Iran's Hormuz leverage wanes as US squeeze bites

Six months after a conflict that unsettled markets and threatened to ignite a broader war, the tables may be shifting in favor of Washington as the United States deploys an unprecedented economic onslaught to achieve what military force could not. Iran's resilience to previous sanctions is now being tested by one of the most severe economic constraints in its history, according to Iranian insiders and regional sources.

A U.S. naval blockade and stricter sanctions are stifling oil exports, limiting access to foreign currency, and highlighting mounting economic stresses within the Islamic Republic. This campaign has prompted U.S. and regional officials to believe that relentless economic coercion can compel Tehran to permit free passage through the Strait of Hormuz, which handles approximately a fifth of global oil and liquefied natural gas (LNG) shipments.

Their assumption is based on the premise that Iran experiences greater economic damage than it imposes. The aim is to choke off oil exports, thereby slashing state revenues, while hindering shipping through Hormuz, which has not sparked the global economic shock Tehran anticipated to compel Washington to negotiate. Energy markets have adapted, and alternative supplies have continued to circulate.

Consequently, Iran's leverage over the Strait of Hormuz has weakened, as Tehran has been unable to fully seal it. Iranian analyst Arash Azizi noted that Iran had anticipated disruptions in the strait to trigger a major shock to the global economy, potentially forcing Washington back to the negotiating table, which has not materialized.

Other nations have adapted, demonstrating the limitations of Iran's capacity to inflict economic harm beyond its borders. The effectiveness of the pressure in eliciting concessions from Tehran remains uncertain, as Tehran has failed to impose the anticipated costs to break Washington's resolve but has shown little indication of relinquishing demands for sanctions relief, access to frozen assets, and recognition of its security role in Hormuz.

While the economic pressure is deepening Iran's pain, the Revolutionary Guard may perceive endurance, backed by the threat of escalation, as a form of leverage rather than a reason to yield. Discussing the possibility of a resolution, U.S. Treasury Secretary Scott Bessent described the strategy as a "one-two punch" combining the blockade with the harshest sanctions ever seen, aiming to collapse the regime.

The resilience of Iran's leadership and its ability to withstand economic and military coercion are subjects of debate, with some considering the regime too resilient to be forced into concessions, while others remain skeptical of the prospects for political change.