A Monthlong Closure of Hormuz Will Bankrupt Countries (w/ Sal Mercogliano)

Despite US military presence, Iran has established effective economic control over the Strait of Hormuz. Ships are now routing through Iranian territorial waters, between two islands, where they are inspected and potentially charged significant fees (up to $2 million per ship) for passage. This contradicts previous US objectives to prevent Iranian control.

Guest Sal Mercogliano states, 'Iran controls the Strait of Hormuz now. They're controlling who's going in and who's coming out.' He details ships routing into Iranian waters for inspection and suspected payment.

The US military's conventional strength is insufficient to fully secure the Strait against Iran's asymmetric tactics. Iran primarily uses unmanned aerial vehicles (Shahed drones) and uncrewed surface vessels (remote-control speedboats) to attack and deter shipping. These 'horde of gnats' are difficult to eliminate entirely, creating an unacceptable risk for commercial vessels.

Mercogliano explains, 'You don't need a navy to exert an anti-ship campaign.' He cites Ukrainian and Houthi examples and describes Iranian tactics: 'Shahed drones... and then unmanned surface vessels, which are basically remote control speedboats.' He contrasts US ability to 'shoot down the flock of geese' with the difficulty of hitting 'a horde of gnats.'

Unlike military operations, commercial shipping cannot tolerate even a small percentage of risk. A 99% success rate is a 'mission kill' for the military but an unacceptable 1% failure rate for a shipping company, especially with dangerous cargo like liquefied natural gas. This low-risk tolerance is why many ships are avoiding the Strait.

Mercogliano states, 'If you tell a commercial shipping guy, there's a 99% chance you're going to get through, what they hear is, there's a 1% I'm not going to get through.' He emphasizes the danger for LNG carriers, calling them 'a floating bomb.'

The closure has trapped an estimated 20,000 seafarers on 3,200 ships in the Persian Gulf. These crews are facing severe shortages of food, water (due to broken purifiers), and fuel, as ports refuse them entry. They are likening their situation to the 'Yellow Fleet' stranded in the Suez Canal for years.

Mercogliano details, '3,200 ships in the Persian Gulf with about 20,000 seafares on board.' He recounts a ship running out of water and being refused port, and crews running low on food and fuel. He mentions them 'starting to call themselves the yellow fleet.'

The US government's policy regarding Iranian oil is confusing. While sanctions are in place, the Energy Secretary has expressed a desire for Iranian oil to enter the global market to offset shortfalls caused by the Strait's closure. This suggests a prioritization of mitigating global gas price increases over strict enforcement of sanctions.

Mercogliano highlights, 'We just had Secretary Bessant come out... and say, "We want that Iranian oil on the global market to make up for the shortfall... which is caused by Iran, which is just the most confusing policy out there."'

If the Strait of Hormuz remains closed for 1 to 6 months, as estimated by the Defense Intelligence Agency, it would lead to catastrophic economic consequences. It would bankrupt Gulf nations, deplete global oil reserves, and force a fundamental, permanent restructuring of global trade patterns and transportation methods, a phenomenon typically only seen during world wars.

Mercogliano states, 'You're talking about bankrupting Bahrain, Qatar, Oman, Kuwait... Saudi is going to be crippled.' He warns of energy shortages, pulling from strategic reserves, and 'restructuring the global trade patterns of the planet which literally only happens during world wars.'