Frequently Asked Questions (FAQ) – August 2026

Dennis Stearns, CFP®, ChFC, MS
Wealth Advisor, Managing Director

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Q: Since it looks like the Iran War now has no end in sight, how does Iran’s control of the Strait of Hormuz and the fees it will charge impact inflation and the global economy?

A: To fully secure the Strait of Hormuz to allow shipping free transit in the future may require more military resources than the U.S. wants to commit. There is a scenario floating around in Washington that a cessation of hostile actions until the mid-term elections, followed by decisive action to secure the Strait, could be an acceptable outcome to allow the U.S. to secure its objectives without too much political damage. With recent escalation in the region, this scenario has become less plausible. And given the super-majority of Americans who now oppose the war, the damage politically may have already been done.

Allowing the Iranians to charge transit fees is considered unacceptable by the Trump administration though there are examples of waterways that do charge fees currently.  With that said, transit fees would most certainly increase the cost of oil.  Further, the extra insurance costs now being charged on oil tankers that would utilize the Strait would make oil costs that much higher, and for longer. Since petroleum finds its way into everything from plastics to agriculture to lubricants to cosmetics to propane, the elevated energy inflation be painful in a world where “affordability” has been stretched already for so many consumers.

It had been believed in D.C. that restricting Iranian oil sales would strangle the economy and eventually force the Iranians to capitulate. We have not believed this scenario was likely in the short run and outlined our reasons in our February 2026 newsletter. The chances that the United States can force Iran to surrender control of the Strait of Hormuz or abandon its core strategic programs solely through economic strangulation are still assessed by experts and intelligence as very low.

While financial restrictions and oil blockades have not caused the government to capitulate, they have caused severe inflation and currency collapse inside Iran. The Iranian regime adapts by shifting the burden onto the civilian population rather than altering its foreign or security policies. This is what happens in an autocratic state where the “resistance” ideology overrides the needs of a people.  Iran relies on highly dispersed assymetrical warfare (often aided by China and Russia), alternative trade routes, informal financial networks, and oil buyers like China who bypass U.S. enforcement — meaning economic isolation can never realistically be driven to zero.

Richard Haas, a longtime presidential advisor and former U.S. State Department policy director and advisor on middle east matters, has this to say in a July 31, 2026 substack post:

“The best way to increase Iran’s incentive to reach a ceasefire is to deny it the ability to use the Strait of Hormuz and to increase sanctions against tankers carrying Iranian oil and against their insurers. Washington should also develop alternatives to the Strait and improve the defenses of Gulf states against Iranian drone and missile attacks. None of this promises a quick fix, but Iran’s economy is its Achilles’ heel, and ramping up pressure on it offers the best approach to persuading Iran’s leaders that a reopening of the Strait and accepting a ceasefire are in the country’s interests. This could take some time, and it may require accepting arrangements for the Strait that give Iran more authority than we would like, but that is likely to be the price to be paid for a ceasefire and the free flow of energy and other shipping.”

Richard wrote The World book in 2020, a work praised by many famous biographers and historians including Doris Kearns Goodwin. Several leading economists called it “perspective and context needed to understand the modern world”.

As so often happens, human ingenuity has already been working on lowering the future economic risk of the Strait, though the Red Sea remains another potential choke point. In a recent briefing, a multi-point strategy was outlined to make the Strait of Hormuz and Red Sea less of a global choke point.

• At least seven major pipeline projects are under construction, in planning, or being discussed. Saudi Aramco and Abu Dhabi National Oil Company, in conjunction with regional and American companies, are fast tracking these building projects.
• By 2028, total Gulf pipeline capacity could exceed 14 million barrels/day, covering over 60% of pre-war Gulf exports.
• Combined, existing and new pipelines could handle 6.5–7 million barrels/day in the short term but remain vulnerable to asymmetric attacks. “The problem isn’t the waterway,” says Bob McNally, founder of Rapidan Energy. “It’s that Iran can use weapons to attack loading facilities, pumping stations, the end stations, these terminals, and the storage units of these pipelines.”

The rapid rise of new solar technology and batteries, plus small non-weaponizable nuclear generators, is considered the ultimate workaround, but these aren’t expected to materially reduce reliance on the Strait for at least 5 years.  

This chart highlights the dramatic shifts in energy used over time and what’s being retired and built in the U.S. in the next few years.

Our Team’s Take: The Iran war endgame scenarios are likely to be unpopular no matter what is done. The extra drag of increased energy costs will likely slow economic growth some, but most estimates of slower growth are modest with only a few scenarios showing the U.S. or the world going into a true recession. If oil moves above $125 bbl for a prolonged period of time, recession scenarios will increase in probability. Sectors of the U.S. economy that are more susceptible to prolonged energy shocks will be more severely harmed than others.

So far, the U.S. stock market has largely ignored the risk by assuming some acceptable outcome (economic point of view) will be reached. The U.S. stock market has been volatile of late lurching between future artificial intelligence scenarios (good and bad) and the continued strong earnings and profit margins discussed in our economic overviews.

The bond market has been pricing in a poor Iran War endgame for a while, elevating mortgage rates and borrowing costs for the national debt.

Iran war endgame risks are elevated – we will continue to adjust our strategies to account for this added risk as the endgame plays itself out. 

More perspective from Ian Bremmer can be found here.