Trump’s Blockade Is a Crisis for Iran The economic damage is immediate and threatens the regime if it lasts.
By the WSJ Editorial Board, talking its book…
Iran’s regime has tried to make this war all about economics, and now it is getting its wish. Since Monday the U.S. Navy has quarantined Iranian ports, blocking ships from entering or exiting the Strait of Hormuz for the purpose of commerce with Iran. The economic damage to the regime is immediate, and the pain will grow the longer the blockade is sustained.
The best estimates we have are from the Foundation for Defense of Democracies’ Miad Maleki, who led the U.S. Treasury’s sanctions campaign against Iran until last year. He writes that the blockade is expected to wipe out $435 million in Iranian economic activity a day and force oil-field shut-ins within two weeks. (…)
Economic modeling by Mr. Maleki’s FDD colleagues, Elaine Dezenski and Daniel Swift, finds that the war’s current economic damage to Iran already exceeds 40% of its prewar GDP. This relies on an International Monetary Fund estimate of a 6.1% Iranian economic contraction in 2026, which they call conservative.
Mr. Maleki calculates that, without exports, surplus production would fill Iran’s oil storage capacity in about 13 days. Then Iran would have to shut-in wells, which can cause severe damage and cost it billions of dollars in annual revenue.
His conclusion? “Iran’s economic structure, heavily dependent on the Persian Gulf transit routes and energy exports, makes continued resistance economically impossible under the U.S. naval blockade.” That is, if it lasts. Iran’s regime could think President Trump won’t sustain the blockade beyond a week or two. He may have to prove it wrong with patience.
Iran’s entire economy will feel the collapse of oil exports. This includes the Revolutionary Guard, which siphons about half the revenue. Other export routes appear unable to compensate for the loss. How will Iran’s banks hold up?
The loss of imports is expected to deepen supply shortages and exacerbate Iran’s inflation, which exceeded 50% before the war. Food inflation had reached triple digits. The currency, which has lost more than 97% of its value since 2018, would also likely suffer without the foreign exchange coming in. Iran’s regime knows all this is a threat to its survival.
The regime has tried to protect itself from its own people by cutting off the internet, crushing the digital economy with it. The destruction of Iran’s productive capacity, especially in steel and petrochemicals and industries that rely on them, also portends layoffs and a spike in inflation, even without the blockade.
Oh, and the regime’s latest budget calls for tax increases. This is not a pretty picture. The shame is that this pressure didn’t begin weeks ago.
Via The Guardian:
The US military appears to be seeking to establish secure passage for non-Iranian ships in order to restart the flow of oil through the strait – and White House officials have briefed some US media that more than 20 vessels not linked to Iran have transited through the waterway since the blockade began.
But experts and analysts who track shipping movements have questioned the accuracy of those claims.
Maritime data company Kpler said “traffic through the Strait of Hormuz remains well below typical levels” and noted just six vessels crossed through the strait on Monday, when the blockade began.
Salvatore Mercogliano, a maritime historian and an associate professor at Campbell University in North Carolina, said “the Trump Administration talks a lot about ships coming through the Strait but there is no indication yet.”
Kpler has said confidence among shipowners remains weak, with uncertainty weighing on “transit decisions.”
For now, the operating environment remains high risk, limiting any meaningful recovery in flows.”
Experts have said that despite the presence of the US navy, many shipping companies will be wary of entering or leaving the strait out of fear of attacks from Iran. German shipping giant Hapag-Lloyd has said it will not resume transiting the strait for now as the situation remains tense.
From Windward:
Maritime activity in the Strait of Hormuz has entered its first full day under active U.S. enforcement, with vessel behavior indicating a fragmented and uneven response to the blockade.
Initial movements show a combination of continued transit, route deviation, and potential evasion. Sanctioned and falsely flagged vessels remain active, with some proceeding through the Strait while others delay, reverse course, or adjust routing patterns.
At the same time, Iranian oil flows continue through indirect distribution networks, with significant volumes accumulating offshore rather than transiting directly through Hormuz.
The operating environment is shifting from uncertainty to active enforcement dynamics, where compliance, evasion, and selective movement are occurring simultaneously.
Yesterday, Trump et al were talking and talking and talking:
In an interview with Fox News, which is scheduled to air later this morning, the US president said the Iran war was “close to over, yeah, I mean I view it as very close to over”. In a short preview of the interview posted on social media last night, Trump said: “If I pulled up stakes right now, it would take them [Iran] 20 years to rebuild that country. And we’re not finished.
“We’ll see what happens. I think they want to make a deal very badly.”
The clip came hours after he told the New York Post that another round of peace talks “could be happening over the next two days” in Pakistan.
Trump has previously suggested that the war was ending. In his address to the nation on 1 April, Trump said the war was “nearing completion” and could end in “two or three weeks”.
Also:
JD Vance has said Iran will “thrive” if it commits to not having a nuclear weapon. Speaking at a Turning Point USA event in Georgia, the US vice-president said Donald Trump “doesn’t want to make, like, a small deal. He wants to make the grand bargain.”
We’re going to make it economically prosperous, and we’re going to invite the Iranian people into the world economy in a way they haven’t been in my entire life.”
On the same day:
Trump told ABC News that, while an official peace agreement may not be necessary, “I think a deal is preferable because then they can rebuild.”
“They really do have a different regime now. No matter what, we took out the radicals,” he said.
Sounds like they’re preparing something…
Meanwhile:
The US is reportedly sending thousands of additional soldiers to the Middle East in an attempt to pressure Iran into a deal to end the war, according to the Washington Post.
Citing US officials, the newspaper reported that about 6,000 troops aboard the aircraft carrier USS George HW Bush and several other warships could move into the region, while 4,200 others could join them towards the end of the month. The move would coincide with the two-week ceasefire ending on 22 April.
And:
The Iranian president, Masoud Pezeshkian, said his country is not seeking war but dialogue, as he warned any attempt by the US to impose its will or force Tehran to surrender “is doomed to failure”.
In comments carried by the official Islamic Republic News Agency (IRNA), he said:
Iran is not seeking war or instability and has always emphasised dialogue and constructive engagement with various countries. However, any attempt to impose one’s will or force the country to surrender is doomed to failure, and the Iranian nation will never accept such an approach.
IMF Warns of Deep Global Downturn if War Is Prolonged International lender sees modest downgrade if war ends soon, but much weaker growth and higher inflation in worse scenarios
(…) Already, the war has been more disruptive to global energy markets than the 1973 oil crisis, the IMF’s chief economist, Pierre-Olivier Gourinchas, said in an interview. He warned that if the disruptions persist beyond this year, even after the U.S. and Iran reached a tenuous cease-fire last week, world economic growth could fall to about 2% in 2026, a sluggish rate seen only during the deepest recent downturns. (…)
In the reference scenario, the conflict resolves promptly yet still places a drag on the global economy. In that outcome, oil would average about $80 a barrel this year, and global output might grow 3.1% on a year-over-year basis, the IMF projected. That is down from the 3.4% growth recorded last year, and lower than the 3.3% the IMF projected in January.
In their adverse scenario, which assumes that the war persists but ends later this year, oil prices spend much of the year around $100 a barrel, global growth might fall farther yet, to around 2.6%. Global inflation would rise to 5.4%.
And in a severe scenario, in which the war continues into next year and keeps oil prices high, the global economy could slide into an even deeper downturn, the IMF projected. (…)
The pain from an extended war would fall unevenly across the globe. Based on the disruptions felt to date, the IMF lowered projected 2026 growth in the Middle East by 2 percentage points, to 1.9%. It also dropped projected growth in Europe by 0.2 percentage point, to 1.1%, and by 0.1 percentage point in China, to 4.4%.
Emerging-market economies that rely on fuel imports could face some of the biggest challenges, the IMF said.
The U.S., buoyed by its large energy industry and its dominant role in the artificial intelligence build-out, will likely fare better, in the IMF’s view. It cut American growth in the reference scenario by just a 10th of a percentage point, to 2.3%, compared with the January outlook. But if the war goes on, central banks such as the Federal Reserve could quickly face a no-win trade off between keeping inflation in check and cushioning a fragile economy, Gourinchas said. (…)
The longer the war continues, the more likely it will contribute to global food shortages, political instability and pain in financial markets, IMF forecasters wrote. (…)
- Treasury secretary Scott Bessent told Semafor Monday that the Federal Reserve should “wait and see” before undertaking further rate cuts. That compares to a January speech in Minneapolis in which Bessent deemed monetary easing “the only ingredient missing for even stronger economic growth, which is why the Fed should not delay.” (ADG)
- South Korea has secured supplies of more than 270m barrels of crude oil via routes unaffected by the US blockade of the strait of Hormuz, a senior official has said. “I hereby report to the nation that visits to four countries have secured the import of 273m barrels of crude oil by the end of this year,” Kang Hoon-sik, chief of staff to the president, said. The amount is sufficient for more than three months of South Korea’s oil needs, Kang said after he returned from a trip to Kazakhstan, Oman, Saudi Arabia and Qatar.
BTW:
The producer price index (PPI) rose 0.5% in March, well below expectations. Energy prices (+8.5%) increased sharply in March as a result of higher oil prices from the Iran war, but food prices declined (-0.3%) after a sharp increase in February. The core PPI and PPI excluding food, energy, and trade services increased by 0.1% and 0.2%, respectively, both below expectations. The February growth rates for the PPI (-0.2pp to +0.5%) and core PPI (-0.2pp to +0.3%) were both revised down. Retailer and wholesaler margins declined by 0.3% and 0.2%, respectively. The ‘old methodology’ core PPI—finished goods excluding food and energy—increased by 0.2%. Core intermediate producer prices increased by 0.7%, and the prices of crude materials less food and energy increased by 0.2%.
While the topline PPI numbers were softer than expected, the PPI components relevant for PCE were stronger than our previous assumptions. Using CPI, PPI, and interim PPI data (which we seasonally adjust), we estimate a 0.33% month-over-month increase in the PCE medical care services category for the month of March.
Based on the details in the PPI and CPI reports, we estimate that the core PCE price index rose 0.27% in March (vs. our expectation of 0.22% prior to today’s PPI report), corresponding to a year-over-year rate of +3.15%. Additionally, we expect that the headline PCE price index increased 0.64% in March, or increased 3.45% from a year earlier. We estimate that market-based core PCE rose 0.25% in March. (Goldman Sachs)
Source: Goldman Sachs Global Investment Research, Department of Labor
More PPI charts from WolfStreet:
Surcharges Are Suddenly Everywhere—And Grumpy Americans Are Paying Up
(…) New fees or surcharges are popping up everywhere as companies search for ways to recoup their own rising costs while blaming outside pressures.
In recent weeks, package-delivery companies and airlines have announced new or higher fees, citing increasing fuel prices. Economists expect more to follow unless oil prices rapidly fall. (…)
“Consumers tend to pay less attention to surcharges than to base prices,” said Vicki Morwitz, a marketing professor at Columbia University. (…)
Companies sometimes prefer surcharges to straight price increases because they shift blame to an external force. When airlines or shipping companies label a fee a “fuel surcharge” they are pointing at a circumstance outside of their control rather than appearing to pad their margins, said Rebecca Hamilton, a marketing professor at Georgetown University. (…)
In that way, the current wave of fuel surcharges might be easier to swallow because consumers know where the increases are coming from. (…)
Delta Air Lines CEO Ed Bastian on an earnings call recently: “Lower fuel costs would certainly help us boost our margins this year and clearly into next year as well.”
While economists focus on core inflation data, Americans are dealing with total inflation hits:
Late Payments Rising for Buy Now, Pay Later, Survey Says
Nearly half of Buy Now, Pay Later users say they’ve paid late on at least one of their installment loans in the past year, according to a survey released on Monday. (…)
Not only have 47% of borrowers paid late on a Buy Now, Pay Later loan within the last year — up six percentage points from 2025 and 13 percentage points from two years ago — but 54% also said that they wouldn’t be able to make ends meet without the loans.
Amid rising affordability concerns and expectations for further-inflated prices this year, US consumers are also increasingly using the installment loans for essentials: 29% said they’ve used the loans for groceries, up from 25% a year ago and 14% two years ago. It’s also more common for borrowers to hold multiple loans at a time, according to the survey, up slightly at 24% from 23% last year.
“This is just further proof of how many Americans are struggling with high prices today and looking for ways to make ends meet,” said Matt Schulz, chief consumer finance analyst at LendingTree. “They’re increasingly paying late, taking out multiple loans at a time and using these BNPL loans for essentials like groceries. None of that is a sign of a confident, thriving consumer.” (…)
John Authers adds:
Beyond the US, usage rose by more than 30% last month, while Klarna’s app download climbed by more than 48% year-on-year. But the challenge is to turn this popularity into profit without being dragged down by increasingly fragile consumers. Businesses are slowly tweaking their business models to stay competitive, as Jason Mikula points out in this Substack. Perhaps they’re coming to realize that their services may fulfill a need for people, but there may simply not be enough margin to go around.
‘Power in the hands of people’: union leaders push to revive ailing US labor movement
Leaders of some of the largest unions in the US have unveiled a drive to jumpstart the country’s ailing labor movement and combat growing wealth inequality under Donald Trump.
To make it easier for workers to join a union, and strengthen the hand of new unions negotiating with powerful businesses, a string of prominent organizers joined together to launch Union Now, a non-profit designed to increase labor union density. (…)
Union density in the US was more than 30% in the 1950s, but declined precipitously over the ensuing decades. It stood at just 10% in 2025, despite opinion polls indicating vast public approval and support for labor unions.
The number of union members in the US peaked in 1979 at 21 million members, compared with 14.7 million today. Over the same period, the US population has grown by more than 100 million. (…)
FYI:
The Canadian travel boycott of the U.S. shows no signs of letting up, with visitation from the country down 35% since President Donald Trump returned to office, data released Monday from Statistics Canada show. The boycott has dealt a massive blow to the U.S. economy:
- 35% The decline in Canadians taking road trips into the U.S. compared to March 2024
- 5% The increase in Canadian visitation overseas year-over-year, a sign Canadians are swapping the U.S. for other international destinations (Forbes)
EU Agrees to Double Steel Tariffs
The European Union approved a plan to double tariffs on steel imports above a certain quota in a bid to shield the bloc’s struggling sector from a glut of foreign imports.
The European parliament struck a deal late Monday to cut the amount of tariff-free steel imports by almost half to 18.3 million metric tons a year and raise tariffs on imports above that quota to 50%.
“The shape and global standing of Europe’s steel sector are fundamental to our strategic autonomy and industrial strength,” Maros Sefcovic, the EU’s top trade negotiator, said. “We therefore cannot afford to turn a blind eye to global overcapacity reaching critical levels.” The deal brings much-needed stability for European steel producers, he added. (…)
Global excess capacity increased to 640 million tons in 2025, according to research by the Organization for Economic Cooperation and Development. (…)
Governments worldwide are increasingly turning to tariffs to protect their domestic industries. The U.S. imposed a 50% tariff on almost all imports and products made with steel last year, though it is now adjusting that tariff system.
Grand Bargain?
David and I see this possible scenario:
- On the critical civilian nuclear issue, the US and Iran find a way to close the gap between 20 years (US) and 5 years (Iran) and agree on other stuff nuclear-related. Sounds easier said than done but this is the main issue and both sides know it must be agreed upon before anything else. The nuclear issue is solvable in the sense that questions of levels of enrichment, sunset clauses and what to do with the existing stash of highly enriched uranium can and have been successfully negotiated before. Otherwise, an indefinite war, potentially expanding, and a world recession. Everybody loses with the US and Trump bigger losers, tagged as responsible for the mess. China is surely intervening to avoid the worst.
- The US declares that Hormuz is not its problem. Iran and the GCCs find a mutually acceptable modus operandi including a toll system that can be used to pay for reparations. Iran demonstrated the leverage potential such strategically significant straits carry and the world will need to find ways and means to deal with such potential threats around the world.
- Israel, isolated, concentrates on Lebanon with its own challenges. Maybe this will help diffuse this other developing problem:
Turkish Foreign Minister Hakan Fidan fired a direct warning at Athens and Nicosia on Monday [last week], saying their military cooperation with Israel “does not bring more trust, it brings more mistrust. It brings more problems and war.” He made the remarks in an interview with the state-run Anadolu Agency.
Greece and Cyprus have deepened defense ties with Israel in recent years, including joint military exercises and basing agreements, moves Turkey has consistently opposed.
Fidan claimed Greece is pursuing “extremely dangerous policies” that no other European country follows on its own, and questioned the strategic logic behind Athens seeking military ties with Israel given that Greece is already a NATO member. He said neither Greece nor what he called the “Greek Cypriot Administration” have any need for Israeli military cooperation, adding that neither side could justify the arrangement to him.
The Turkish minister also warned that Israel may attempt to frame Turkey as its next adversary after Iran, saying Israel “cannot survive without an enemy.” He described Israeli operations in Lebanon as similar to Gaza and called Israeli strikes in Syria a “serious threat” to Turkey.
- Other, more secondary, issues are compromised by all parties (guarantee of nonaggression, sanctions, etc.)
Not completely unrelated:
Donald Trump said he had given the UK “a good trade deal, better than I had to, which can always be changed.”
The Art of The Deal…
BTW:
The Defense Department’s Drone Dominance push is designed to arm American troops with expendable drones on a massive scale in a few short years.
A Pentagon competition to build out a killer drone fleet ended with a small British company crushing American contractors on their own turf
Skycutter — the British company with frontline Ukraine experience — entered the Shrike 10-F, a 10-inch drone that can be operated via fiber optic cable to counter electronic jamming and spoofing.
- The drone is the result of collaboration with SkyFall, a Ukrainian outfit.
- “They make one every 23 seconds, 123,000 units per month,” Vincent Gardner, Skycutter’s operations director, told Axios. “We redesigned it with them to exclude any Chinese parts or components.”
Skycutter scored an overall 99.3 at an attack drone fly-off at Fort Benning in Georgia. In second was Neros, a Southern California startup, at 87.5. (Axios)