How the US can shut down Iran

Iran is a just a gas station that's masquerading as an Islamic Republic

Since hostilities in the Gulf erupted almost two weeks ago, market sentiment has swung from extreme complacency to all-out panic and back again. We’re now on the way back to all-out panic, as Brent sits right around $100. The prevailing narrative is that Iran can use mines, drones and missiles to shut down tanker traffic through the Strait of Hormuz, giving it the wherewithal to hold global oil markets - and the US - hostage. There’s no denying that’s true, but this narrative ignores Iran’s own massive dependency on oil exports. The late Senator John McCain in 2014 described Russia as a gas station masquerading as a country. The same goes for Iran. The US should stop any and all oil exports out of Iran. It has the naval resources to blockade Iran’s main oil export hubs and should use them. That’ll hit China, which is the main buyer of Iran’s oil, but that will only incentivize China to lobby Iran to open up the Strait for all ship traffic. Rather than spike oil prices, shutting down tanker traffic out of Iran’s ports might be seen by markets as bringing an end of hostilities nearer. Oil prices might well fall as a result. Without the money from its oil exports, Iran’s economy would implode. It’s just a gas station masquerading as an Islamic Republic.

The chart above shows a four-quarter moving average for Iran’s current account balance (black line) and its underlying drivers. In the year to Q3 2025, Iran ran a current account surplus of around 3.5 percent of GDP, which means it’s exporting more than it imports and therefore is accumulating foreign assets. The only reason that’s possible is because oil and gas exports are huge, standing near 15 percent of GDP (blue bars). All the hard currency from those exports pays for imports that run the economy and Iran’s war machine. Netting out what little non-oil exports Iran has, imports amount to around eight percent of GDP (red bars). This - in a nutshell - is Iran’s economy. It exports energy and the cash from that pays for everything else. Shut down those energy exports and Iran falls apart. The Ayatollahs might be a little more circumspect about trying to mine the Strait of Hormuz if their economy is imploding.

It’s unclear how much oil is actually exiting Iran at this point. Prior to hostilities, 20 million barrels transited the Strait of Hormuz daily. Iran accounted for ten percent of this, with much of that going to China. Some reporting says Iran is now exporting more oil than before the war. I frequently hear the argument that this flow should be allowed to continue, or else global oil prices will spike even further. I think that’s totally the wrong way around. If the US shuts down ship traffic out of Iran’s ports, it’ll be a signal to markets Iran’s intransigence may soon end, especially if China starts lobbying Tehran because it needs Iranian oil. That could see oil prices fall, not rise.

There’s a German expression that goes: “Nägel mit Köpfen machen,” which translates literally as “making nails with heads” but really just means doing the job right. The US can implode Iran’s economy by shutting down its oil exports. That might open up the Strait of Hormuz a lot faster than anything else. Time to implode Iran’s economy and give the Ayatollahs a taste of their own medicine.