Horror at Hormuz

In two weeks of the Iran War, two crucial factors have emerged. Coping with them will guide us whether this war will be short (a matter of months this year), or prolonged, or become another American forever war.

One, the Iran conflict has become an energy war and consequently, an economic war, one that cannot be won by sheer military might wielded by even the most powerful army and richest nation on earth. It became an economic war because the enemy, Iran, has taken effective control of what is today the world’s most important small body of water—the Strait of Hormuz through which passes 20 million barrels or 20 percent of the world’s oil supply, and 20 percent of liquefied natural gas or 112 billion cubic meters, cooled into liquid form for easier storage and transport. More than 80 percent of that LNG went to Asia in 2024, according to the US Energy Information Administration.

Hormuz Strait is only 33 kms wide at its narrowest, limiting passage by oil tankers to a two-way lane. The tankers, each with up to $200 million worth of crude, chug-chug at 20 kph speed or five hours to pass through the 100-km long strait, making the seaborne behemoths highly susceptible to $20,000 (per piece) Iranian Shahed drones whizzing by at 185 kph. The Iranians do not even need to use drones. They can employ small boats laying much cheaper mines undersea, each costing $1,500 to $2,000. In fact, Iran does not even need to lay mines. It can simply threaten (not actually deploy drones and cheap mines) and the whole world calcifies in terror.

Terror is cheap. An army is expensive. Donald Trump spent $11 billion in the first six days of the war. The US Navy, even if it deploys all its 11 nuclear-powered aircraft carriers, cannot solve the horror of Hormuz. Which is why till now, the US military has not moved in to take control of the Strait of Hormuz. It simply cannot be done – unless at great cost.

Two, Donald Trump may actually be fighting a mirage. Iran effectively has no leader. Mojtaba Khamenei, 56, has not been seen (on live video) nor heard from (in live audio) since his election March 8, as the religious leader, head of government, head of the military, head of the legislature and head of the judiciary in a succession that rivals that of an entrenched monarchy. Mojtaba was reportedly injured in the Feb. 28 bombing of Tehran by the US and Israel. Not only injured, but injured seriously.

For all the world knows, Mojtaba is probably in a coma or dead. Thanks to Iran’s exquisite leadership layering, its government and its military are functioning with clockwork efficiency and ruthlessness, subjecting six Gulf countries friendly to the US and hosting its bases to punishing missile and drone attacks, escalating the war regionally and globally. Through a presenter who read his statement, Mojtaba has vowed to avenge “the blood of martyrs” and to keep the Strait of Hormuz shut. He called on his neighbors in the Gulf to close US bases on their territory or Iran will keep targeting them.

Aside from the loss of human lives and degraded infrastructure, the Iran war’s toll on the world has been enormous and unprecedented.

The wars cascading economic fallout is now radiating well beyond the Persian Gulf, reshaping global commodity markets, food systems, industrial supply chains, financial conditions and geopolitical alignments – potentially for years to come,” said the World Economic Forum on March 12, explaining:

This is not only a regional crisis. It is a structural shock to the world economy, delivered at a moment of geo-economic fragility. The longer it runs, the more lasting the damage becomes. First it hits oil, gas, shipping and aviation; then inflation, industrial costs and food security and eventually trade routes, investment decisions and political stability.

“The energy disruption is only the most visible layer. The strait is a chokepoint for an interlocking web of commodity flows. Even where cargo still moves, the war is imposing a global surcharge through shipping costs and insurance. War-risk cover has been canceled or repriced, marine premiums have surged and freight costs are rising across energy and non-energy trade alike. The ripple effects have stretched from semiconductor fabs in Taiwan, China, to farms in Brazil and steel mills in South Korea.”

And to shanties in Manila.

Chimes in financial giant MUFG in an analysis: “We see the Philippine peso as vulnerable and USD/PHP possibly rising above the 60 levels if the Iran and Middle East conflict is sustained and the Strait of Hormuz remains closed, with oil prices already reaching above $100/bbl at the time of writing. While we do not yet know how the Iran and Middle East conflict will play out from here, it’s important to stress our current base case USD/PHP forecast of 58.00 by 4Q 2026 assumes a resolution after March 2026 and implicitly for oil prices to fall towards the $70/bbl levels.”

Warns MUFG: The indirect effects across a range of sectors could also be meaningful for the Philippines beyond the first order impact, and ultimately points to a stagflationary environment of higher inflation and weaker growth for the Philippines. With possible production and supply chain disruptions negatively impacting energy-intensive sectors such as manufacturing, transportation, travel and food production, a lengthy Strait of Hormuz closure scenario may well morph into something akin to COVID lockdowns.”

Stagflation is high inflation, slow or negative growth and unemployment (5.8 percent or 2.96 million jobless in January 2026 – highest since June 2022). Prepare for higher prices of food, of electricity, of nearly all manufactured goods, of travel and of transportation. Hard times have just begun. Hold on to your jobs.

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