Naval blockade could shake Iran’s economy and end war early, analyst says

The US blockade of ships entering or leaving Iranian ports took effect on Monday as President Donald Trump seeks to pressure Iran by cutting its oil revenue.

The Iranian economy was already in shambles before the US and Israel launched their war against the Islamic republic more than six weeks ago, and reports indicate that incessant bombing has pushed the regime to the brink.

Despite the heavy losses suffered by the Iranian military, the country still has enough missiles and drones to effectively close the Strait of Hormuz while allowing its own oil tankers to pass through. Tehran’s control over this narrow waterway is its most powerful weapon as global energy markets suffer from shortages, but a U.S. blockade could turn the tide.

“By putting pressure on this money machine, the economy goes into freefall, giving the ayatollahs the much-needed motivation to actually negotiate,” Robin Brooks, a senior fellow at the Brookings Institution, wrote in a Substack post on Monday.

This comes after talks between the US and Iran in Pakistan broke down over the weekend, throwing a fragile two-week ceasefire into doubt as both sides appear unwilling to budge.

Brooks acknowledged that the regime may not care about the economic hardships faced by the Iranian people due to the blockade, adding that it was unclear how many weeks it would need to remain in place to get Tehran to negotiate.

“But what I do know is this: As Iran’s oil exports collapse, there will be no money for imports, so economic activity collapses, the currency goes into a spiral of devaluation and hyperinflation sets in,” he predicted.

In fact, hyperinflation may be just around the corner. Residents of Tehran and other cities told Reuters that some prices have risen by around 40% since the start of the war, while the rial has fallen 8% against the dollar in the parallel market.

The economic consequences of a blockade are so severe that Brooks declared, “I have no doubt whatsoever” that the regime will return to the negotiating table.

Of course, stopping the flow of Iranian oil could cause more turbulence in energy markets. But he stressed that Iran is a relatively small supplier of oil, and that cutting its production is not likely to raise Brent crude much above $120 per barrel. On Monday, the benchmark price rose 6% to $100.88, after advancing 8% earlier.

Overall, the blockade has more advantages than disadvantages, and its effect on oil is a manageable risk, he added: “The goal is to end this war more quickly by bringing the ayatollahs to the negotiating table in good faith.”

Brooks has been advocating a naval blockade since Iran closed the Strait of Hormuz. Others have also pointed to this measure as the preferable option over sending US ground troops to take control of the strait.

The blockade also falls far short of Trump’s previous apocalyptic threats to bomb Iran “back to the Stone Age” and eliminate its civilization.

Miad Maleki, a senior adviser at the Foundation for Defense of Democracies and a former Treasury Department official, calculated that the U.S. naval blockade will cause Iran about $435 million a day in economic losses, or $13 billion a month.

“The rial enters terminal collapse. Iran’s non-strait alternatives can replace less than 10% of Gulf flow. The blockage makes continued resistance economically impossible,” he wrote in X.