Iran: Is the cost of closing the Strait of Hormuz too high?
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For a few days, the world held its breath. It seems the conflict between Israel, the US and Iran is not going to escalate any further, at least for now. Iran opted to save face by launching an attack on a US military base in Qatar, which the stock market interpreted as a de-escalatory gesture.
This retaliatory strike by Tehran was "loud enough for headlines, quiet enough not to shake the oil market's foundations," Stephen Innes of SPI asset management commented to Reuters. Immediately after the strike on Monday evening, the oil price fell again sharply.
And yet Iran holds a powerful trump card. It could do immense damage to the global economy by blockading the Strait of Hormuz. But would this really be to its advantage — or would it be more of an own goal?
Why oil exports are so important for Tehran
The US energy information administration (EIA) says that "Iran's economy is relatively diversified compared with many other Middle Eastern countries."
However, the goods produced by the country's industry are primarily sold on the domestic market.
The export of oil and petroleum products is therefore an important source of income for the government. These constitute more than 17 percent of the country's total exports, with natural gas at 12 percent. According to the EIA, Iran was the fourth-largest producer of crude oil among the OPEC countries in 2023, and in 2022 it was the world's third-largest producer of dry gas (natural gas that is at least 85 percent methane, containing only negligible quantities of condensable gases such as hydrogen).
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Iran exports oil, despite sanctions
Although it has been subject to sanctions for many years, this has not prevented the Iranian regime from exporting oil. China in particular has benefited: In 2023, it took almost 90 percent of the oil exported by Iran.
In March 2024, the Financial Times quoted Javad Owji, Iran's minister of petroleum at the time, saying that Iran's oil exports "generated more than 35 billion dollars" in 2023. According to the World Bank, between April and December 2023 the oil sector represented more than 8 percent of Iran's GDP.
And based on estimates from the data analysis company Vortexa, it is believed to have exported even more the following year.
China: an important trade partner
Iran would therefore damage itself if it blocked the Strait of Hormuz. Not only would its own oil revenue be affected, it would also upset its trading partner China, which profits from buying the oil at low cost.
The London-based TV station Iran International estimates that Tehran sells its oil at a 20 percent discount on the world market price, because its buyers risk getting into trouble on account of the US sanctions.
The broadcaster explained that Chinese refineries are the biggest buyers of Iran's illegal consignments of oil. Intermediaries mix it with deliveries from other countries, and the oil is then declared in China as having been imported from Singapore or other countries of origin.
According to Rystad Energy, an independent energy research company based in Norway, China imports a total of almost 11 million barrels of crude oil per day, around 10 percent of which comes from Iran.
Blockade would affect neighbouring countries
A blockade would also have caused trouble for Iran's neighbours. Kuwait, Iraq and the United Arab Emirates also transport their oil through the passage. In a post on LinkedIn, the economist Justin Alexander, a Gulf region analyst, commented that if Tehran were to close the strait, this would "undermine remaining alliances" it still has with countries in the region.
Whether Iran could actually maintain a blockade is also doubtful.
Homayoun Falakshahi from the analytics firm Kpler told German TV that he believed a blockade would provoke a swift and forceful military response from both the US and European countries, and that Iran would only have been able to close the strait for a day or two.
Iran's struggling economy
Furthermore, if Iran's economic situation were to deteriorate even further, it would go down very badly with the Iranian people. Djavad Salehi-Isfahani, professor of economics at Virginia Tech in the US, told DW that the standard of living in Iran had already dropped to the level of 20 years ago as a result of sanctions.
These apply not only to the oil industry, but also to international payment transactions with Iran, which drives up inflation. This has been rising steeply since the beginning of the year, to more than 38.7 percent in May 2025 compared with May 2024. The combination of sanctions and the low exchange rate is making daily life ever more expensive for people in Iran.
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Eisenhower, in a letter in June 1953, offered sympathy but warned that aid was unlikely so long as Iran withheld oil: 'There is a strong feeling… that it would not be fair to the American taxpayers for the United States Government to extend any considerable amount of economic aid to Iran so long as Iran could have access to funds derived from the sale of its oil.' Mossadegh's response was blunt. He accused Britain of sabotaging Iran's economy through 'propaganda and diplomacy,' and warned that inaction could carry lasting consequences: 'If prompt and effective aid is not given to this country now, any steps that might be taken tomorrow… might well be too late,' he wrote. Weeks later, in August 1953, the CIA and Britain's MI6 launched a covert operation to oust Mossadegh and restore the Shah, Mohammad Reza Pahlavi, to power. 'A decision was made to develop and carry out a plan to overthrow Mussadiq and install Zahedi as prime minister,' Gasiorowski wrote. 'The operation was to be led by Kermit Roosevelt, who headed the CIA's Middle East operations division.' The mission, code-named Operation Ajax, used anti-Mossadegh propaganda, bribes, and orchestrated street unrest. After an initial failure and the Shah's brief exile, loyalist military units staged a successful coup on August 19. Mossadegh was arrested, tried, and placed under house arrest until his death in 1967. In 2013, the CIA officially acknowledged its role, releasing declassified documents that described the coup as 'an act of U.S. foreign policy, conceived and approved at the highest levels of government.' In Iran, schoolchildren learn about the 1953 coup in classrooms. State media airs annual retrospectives on Mossadegh's downfall. His name recurs in graffiti, political speeches, and university lectures. In his book The Coup: 1953, the CIA, and the Roots of Modern U.S.-Iranian Relations, the historian Ervand Abrahamian called the operation 'a defining fault line not only for Iranian history but also in the country's relations with both Britain and the United States.' It 'carved in public memory a clear dividing line — 'before' and 'after' — that still shapes the country's political culture,' he wrote. While Cold War defenders portrayed the coup as a check on communism, Abrahamian sees oil and empire as the true motivators. 'The main concern was not so much about communism as about the dangerous repercussions that oil nationalisation could have throughout the world,' he argues. Following the coup, the Shah ruled with increasing autocracy, supported by the US and bolstered by SAVAK (Sazeman-e Ettela'at va Amniyat-e Keshvar), a secret police trained by the CIA. Decades of repression, inequality, and corruption gave way to the 1979 Islamic Revolution, which toppled the monarchy and established the Islamic Republic. 'The strategic considerations that led US policymakers to undertake the 1953 coup helped set in motion a chain of events that later destroyed the Shah's regime and created severe problems for US interests,' wrote Gasiorowski. On November 4, 1979, the US Embassy in Tehran was seized. Fifty-two Americans were held hostage for 444 days. Revolutionaries repeatedly cited 1953 as the origin of their mistrust. Though Washington denied involvement for decades, few Iranians ever doubted the CIA's role in Mossadegh's fall. 'The coup revealed how the United States began almost instinctively to follow in the footsteps of British imperialism,' write David W Lesch and Mark L Haas editors of The Middle East and the United States: History, Politics, and Ideologies . 'Demonstrating a preference for the status quo rather than the forces of change.' Even President Barack Obama, in a 2009 speech in Cairo, acknowledged the long shadow of 1953, noting that the coup had created 'years of mistrust.' No US president has ever issued a formal apology. Dr Omair Anas, director of research at the Centre for Studies of Plural Societies, a non-profit, non-partisan, independent institution dedicated to democratising knowledge, sees the 1953 events as not just a turning point but a template for today's impasse. 'The 1953 coup was staged in the backdrop of the Cold War which resulted in Iran's inclusion into the CENTO alliance along with Pakistan and Turkiye,' he said. He is sharply critical of current regime change rhetoric, describing it as detached from Iran's internal political conditions. 'The most important player is Iran's domestic politics,' he said. 'At this stage, it is not willing and prepared for a regime change.' Anas points out that the government has already absorbed considerable dissent: 'Previous anti-hijab protests have already accommodated many anti-regime voices and sentiments.' But absorbing discontent, he suggests, is not the same as welcoming systemic change. 'Any regime change at this stage would immediately lead the country to chaos and possible civil war, as the new regime won't be able to de-Islamise the state in the near future.' Trump's rhetoric, therefore, landed with particular resonance. While senior officials have attempted to distance the administration from talk of regime change, many in Iran and beyond see a familiar playbook: pressure, provocation, and the threat of externally imposed political outcomes. Dr Anas contends that many of the so-called alternatives to the Islamic Republic are politically inert. 'Anti-regime forces since 1979 have lost much ground and haven't been able to stage a major threat to the revolution,' he said. 'The West is fully aware that the Pahlavi dynasty or the Mujahidin-e-Khalq (MEK) have the least popularity and organisational presence to replace the Khamenei-led regime of Islamic revolution.' As he sees it, the system's survival is not merely a matter of repression but of strategic logic. 'Khamenei can only be replaced by someone like him,' he said. 'The continuity of the Islamic revolution of Iran remains more preferable than any other disruptive replacement.' He also warns that a forced collapse of the current order could have serious regional implications. 'In the case of violent suppression of Islamist forces, the new Iranian state might seek the revival of the Cold War collaboration with Pakistan and Turkiye and a strong push against Russia.' For India, a country that has generally maintained a policy of non-intervention, such a development could be deeply destabilising. 'Any abrupt change would complicate India's West Asia and South Asia strategic calculus,' he said, 'and more fundamentally India's Pakistan strategy.' Dr Anas also sees Western credibility as severely eroded across the region. 'The West has left no credibility whatsoever about human rights, freedom, and democracy after the Israeli-Gaza war,' he said. 'The Middle Eastern public opinion, including that of Kurds, Druze and Afghans, have lost hope in Western promises. They prefer any autocratic regime to West-backed regimes.' India, he said, risks being caught flat-footed if political transitions come suddenly. 'India generally stays away from the normative politics of the Middle East,' he said. 'While this shows India's principled stand on no intervention in internal politics, it also puts India in a weak position once the regime changes, as happened in Syria.' His recommendation? 'India needs to engage more actively with West Asian civil society to have more balanced relations beyond states.' Aishwarya Khosla is a journalist currently serving as Deputy Copy Editor at The Indian Express. Her writings examine the interplay of culture, identity, and politics. She began her career at the Hindustan Times, where she covered books, theatre, culture, and the Punjabi diaspora. Her editorial expertise spans the Jammu and Kashmir, Himachal Pradesh, Chandigarh, Punjab and Online desks. She was the recipient of the The Nehru Fellowship in Politics and Elections, where she studied political campaigns, policy research, political strategy and communications for a year. She pens The Indian Express newsletter, Meanwhile, Back Home. Write to her at or You can follow her on Instagram: @ink_and_ideology, and X: @KhoslaAishwarya. ... Read More
