a vital global oil exporting choke point — and its retention of its enriched uranium stockpile.
Trump has no choice but to try to open the strait
Former US Ambassador to the UN Nikki Haley said Trump had no choice but to try to open the strait. “If we did not do anything to stop them, not only would they have leverage; they would have even more money than they had before to funnel money to their proxies, even more money to buy supplies for ballistic missiles and continue their nuclear production,” Haley told CNN’s Dana Bash on “State of the Union” on Sunday.
The president’s idea of blockading the strait might be a way of testing Iran’s control over the waterway without the high-risk move of committing US ground troops to attack shore-based missile facilities, which could lead to American casualties. But the operation might also make US ships more vulnerable to Iranian attacks.
Blocking the strait would also raise the risks of diplomatic confrontations with large powers such as China if the US sought to halt any of their vessels transiting the strait. Trump has invested substantial political capital in his summit next month with Chinese leader Xi Jinping, which has already been postponed once because of the war.
A US blockade halting all ships that agreed to Iran’s terms of passage might also harm allies like Japan and those in Europe that Trump has already alienated with the war and which rely heavily on Gulf oil supplies.
Small wonder that some Trump critics doubt his latest attempt to wrest control of the war will work, seeing it as another example of erratic leadership featuring shifting rationales for the conflict, grave threats and climb downs.
“I don’t understand how blockading the strait is going to somehow push the Iranians into opening it. I don’t get the connection there,” Sen. Mark Warner, a Virginia Democrat, said on “State of the Union.”
White House explains how the Iran talks foundered
The White House on Sunday listed the US demands that Iran refused to accept. They included an end to all uranium enrichment and the dismantling of nuclear facilities damaged during US raids last year. To forestall future development of nuclear programs, the administration wants to ensure the retrieval of more than 400 kilograms of highly enriched uranium believed to be buried in the wreckage of Iran’s nuclear facilities.
US and Israeli war aims also include thwarting of Iran’s regional threat, which it’s imposed for years through a network of proxy radical groups. Vice President JD Vance, leading the US delegation, therefore asked the Iranians to end funding for Hamas, Hezbollah and the Houthis in Yemen. In what he said was Washington’s “final and best offer,” he included a demand for the opening of the strait for toll-free navigation.
From a US perspective, these are all reasonable strategic demands. But it’s arguable whether the war has advanced Trump’s capacity to deliver them.
Iran’s rejection of US demands raises the question of exactly what Washington has achieved strategically in six weeks of war. Iran’s position is little changed since talks the US broke off before launching the conflict. And it now has a new point of leverage — its control of the strait.
Iran is accusing Washington of being inflexible, and its intransigence seems to give Trump no option but to consider more military action. Iranian negotiator and Speaker of Parliament Mohammad Bagher Ghalibaf said it’s up to the US to respond to what he described as constructive proposals. “America understood our logic and principles, and now it is time for it to decide whether it can gain our trust or not,” he said.
For economic and political reasons, as well as strategic ones, the administration is under increasing pressure to end the war quickly — a factor likely playing into the calculations of a blockade of the strait.
Iran’s defiance is again challenging administration claims that the war is an unqualified success and that thousands of missile and air strikes have destroyed Tehran’s navy and air defenses; exacted a harsh toll on its military; and eliminated layers of the Islamic Republic’s senior leadership.
A war that Trump had hoped would be quick and decisive is dragging on with no end in sight. The economic damage is huge and growing — bad news for the president’s eroded approval ratings. Trump’s fury that US European allies refused to join a war they were not informed about in advance and did not want has meanwhile caused new splits in NATO. It is too soon to make definitive judgments on whether the war will reshape Iranian politics. But a regime that brutally represses its people has survived after defying US and Israeli military might, and it continues to threaten US Gulf allies.
The proposed blockade is Trump’s latest attempt to disprove the maxim that foreign wars are easy for presidents to start and hard for them to stop. But even if it works, it will come with heavy costs that reflect the many consequences Trump failed to foresee.
This story has been updated with additional information.
President Donald Trump is threatening to close off the Strait of Hormuz — a crucial waterway that he has repeatedly told Iran must be reopened unconditionally.
“Effective immediately, the United States Navy, the Finest in the World, will begin the process of BLOCKADING any and all Ships trying to enter, or leave, the Strait of Hormuz,” Trump posted on Truth Social Sunday morning. “At some point, we will reach an ‘ALL BEING ALLOWED TO GO IN, ALL BEING ALLOWED TO GO OUT’ basis, but Iran has not allowed that to happen.”
Iran’s decision to close the strait to oil tanker traffic has caused severe economic damage to some countries that rely on Middle Eastern crude, and it has led prices to surge around the world — including the United States.
So why would Trump want to blockade the strait that he wants reopened?
The strait isn’t technically closed — Iran has been gradually allowing some tankers through in exchange for a toll of up to $2 million per ship. And, crucially, Iran has been allowing its own oil to pass in and out of the region throughout the war: Iran had managed to export an average of 1.85 million barrels of crude a day through March — about 100,000 barrels a day more than in the previous three months, according to data and analytics firm Kpler.
By closing off the strait, Trump could cut off a key source of financing for Iran’s government and military operations.
It’s a lever the administration has been unwilling to pull: Blockade the strait — even to Iranian oil, and the price of oil could surge around the globe.
That’s why the US Navy has allowed Iranian tankers to pass through the region. Any oil flowing out of the region right now could help keep oil prices at least somewhat in check.
In fact, the United States in March granted a temporary license for Iran to sell oil that had been sitting afloat on tankers.
The United States has sanctioned Iranian oil on and off for decades, and the Trump administration has blocked sales of the country’s crude since it abandoned the Iran nuclear agreement in 2018. Trump’s decision to drop sanctions last month freed up a lot of crude: 140 million barrels worth, which is enough to satisfy the entire world’s oil demand for about one-and-a-half days, according to the US Energy Information Administration.
But the optics of the temporary, one-month waiver on sanctions were difficult: The license allowed Iran to sell its sanctioned oil to help finance its war against the United States and its allies. And Iran was profiting handsomely off its sales, selling its oil for a premium of several dollars above the price of Brent crude, the international benchmark.
Anger about surging gas prices pressured the Trump administration to wrap up its war, and releasing hundreds of millions of barrels perhaps bought it a bit of time. Because Iran was selling its oil anyway, dropping the sanctions opened up the oil sales to Western countries instead of going exclusively to China, Iran’s biggest customer by far.
The administration has tried to find any lever it can pull to keep oil prices in check while it wages its war. It coordinated a historic release of emergency oil reserves around the globe, and the Trump administration desanctioned hundreds of millions of barrels of Russian oil last month, as well.
Now, Trump is risking sending oil and gas prices even higher to maximize leverage over Iran to end the war.
Reopening the Strait of Hormuz is proving to be difficult. But even if the vital waterway fully opens and oil and other necessary cargo sail out, it won’t be enough to return things to normal.
That’s because empty ships will need to sail back into the strait to keep the flow of goods moving. Experts say that shipping lines won’t start entering the Persian Gulf through the strait as long as there’s a strong risk that the ceasefire is only temporary.
Tankers and ship owners — as well as their insurers — won’t allow their ships to re-enter the Gulf unless they’re sure they won’t be caught there for weeks or longer, said Lale Akoner, a global market analyst at eToro.
“A two-week ceasefire and a ceasefire that’s fragile — I don’t think that would give the confidence (to ship operators) that is needed,” she said.
Without new ships entering the Gulf to pick up the next loads of oil, fertilizer and other much-needed cargo, the benefits of hundreds of fully loaded ships sailing out of the strait will prove to be short-lived. The shortages and elevated prices for oil and other goods are likely to continue for months.
To get things back on track, first the ships that have been trapped in the Gulf need to leave. So far that hasn’t happened, according to Matt Smith of trade analytics firm Kpler.
“(Almost) nobody is confident enough to pass through the strait,” he said. The 100-plus oil tankers that typically move through the Strait of Hormuz every day, have been reduced to 10 or fewer, Smith noted.
Even if there is confidence in the ceasefire, the flow of vessels is going to be overwhelmingly outbound ships. Smith said there are about 400 loaded oil tankers in the Gulf waiting to get out, but only about 100 empty tankers eager to get in.
Smith said if the strait were to open today, it would still likely take until July for oil flows to get back to normal.
The same is true with container ships that are critical for delivering food and other goods the Gulf states depend upon, as well as exports like fertilizer and industrial resins. There are about 100 container ships waiting to exit, but virtually none waiting to enter, said Peter Tirschwell, vice president for maritime and trade at S&P Global Market Intelligence.
That means 30% of the world’s fertilizer that normally comes out of the region is likely stuck there for months until there are new ships to take them out, he said. As with the oil, sending that cargo out by ship is the only way to move it.
“The capacity does not exist to easily reroute those cargoes,” he said.
Without new ships coming through the strait and into the Gulf, experts say production of various goods made there — crude oil, gasoline and other refined fuels and fertilizer — will remain on hold.
Production halted during the past six weeks because there was no place to put those goods, said Smith.
The oil producers around the Gulf “are used to just putting (oil) on a tanker and it immediately going out,” he said. “They’re going to need time to increase production, but also have the tankers in place there to be able to load that crude.”
Oil prices plummeted and stocks surged Wednesday after a fragile ceasefire between the United States and Iran took effect, spurring hopes that oil tankers would be allowed to pass through the Strait of Hormuz.
WTI, the US crude benchmark, tumbled 16.41% to settle at $94.41 per barrel. Still, crude is well above the $67 per barrel level it settled at on February 27, before the war began.
Brent crude, the global benchmark, dropped 13.29% to settle at $94.75 per barrel, its lowest settle price since March 11 — but also still well above the $73 per barrel level it settled at on February 27.
US stocks closed sharply higher: The Dow soared 1,325 points, or 2.85%, and had its best day in a year. The S&P 500 gained 2.51%, and the tech-heavy Nasdaq Composite surged 2.8%.
Both WTI and Brent posted their biggest single-day declines since April 2020. Despite the sharp moves, there is uncertainty about the state of the ceasefire and whether more oil tankers will actually be able to resume transit through the critical strait, through which about 20% of the world’s oil supply normally passes.
White House press secretary Karoline Leavitt said Wednesday that Iran has assured the White House that it is allowing traffic through the Strait of Hormuz, despite reports of Tehran once again closing the waterway after Israel attacked Lebanon.
The war in the Middle East — and the effective closure of the crucial Strait of Hormuz — has caused the biggest oil supply shock on record, choking off roughly 12 million to 15 million barrels of crude oil a day.
“The market has been eager to get good news but it remains to be seen if the Strait of Hormuz opens fully,” Bob McNally, founder and president of Rapidan Energy Group, told CNN. “That’s the whole ball of wax and so far Washington and Tehran seem to be talking past each other on that.”
American drivers have seen the average price of a gallon of regular gas soar $1.18, or 40%, to $4.16 since the start of the war, according to AAA. They could get some modest relief soon, with retail prices expected to start to edge down in the coming days.
But price-tracking service GasBuddy estimates it’ll still take one to two weeks for the average price nationally to get back below $4. And it is likely to be months before the average price is back to the pre-war level of less than $3 a gallon, said oil analyst Andy Lipow, president of Lipow Oil Associates.
“Crude oil is still $30 per barrel higher than it was on February 27, before the conflict began,” Lipow said in an email to CNN Wednesday. “Gasoline futures are still about 70 cents higher than when the war started. It will take weeks if not months to restart crude oil production (in the Persian Gulf) and get it exported.”
The terms under which tankers will be allowed to pass through the strait remain unclear, with Iran’s semi-official Tasnim news agency reporting that Iran and Oman plan to charge transit fees — a situation unlikely to be acceptable to the United States and its allies, particularly if any of that revenue flows to Iran’s Islamic Revolutionary Guard Corps (IRGC), designated a terrorist organization by many Western countries.
Iran also emphasized that the ceasefire was only temporary. “This is not the end of the war but all military branches should follow the Supreme Leader order and cease their fire,” according to a statement read out on state-run news channel IRIB.
Iran said its military would regulate passage through the Strait of Hormuz, granting the country “unique economic and geopolitical standing,” according to a statement from Iran’s Secretariat of the Supreme National Security Council.
Tehran has in recent weeks charged some shipping companies a reported $2 million fee to guarantee safe passage through the strait.
Transit fees of $1-2 million per tanker would add roughly $1 per barrel to the cost of oil transported through the Strait, according to Neil Shearing, group chief economist at Capital Economics. That amounted to a “modest impact on global energy prices,” though in practice could mean a “de facto partial nationalisation of the shipping route,” he added.
“There are significant hurdles to overcome before the ceasefire agreement between the US, Israel and Iran can translate into a lasting end to the war.”
Traders will now look for evidence that the large volume of oil and natural gas stranded in the Gulf region is beginning to move through the strait.
There are “early signs” of this happening, MarineTraffic, a ship-tracking platform, said on X. It said that a Greek-owned bulk carrier and a Liberia-flagged vessel had transited the strait early Wednesday.
As of Tuesday, 187 tankers laden with 172 million barrels of seaborne crude and refined oil products remained inside the Gulf, according to Kpler, a global trade intelligence firm.
That backlog won’t clear overnight, with potential lasting consequences for energy markets.
“Beyond the near term, Iran’s ruling regime has (arguably) solidified its political control, and has demonstrated its capacity for bringing global oil and gas markets to their knees,” Karl Schamotta, of Corpay Currency Research, wrote in a note Tuesday evening.
Global stock markets surge
Beyond oil, news of the ceasefire has sparked a relief rally in stock markets around the world. Countries in Asia and Europe are sensitive to the volatility in energy prices because they are more reliant on the Middle East for oil and liquified natural gas.
South Korea’s Kospi led gains in Asia to close 6.87% higher. Japan’s Nikkei gained 5.39%, its best day since last April. Hong Kong’s Hang Seng gained 3.09%.
In Europe, Germany’s Dax soared 5.06% and France’s CAC 40 index jumped 4.49%, each posting their best day since March 2022.
Wall Street’s fear gauge, the VIX, dropped 22% to just above its pre-war level. With its surge Tuesday, the tech-heavy Nasdaq is down just 0.15% since the war began, although it is still down 5.5% from its record high in October.
Trump agreed to the ceasefire less than two hours before his 8 p.m. ET deadline to destroy a “whole civilization.” He said the agreement hinged on the reopening of the Strait of Hormuz.
“We received a 10 point proposal from Iran, and believe it is a workable basis on which to negotiate,” Trump posted on Truth Social on Tuesday night.