Strait of Hormuz Tensions Surge After U.S. Strike, But Closure Remains Unlikely — For Now

Political

Middle East Situation

Summary:

Following the U.S. airstrikes on Iranian nuclear sites, Iran’s parliament has called for the closure of the Strait of Hormuz. While the decision now lies with Iran’s Supreme National Security Council...

Strategic Flashpoint Reemerges Amid Escalation

The Strait of Hormuz, a narrow and geopolitically vital waterway through which approximately 20% of global oil and gas supplies pass daily, has once again become the focal point of global energy concerns following the U.S. strike on Iranian nuclear facilities. Iran’s parliament over the weekend urged a blockade of the strait, but the final call rests with its Supreme National Security Council, which includes key military and political figures.

The move follows long-standing Iranian rhetoric that has used the threat of strait closure as a form of geopolitical signaling. However, U.S. Vice President JD Vance dismissed the prospect as "suicidal," citing the Islamic Republic’s deep reliance on oil exports that depend on the strait itself.

Iran Faces Cross-Pressures Between Leverage and Self-Harm

While Iran has often used low-ranking officials to float the possibility of closure—thereby sowing market instability—the true cost of action remains steep. Iran itself exports over 1.3 million barrels of oil daily, mostly destined for China, with the Strait of Hormuz serving as the primary route. Closing it would cut off this critical revenue stream.

Energy researcher Noam Raydan noted that only if Iran’s own oil infrastructure is extensively damaged—which has not occurred thus far—would full strait closure become a strategically viable option. While one refinery in southern Tehran was hit in an Israeli airstrike, the country’s broader oil network appears intact for now.

Iranian Foreign Minister Abbas Araghchi, while maintaining a defiant tone, avoided direct confirmation of any specific retaliatory move. He emphasized that the U.S. "only understands the language of force," leaving analysts to interpret this as part of a broader, deliberately ambiguous messaging strategy.

Markets Watch and Wait: Risk Remains Elevated but Controlled

Despite the high-stakes rhetoric, markets have not yet reacted with full-scale panic. This suggests that traders see the closure of the Strait of Hormuz as a tail-risk event—serious, but still improbable unless Iran’s leadership believes it has little left to lose.

JPMorgan analysts have identified the closure of the strait as a "worst-case scenario," projecting that such a move could drive oil prices to $120 per barrel and push U.S. inflation toward 5%. These estimates highlight the asymmetric risk: a single act could destabilize global energy flows and financial markets, even if temporary.

Yet the Trump administration maintains cautious confidence that Iran will avoid this path. “It doesn’t make any sense,” said Vance, underlining the potential self-inflicted damage. Secretary of State Marco Rubio echoed this sentiment, calling such a decision “another terrible mistake,” and signaled the U.S. has contingency plans should Iran proceed.

As it stands, Iran’s threat to close the Strait of Hormuz remains a powerful tool of psychological and market pressure rather than a confirmed course of action. The economic logic against closure is strong, but so is the volatility of conflict-driven decision-making. For now, the world watches a delicate game of brinkmanship where oil markets, regional stability, and diplomatic ties all hang in the balance—awaiting Iran’s next move.

Source: Yahoo Finance

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Middle East Situation

Political

A Dramatic Reversal of Trump’s Anti-War Image

President Trump, who rose to power criticizing America’s costly military entanglements in Iraq and Afghanistan, now finds himself at the center of a potentially larger conflict. On June 21, he ordered a long-range strike targeting three of Iran’s nuclear facilities using the most powerful conventional weapons in the U.S. arsenal. The attack, announced as a “spectacular military success,” represents not only a sharp pivot from Trump’s earlier diplomatic overtures to Tehran but also a direct confrontation with a state actor many U.S. presidents previously approached with caution.

Standing with key members of his national security team, including Vice President JD Vance and Secretary of State Marco Rubio, Trump issued an ultimatum: either Iran accepts peace under U.S. terms or faces “a tragedy far greater than anything witnessed in the past eight days.” The statement signaled readiness for further escalation and projected strength. Yet beneath the rhetoric lies the broader uncertainty of whether this strategy will yield diplomatic leverage or lead to deeper conflict.

Iran: A Heavier Adversary than Iraq

Unlike Iraq in 2003, Iran is a regional power with twice the population, a hardened military infrastructure, and decades of experience projecting power across the Middle East. Analysts and lawmakers warn that Iran’s capacity to retaliate—whether through proxy forces or direct attacks—poses serious risks to U.S. troops, regional allies, and global economic stability.

Senator Jack Reed, a senior Democrat on the Senate Armed Services Committee, called Trump’s action a “massive gamble,” noting the absence of a congressional mandate and the historical reluctance of past presidents—Democratic and Republican alike—to initiate such strikes. Barack Obama and Joe Biden, faced with similar provocations, chose diplomacy over force, fearing the very quagmire Trump now flirts with.

A Defining Choice with Uncertain Outcomes

The central gamble of Trump’s strategy is that a weakened Iran will submit to a new deal under American conditions. However, this assumption is far from certain. As Rosemary Kelanic from Defense Priorities cautions, coercive force may harden Tehran’s resolve rather than soften it. Iran still retains uranium stockpiles and enrichment capabilities. If diplomatic collapse follows the strikes, Tehran could be pushed closer to developing nuclear weapons—a move that U.S. intelligence services say it has thus far avoided.

The causal dynamic between external pressure and internal radicalization is critical here. Rather than surrendering, Iran might interpret the strikes as justification to accelerate its nuclear program, undercutting the very objective Trump claims to pursue.

Military Success vs. Strategic Overreach

Trump’s airstrikes may deliver immediate tactical wins—damaged facilities, bold optics, political applause from hawkish factions—but they do not resolve the strategic dilemma of regime behavior and long-term deterrence. Indeed, the strikes risk triggering a broader regional escalation involving Iranian proxies across Iraq, Syria, Lebanon, and Yemen, potentially destabilizing key trade routes and threatening global energy markets.

Furthermore, Trump’s military assertiveness is testing his own political narrative. Having won the 2016 election partly by denouncing Hillary Clinton’s support for the Iraq War, Trump now steps onto a similar path. Ironically, Vice President Vance, who served in that war, had returned home disillusioned by its costs. Now, both men lead an administration that appears willing to take similar risks.

As Washington Post aptly notes, the coming days will shape the legacy of Trump’s presidency. Should Iran falter without meaningful retaliation, Trump may be seen as the leader who finally neutralized a decades-long threat and redefined U.S. military deterrence. But if Iran resists or escalates, the United States may find itself locked in another draining war—precisely the scenario Trump once promised to avoid. At stake is not only the future of Middle East stability but also Trump’s credibility as a strategist who vowed to break from the interventionist mistakes of his predecessors.

Source: The Economic Times

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Michael Ross

The unprecedented US airstrikes on Iran have set traders and governments worldwide on edge, as the Islamic Republic warns of retaliation and Israel shows no sign of letting up in its assault.

Source: Yahoo Finance

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Kevin Morgan

US strikes on Iran over the weekend have added to risks for global oil supply, which has so far been unaffected by some of the most extreme military actions in the Middle East in years.

Brent crude jumped early on Monday to trade above $80 a barrel for the first time since mid-January after US President Donald Trump said air attacks had “obliterated” Iran’s three main nuclear sites. It then pared gains, as the vital Strait of Hormuz remains open to tankers.

Analysts are now trying to weigh the increased geopolitical risk against previous fears that strong production and a lukewarm global economy could result in a supply glut. Here’s what oil watchers are saying:

Iran will likely be very cautious about disrupting Hormuz, the narrow passage separating Iran and the Arabian peninsula through which about 25% of the world’s oil and 20% of global liquefied natural gas must pass, said Bob McNally, president and founder of Rapidan Energy Group and a former White House energy official.

“Traders are holding their breath, waiting to see if Israel or Iran expand this conflict beyond military and political targets into traded energy,” McNally said on Bloomberg TV. “So far, no one has pulled that trigger. And if they don’t, I can see the price reversing.”

Iran has other options for retaliation, including using its regional proxies to disrupt global trade flows more indirectly, according to Kpler Ltd. senior crude analyst Muyu Xu . That’s what happened after Israel’s invasion of the Gaza strip in 2023, when Houthi rebels in Yemen began attacking ships in the Red Sea. A direct move to disrupt Middle East oil flows would have severe consequences for prices, she said.

“If Iran blocks the Strait of Hormuz, even for one day, oil can temporarily hit $120 or even $150 a barrel,” she said. “And if it attacks major oil production or export facilities in neighboring countries, it may drive up prices higher for longer.”

Oil markets have been incredibly choppy since Israel began strikes on Iranian nuclear infrastructure earlier this month, with some trading sessions beginning with price spikes before they retreated into daily losses. Traders need to look past the surprise of the news and analyze whether the underlying risks have actually changed, said Vandana Hari, founder of consultancy Vanda Insights.

“Beyond the knee-jerk reaction to the shock US attacks, the market needs to assess if the risk of the worst-case supply disruption scenarios has risen,” Hari said. “I don’t see a material increase.”

Long-time oil market hand Harry Tchilinguirian said he’s particularly watching whether Iran risks pulling the US deeper into the conflict by responding with strikes on US military assets or energy infrastructure in the region, which could drive prices higher. If the response is confined to Israel, that could reduce fears of escalation.

“Basically, the ball is now in Iran’s court to respond, and while it says all options are on the table, some are more consequential than others,” said Tchilinguirian, head of oil research and analytics for Onyx Commodities Ltd.

It’s not just crude oil that faces risk. The Strait of Hormuz is also a major chokepoint for LNG and refined products including diesel and jet fuel. Some fuel markets may see the biggest price responses to the latest development, said June Goh, senior oil market analyst with Sparta Commodities.

“Diesel and jet fuel supply chains are most exposed to the Middle East as oil from the Arab Gulf and the West Coast of India flows through the Straits of Hormuz to feed the main demand hub in Europe,” Goh said. “The east-west spread for middle distillates is expected to widen further to incentivize barrels to flow into Western markets.”

Source: Bloomberg Europe

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Henry Thompson

U.S. President Donald Trump on Sunday raised the question of regime change in Iran following U.S. strikes against key military sites over the weekend, as senior officials in his administration warned Tehran against retaliation.

"It’s not politically correct to use the term, “Regime Change,” but if the current Iranian Regime is unable to MAKE IRAN GREAT AGAIN, why wouldn’t there be a Regime change??? MIGA!!!" Trump wrote on his social media platform.

Trump's post came after officials in his administration, including U.S. Vice President JD Vance and Defense Secretary Pete Hegseth, stressed they were not working to overthrow Iran's government.

"This mission was not and has not been about regime change," Hegseth told reporters at the Pentagon, calling the mission "a precision operation" targeting Iran's nuclear program.

Vance, in an interview on NBC's "Meet the Press with Kristen Welker," said "our view has been very clear that we don't want a regime change."

"We do not want to protract this or build this out any more than it's already been built out. We want to end their nuclear program, and then we want to talk to the Iranians about a long-term settlement here," Vance said, adding the U.S. "had no interest in boots on the ground."

"Operation Midnight Hammer" was known only to a small number of people in Washington and at the U.S. military's headquarters for Middle East operations in Tampa, Florida.

Complete with deception, seven B-2 bombers flew for 18 hours from the United States into Iran to drop 14 bunker-buster bombs, chairman of the Joint Chiefs of Staff, General Dan Caine, told reporters.

In total, the U.S. launched 75 precision-guided munitions, including more than two dozen Tomahawk missiles, and more than 125 military aircraft in the operation against three nuclear sites, Caine said.

The operation pushes the Middle East to the brink of a major new conflagration in a region already aflame for more than 20 months with wars in Gaza and Lebanon, and a toppled dictator in Syria.

DAMAGE TO FACILITIES

With the damage visible from space after 30,000-pound U.S. bunker-buster bombs crashed into the mountain above Iran's Fordow nuclear site, experts and officials are closely watching how far the strikes might have set back Iran's nuclear ambitions.

Caine said initial battle damage assessments indicated all three sites sustained extremely severe damage and destruction, but he declined to speculate whether any Iranian nuclear capabilities might still be intact.

U.N. nuclear watchdog chief Rafael Grossi was more cautious, saying while it was clear U.S. airstrikes hit Iran's enrichment site at Fordow, it was not yet possible to assess the damage done underground.

A senior Iranian source told Reuters on Sunday that most of the highly enriched uranium at Fordow, the site producing the bulk of Iran's uranium refined to up to 60%, had been moved to an undisclosed location before the U.S. attack.

Vance told NBC the U.S. was not at war with Iran but rather its nuclear program, and he thought the strikes "really pushed their program back by a very long time."

Trump called the damage "monumental," in a separate social media post on Sunday, a day after saying he had "obliterated" Iran's main nuclear sites, but gave no details.

Tehran has vowed to defend itself and responded with a volley of missiles at Israel that wounded scores of people and destroyed buildings in its commercial hub Tel Aviv.

But, perhaps in an effort to avert all-out war with the superpower, it had yet to carry out its main threats of retaliation, to target U.S. bases or choke off the quarter of the world's oil shipments that pass through its waters.

Caine said the U.S. military had increased protection of troops in the region, including in Iraq and Syria.

The United States already has a sizeable force in the Middle East, with nearly 40,000 troops in the region, including air defense systems, fighter aircraft and warships that can detect and shoot down enemy missiles.

Reuters reported last week the Pentagon had started to move some aircraft and ships from bases in the Middle East that may be vulnerable to any potential Iranian attack.

NOT OPEN-ENDED

With his unprecedented decision to bomb Iran’s nuclear sites, directly joining Israel’s air attack on its regional arch foe, Trump has done something he had long vowed to avoid - intervene militarily in a major foreign war.

There were sporadic anti-war demonstrations on Sunday afternoon in some U.S. cities, including New York City and Washington.

It was unclear why Trump chose to act on Saturday.

At the press conference, Hegseth said there was a moment in time when Trump "realized that it had to be a certain action taken in order to minimize the threat to us and our troops."

After Trump disputed her original assessment, Director of National Intelligence Tulsi Gabbard on Friday said the U.S. had intelligence that should Iran decide to do so, it could build a nuclear weapon in weeks or months, an assessment disputed by some lawmakers and independent experts. U.S. officials say they do not believe Iran had decided to make a bomb.

U.S. Secretary of State Marco Rubio, asked on CBS' "Face the Nation with Margaret Brennan" whether the U.S. saw intelligence that Iran's Supreme Leader Ayatollah Ali Khamenei had ordered nuclear weaponization, said: "That's irrelevant."

Hegseth, who said the Pentagon notified lawmakers about the operation after U.S. aircraft were out of Iran, said the strikes against Iran were not open-ended.

Rubio also said no more strikes were planned, unless Iran responded, telling CBS: "We have other targets we can hit, but we achieved our objective. There are no planned military operations right now against Iran - unless they mess around."

Source: Reuters

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Nathaniel Wright

Japanese manufacturing activity rose more than expected in June and was back in expansion territory, purchasing managers index data showed on Monday.

The au Jibun manufacturing PMI rose 50.4 in the first three weeks of June, more than expectations of 49.5 and also picking up sharply from the 49.4 seen in May.

A reading above 50 indicates growth, with the manufacturing PMI now on track to log its first positive month since May 2024.

Au Jibun analysts said the positive print was driven by renewed increases in output and inventory, although overall demand still remained muted. Still, Monday’s data showed that Japan’s major manufacturers saw some recovery in new orders despite the impact of steep U.S. trade tariffs, which had been a major pressure point on automakers in the past two months.

Japan’s services sector continued to grow, with the au Jibun services PMI up 51.5 in June from 51.0 in the prior month. Japanese services demand has remained strong despite recent weakness in manufacturing, with local demand especially underpinned by a bumper wage hike earlier this year.

The positive PMIs saw the au Jibun flash composite output index– a gauge of overall business activity– rise to 51.4 in June from 50.2 in May.

Source: Investing

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Gerik

Economic

Middle East Situation

Domestic Political Division and Global Market Anxiety

President Donald Trump’s authorization of airstrikes against three Iranian nuclear facilities has provoked both political controversy at home and economic unease abroad. While several Republican lawmakers expressed strong support for the move, Democratic leaders—most notably House Minority Leader Hakeem Jeffries—criticized the decision as reckless and unilateral. Jeffries accused the President of bypassing congressional authorization and warned that the action could entangle the U.S. in a costly and potentially disastrous war in the Middle East.

Beyond political rifts, the strikes have introduced significant uncertainty into global markets. Analysts and policymakers are now grappling with the prospect of rising oil prices, a potential inflation surge, and disruptions to global energy supply chains—all of which could intensify if Iran retaliates or if the Strait of Hormuz is closed.

Oil Supply Disruption Threatens Global Energy Stability

Iran, a major OPEC oil producer, plays a critical role in maintaining the balance of global crude supply. The U.S. strikes not only risk damaging Iran’s nuclear capabilities but may also impair vital energy infrastructure. This adds to the risk that Tehran could retaliate by obstructing the Strait of Hormuz—a strategic chokepoint through which roughly 20% of the world’s oil flows.

Since June 10, Brent crude prices have surged by 18%, peaking at $79.04 per barrel on June 19, the highest in nearly five months. Market analysts such as Mark Spindel from Potomac River Capital anticipate continued upward momentum in oil prices as conflict escalates. Oxford Economics warns that under a worst-case scenario—including a full blockade of the Strait—oil prices could soar to $130 per barrel, pushing U.S. inflation to near 6% by year-end. Yuki Togano from Japan’s Research Institute suggests that prices could even touch $140, underscoring the vulnerability of Asian economies, particularly Japan, due to their dependency on Middle Eastern oil imports.

Short-Term Currency Gains, Long-Term Dollar Risks

The conflict also has mixed implications for the U.S. dollar. In the immediate term, the greenback could strengthen as a safe-haven asset, attracting capital inflows amid global volatility. However, history suggests that prolonged U.S. involvement in foreign wars tends to weaken the dollar. Thierry Wizman of Macquarie recalled the depreciation of the dollar during the post-9/11 military campaigns in Afghanistan and Iraq, warning of similar trends if Washington escalates its role in the Middle East.

The relationship between geopolitical instability and currency dynamics hinges on investor expectations: while short-term conflict favors dollar strength, long-term fiscal stress and military overreach could undermine confidence in U.S. debt sustainability.

Stock Market Volatility and Global Spillovers

Equity markets have so far shown resilience, absorbing the early stages of the Israel-Iran conflict with minimal disruption. However, direct U.S. military engagement is a different magnitude of risk. A prolonged or escalating intervention could trigger equity sell-offs, particularly in energy-sensitive and emerging markets.

Financial markets are preparing for divergent scenarios. Investors now face the possibility of energy-driven inflation, central bank policy shifts, and the deterioration of geopolitical stability—all of which introduce volatility into bond markets, commodity prices, and asset valuations.

Rising Defense Costs and Fiscal Implications for the U.S.

Should the conflict evolve into a sustained military campaign, the U.S. may face increasing defense expenditures at a time when its fiscal capacity is already strained. Tax cuts under the Trump administration have widened the federal deficit, and additional wartime spending could further pressure bond markets and raise concerns about fiscal sustainability. The economic burden of a long conflict could undermine domestic investment, exacerbate public debt, and test the limits of bipartisan support.

The causal pathway between military escalation and fiscal deterioration is not hypothetical—it is supported by empirical precedents. In this scenario, the combination of higher oil prices, inflationary pressures, and expanding deficits could weigh heavily on both U.S. economic growth and global financial confidence.

The U.S. airstrikes on Iran mark a turning point in both geopolitical and economic terms. While intended to curb Tehran’s nuclear ambitions, the action risks triggering a wider regional conflict with serious economic consequences. Surging oil prices, potential supply shocks, inflation risks, currency volatility, and political uncertainty are now part of a complex matrix shaping global markets. Unless diplomacy is urgently revived, the economic toll of this military decision may extend far beyond the battlefield—disrupting economies, shaking investor confidence, and redefining strategic risk in the global order.

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