Summary

At 10 a.m. ET on Monday, the U.S. navy began its blockade of Iranian ports, aimed at the Iranian tankers and the other Iran-friendly ships which have managing to traverse the Strait of Hormuz. Trump had been demanding Iran open the international waterway, which usually sees the transit of one-quarter of the world's seaborne oil trade. Since the war has begun though, traffic has plunged 90 percent, sparking global supply panic and rising oil and fuel prices. Following the breakdown of talks between U.S. and Iranian negotiators on Sunday, Trump announced the U.S. would blockade the already impacted strait to retaliate against Iran. But it doesn't appear to be working. In the first 24 hours since the operation began, at least seven ships have made it through including four tankers linked to Iran. One was a Chinese-owned vessel sanctioned by the U.S. in 2023 for carrying Iranian oil. That was spotted on the other side of the Strait in the Gulf of Oman on Tuesday. Along with question as to how the U.S. would feasibly police the strait in this way, there are also questions around who this is aimed at and why. Many have interpreted the U.S. blockade as being aimed at Iran's shadow fleet which carries oil supplies many suspect go to China- the destination for nearly all Iran's oil exports. Iran had blocked most traffic but not all Since the U.S. and Israel launched their offensive on February 28, oil tanker traffic through the strait is down from a prewar 138 ships per day to a daily average of 3.4,according to TankerTrackers.com. That includes 150 tankers, 100 of which are vessels of the so-called shadow fleet, the maritime intelligence company wrote. or sanctions-evading ships largely understood to be delivering oil to China via Malaysia. In the first weeks of the war, Iran showed it was ready to attack ships, with vision of at least two tankers being hit by Iranian missiles or speedboats. However in the past fortnight, a pattern emerged, calculated through shipping data sites, which appeared to show some ships taking a certain route close to the Iranian coastline, to get out. Reports emerged that ships were having to make payments—varying from $2 million paid in the Chinese yuan currency to crypto—and that Iran was perhaps operating a "toll booth" before allowing passage. Trump has instructed the U.S. Navy to intercept "every vessel in international waters" which paid Iran a toll. "No one who pays an illegal toll will have safe passage on the high seas,” he said. However the U.S. Central Command, in charge of the operation, said it was more select than that. They said the blockade would be enforced against vessels "entering or departing Iranian ports and coastal areas, including all Iranian ports on the Arabian Gulf and Gulf of Oman. “It is unclear what the ultimate goal of the blockade is," Andrea Ghiselli, assistant professor of international relations at Beijing's Fudan University, wrote in an analysis for the Australian Lowy Institute think tank. "One possible explanation was to put pressure on countries that import Iranian oil, especially China, to make them push Iran to accept American conditions for the end of the war. "However, as there are reports of a Chinese-owned ship, one that was known for facilitating the trade of sanctioned Iranian oil, transiting through the Strait without being stopped, that first hypothesis appears wrong." Iran's been making money Analysts say first and foremost President Trump is applying a U.S. blockade to try and harm the Iranian economy. Its sanctioned oil exports remains a central pillar of its economy, and since its ships have been the only ones regularly getting out through the strait since March, it has likely increased its cash flow by hundreds of millions, according to a Bloomberg analysis. But the double-bind, while aimed at inflicting maximum pressure on Iran's economy, will also intensify "the worst global oil supply shock in history," Rapidan Energy Group CEO Scott Modell told Newsweek. "He [Trump] is essentially accepting higher oil prices as the cost of building this additional leverage, betting that American tolerance for $4-plus gasoline is greater than Iran's willingness to withstand economic pain." The global economic pain will continue as he says it's likely that international shipping will continue to avoid the strait due to sky-high insurance premiums. Ships will also likely be fearing a resumption of Iranian strikes in the Gulf and against Gulf state energy sites if the ceasefire breaks down, he added. Iran launched several strikes on key energy facilities in Qatar, Saudi Arabia, Kuwait and the United Arab Emirates in the first month of the war. Key Saudi refineries in Ras Tanura and Yanbu were hit, with the latter on the Red Sea potentially jeopardising all possible energy-supply routes out of the Gulf. The Red Sea had been seen as an alternative route to the Strait of Hormuz. More than 25 companies operating in the Gulf states, including national and international energy firms, have applied force majeure. China connection China's Foreign Ministry on called the U.S. blockade escalation "dangerous and irresponsible." "The U.S. side has increased its military deployment and adopted targeted blockade actions, which will only intensify contradictions, exacerbate tensions, undermine the already fragile ceasefire situation, and further impact the safety of passage in the strait," spokesman Guo Jiakun told reporters Tuesday. "The root cause of the blockage of navigation in the strait is the war in Iran, and the way to solve this problem is to cease fire and stop the war as soon as possible," he told reporters. China is Iran's biggest oil customer and the recipient of most of the "shadow fleet" supplies. Beijing buys more than 90 per cent of the oil exports and would no doubt be feeling the drawback through the strait. But Iran comprises only an estimated 13 percent of China's foreign-bought oil. So the blockade, while an inconvenience, is no more of an issue for China than for other oil-importing economies, Christopher Weafer, CEO of Eurasia-based strategic consultancy Macro-Advisory told Newsweek. Prior to the war, China had definitely benefited from being able to import almost 1.5 million barrels per day of Iranian oil and at a discount to the prevailing market price. Neither country has ever confirmed the size of the discount, but traders say it has often been 'sizable.'" But China has also been able to get all the oil it needs from the wider market and at the full market rate. "Recall that China—and India—are now also paying the full market rate for Russian oil as a result of the war in the Gulf," said Weafer. He noted before February 28, both China and India had reportedly been buying Russian crude with discounts of between 25 percent and 33 percent. "That stopped almost immediately after the first bombs fell on Tehran. "China has lost access to cheap oil and is now paying the same as other importers. Beijing may be annoyed but can hardly complain— it can still access all the oil it needs but now at the same price as others pay." China is also structurally better prepared than many of its neighbors to deal with the Strait blockage—given its diversified energy mix, alternative overland supply routes abd strategic petroleum reserves estimated to cover roughly 100 days of imports. However, the world's second-largest economy remains vulnerable if the crisis drags on. China's petrochemicals, aviation, shipping and heavy transport sectors are particularly exposed. The timing of the blockade has also raised questions about whether it could undermine Trump's wide-ranging talks with Chinese counterpart Xi Jinping, scheduled for mid-May. Modell said the obstruction is unlikely to deter Trump, but also not likely to derail the meeting. "The U.S.-China summit next month will not weaken President Trump’s resolve to achieve a face-saving outcome in the war with Iran," he said. "Moreover, aside from opportunistic diplomatic intervention, China shows no willingness to exert additional leverage to end the war."