In the Strait of Hormuz, a conflict sustained by making others pay the price. For now

The war in Iran and the conflict around the Strait of Hormuz have settled into a strange rhythm: reports of an imminent deal alternate with threats of renewed escalation. Energy prices fall on hints of a breakthrough and spike when hopes recede.

Beneath the headlines lies a more consequential fact: neither the United States nor Iran bears enough of the burden of war to prefer compromise over conflict. Much of the pain falls on others. Increasingly, both combatants are exploiting that suffering to force concessions from the other side. 

Making outsiders pay has become a core strategy of war.

The Strait of Hormuz is Iran's main instrument for doing so. Tehran uses its leverage over one of the world's most important energy corridors to impose pain on other countries, hoping they will press Washington to compromise. America pursues a parallel logic, weaponising access to the global financial and trading system to make continued dealings with Iran more costly. 

Before the war, roughly a fifth of the world's oil and gas passed through the strait. Traffic is now a fraction of prewar levels, sending freight and insurance premiums soaring and forcing cargoes onto longer routes. US financial pressure works through a different channel, raising financing costs and risks for banks and businesses that continue dealing with Tehran.

At the core of this standoff is an asymmetry of power and stakes—the United States is stronger. But Iran's theocratic leadership sees making concessions under pressure as a potential threat to regime survival. That gives Tehran an incentive to tolerate hardship that US politics make far harder for Washington to sustain. 

The battle for outside pressure

Both sides are trying to convert the costs borne by third countries into pressure on their adversary. 

Washington has formalised this strategy. Under Operation Economic Outcast, launched in late August, the Trump administration is pressing countries to sever Iran's remaining economic lifelines or risk secondary sanctions. The U.S. Treasury has targeted nearly 60 entities, individuals and vessels, while widened sanctions exposure on shipping, technology, and gold. The message to third countries is explicit: continued dealings with Tehran could jeopardise access to the US  financial system.

Tehran is tightening its own pressure through Hormuz. It recently granted special passage to several Iraqi oil tankers after repeated requests from Baghdad, while blacklisting dozens of other vessels and threatening them with fines, detention or cargo seizure. Rather than simply closing the waterway, Tehran is turning passage into a privilege it can grant, deny or price.  

The countries caught in the middle are not passive. Oman and Pakistan are mediating, while energy importers seek alternative supplies and routes. China has rejected Washington's new sanctions threat, while Europe wants open sea lanes but remains heavily dependent on American military power to secure them. Russia, meanwhile, benefits from tighter energy markets. How these countries respond will help determine whether the pressure imposed on them ultimately becomes leverage for Washington or Tehran.   

Washington confronts a dilemma: it needs third-country cooperation, but coercing those countries too aggressively risks economic and diplomatic blowback. Tehran faces the same contradiction: the more effectively it weaponises Hormuz, the more it alienates countries whose support—or at least neutrality—it  needs.

Washington is  therefore trying to shape those responses. Trump has threatened military action if Oman's dealings with Tehran obstruct US efforts to reopen Hormuz. Yet Muscat continues to mediate and is now negotiating a temporary shipping corridor with Iran. Trump has also ordered joint military exercises with South Korea to be scaled back after Seoul declined to join the campaign against Iran. Countries hoping to remain outside the war are increasingly being told that neutrality carries a steep price.

But making outsiders pay is not the same as enlisting them. Isolating Iran requires cooperation from the countries through which its trade and finance still flow—above all China. Tellingly, Operation Economic Outcast stopped short of sanctioning the major Chinese financial institutions suspected of facilitating the Iranian oil trade. 

Washington confronts a dilemma: it needs third-country cooperation, but coercing those countries too aggressively risks economic and diplomatic blowback. Tehran faces the same contradiction: the more effectively it weaponises Hormuz, the more it alienates countries whose support—or at least neutrality—it  needs.

The limits of making others pay  

Making outsiders pay works only while the leverage gained exceeds the cooperation lost. Once this is no longer the case, a strategy that helped sustain the war begins to undermine it. 

Some of the burden both sides have pushed outwards is already boomeranging back. Iran has suffered vastly greater direct damage: prices were 84 percent higher in August than a year earlier, while a collapsing currency and falling real incomes squeeze an already strained society. In the United States, higher energy prices feed inflation, while a war whose cost the Pentagon said in July had reached $37.5 billion adds to an already heavily indebted federal balance sheet. 

The latest escalation suggests that neither side yet believes this strategy has reached its limit. Washington and Tehran are still prepared to intensify pressure on each other even as much of the resulting cost falls elsewhere. But every new round of fighting raises that cost. For countries already contending with expensive energy, persistent inflation and high borrowing costs, absorbing the consequences of a war they did not choose becomes progressively harder.

Conflicts endure when those who can end them do not bear enough of the burden, while those who bear most cannot end them. America and Iran have prolonged this war by making others pay, but each now needs the cooperation of the very countries it is coercing. But as the bill rises, the countries paying it have stronger reasons to push back. Whether they pressure Washington, Tehran or both may increasingly shape what happens next.

Sketch: TBS

Zahid Hussain is a former economist at the World Bank, Dhaka Office. Tom Felix Joehnk is a former correspondent for The Economist.