Amid ongoing Middle East conflict, global concerns are deepening over a potential blockade of the Strait of Hormuz. Reports indicate that Iran is evaluating conditions under which vessels might be permitted to pass through the critical waterway.
Citing a senior Iranian official, CNN reported on March 13 that Iran is contemplating granting passage to a limited number of oil tankers through the Strait of Hormuz, provided that the petroleum cargoes aboard are settled in Chinese yuan. The source added that Iran is currently developing a new plan to manage tanker transit through the strait, with the potential measure being considered as part of this effort.
Currently, international oil trade is almost exclusively conducted in U.S. dollars, with the sole exception being sanctioned Russian oil, which is traded in rubles or yuan. In recent years, China has actively promoted the use of yuan for oil purchases, particularly with Saudi Arabia, though the dollar remains the world's primary reserve currency.
Against the backdrop of Middle East hostilities, Iran recently announced the closure of the Strait of Hormuz. On March 12, Iran's Supreme Leader Mujtaba Khamenei, in his first speech since taking office, emphasized that Iran should continue the blockade to pressure its enemies.
The Strait of Hormuz, situated between Oman and Iran, connects the Gulf of Oman to the east with the Persian Gulf to the west. It is a vital shipping lane and one of the world's most crucial routes for crude oil trade. Approximately one-fifth of the globe's daily crude oil and liquefied natural gas shipments pass through the strait. Its closure could significantly impact global exports of oil and natural gas.
Bloomberg described a substantial closure of the Strait of Hormuz on March 2 as an "earthquake-level" shock to the global oil market. Current market anxieties over this key energy artery have driven oil prices to their highest point since July 2022, the first summer following the outbreak of the Russia-Ukraine conflict.
The United Nations warned on March 13 that continued conflict and any restrictions on shipping through the Strait of Hormuz would have a "massive impact" on humanitarian aid efforts. Tom Fletcher, the UN Under-Secretary-General for Humanitarian Affairs, stated that if vessel traffic through the strait halts, the consequences would ripple out rapidly, making the transport of food, medicine, fertilizer, and other supplies increasingly difficult and costly.
Iran's Deputy Foreign Minister Ravandchi previously stated that Iran would permit vessels from some countries to pass through the Strait of Hormuz, but nations involved in aggression against Iran would not enjoy "safe passage" rights.
Recent transit activity through the Strait of Hormuz has nearly come to a complete standstill.
On March 12, CNN, citing multiple informed sources, reported that the U.S. Department of Defense and the National Security Council significantly underestimated Iran's resolve to blockade the strait in retaliation for U.S. military strikes during their planning of ongoing operations. These sources indicated that President Trump's national security team failed to adequately assess the potential consequences of military action, with some officials describing the administration as facing a "worst-case scenario."
Although key officials from the U.S. Treasury and Energy Departments participated in some pre-war planning meetings—their analyses and forecasts are typically considered indispensable in decision-making processes—their input was relegated to a "secondary consideration" in the current administration's decisions.
Sources acknowledged that the Treasury and Energy secretaries have played significant roles during the planning and execution phases of military operations. However, President Trump's tendency to rely on a tight-knit circle of advisors for national security decisions has effectively marginalized interagency debates concerning potential economic repercussions, specifically the economic shockwaves that could follow an Iranian blockade of the strait in retaliation against the U.S. and Israel.
Multiple current and former U.S. officials told CNN that any military action plan against Iran traditionally considers the possibility of Iran closing the Strait of Hormuz. The U.S. military has long maintained and updated plans for responding to Iranian military actions in this key waterway.
Nevertheless, against a backdrop of ample global oil and LNG supplies, record U.S. oil production, the current Venezuelan government's compliance with the U.S., and expectations of rapidly expanding production potential from a former adversary nation, the scale of global downside risks was not viewed by U.S. officials as a primary consideration.
CNN noted that the stark reality of the current Strait of Hormuz crisis has left former diplomatic, economic, energy officials, and industry executives interviewed feeling both bewildered and astonished. A former U.S. official who served in both Republican and Democratic administrations stated that while this scenario long seemed implausible, planning for it has been a "cornerstone principle" of U.S. national security policy for decades, and witnessing the current situation is "stunning."
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