Bessent: Hormuz to Become Worthless as US Blockade Starves Iran's Oil Lifeline

The Strait of Hormuz, long regarded as the world's most critical energy chokepoint, could become strategically irrelevant within two years as alternative pipeline routes bypass the waterway, US Treasury Secretary Scott Bessent said Tuesday. Speaking on the sidelines of a gathering of global finance chiefs in Asheville, North Carolina, Bessent framed the decline of Hormuz as an inevitable consequence of Washington's escalating campaign to isolate Iran economically. "That will be bypassed in two years," he said. "In two years, the Strait of Hormuz will be like a worthless piece of water." The remarks came as the US naval blockade of Iranian oil shipments enters its seventh week, marking the first time on record that Tehran has gone so long without meaningful crude exports transiting the strait. Two oil tankers attempting to leave the waterway were struck by projectiles late Monday, according to maritime security consultant Marisks, underscoring the volatility now surrounding the route.

Blockade squeezes Tehran's finances

The blockade, reinstated on July 14 as part of the six-month conflict between Washington and Tehran, has stopped fresh Iranian crude cargoes from reaching China, Tehran's only major remaining oil customer. According to data from Kpler, Vortexa and TankerTrackers.com, no Iranian crude cargoes have successfully transited the strait to China since the blockade took effect. Iran loaded approximately 220,000 to 255,000 barrels per day of crude oil and condensate in August, down from roughly 740,000 bpd in July and about 2 million bpd in March, according to Vortexa and Kpler estimates. "Even at the height of maximum-pressure sanctions in 2019-20, some Iranian crude cleared Hormuz every single month; at no point did outbound flows fall to near-zero for a sustained stretch as they have since mid-July," said Vortexa analyst Claire Jungman. The collapse in export revenue is draining one of Iran's main sources of foreign-currency income and could force Tehran to finance spending by printing money, risking even higher inflation, according to Kpler analyst Homayoun Falakshahi. The International Monetary Fund estimates Iran's inflation rate at nearly 70% this year, the world's third-highest after Venezuela and Sudan. Iran currently has 29 tankers inside the strait carrying 36.11 million barrels of crude, according to TankerTrackers.com co-founder Samir Madani. Beyond the blockade zone, dozens of Iran-linked shadow-fleet tankers remain active, with 51 vessels operating in the Gulf of Oman and another 81 making deliveries in Asia or waiting off Malaysia, according to David Tannenbaum of Blackstone Compliance Services. Iranian crude in floating storage west of the blockade line rose to 41.7 million barrels by August 26 from 35.5 million at the end of July, while total Iranian crude afloat fell to 107 million barrels from 135 million, Vortexa data showed.

Washington escalates financial pressure

Bessent outlined additional steps the administration is weighing to intensify economic pressure on Tehran, including sanctions against another bank this week and an additional bank next week. Last week, the US targeted branches of Egypt's second-largest bank, Banque Misr, in the United Arab Emirates over their business dealings with Iran. Bessent said Washington deliberately avoided sanctioning the parent bank in Egypt. "We did not sanction them because we did not want to go back to the Egyptian parent," he said. The Treasury has taken a more prominent role in the US campaign against Iran in recent weeks, using new authorities to target Iran across digital assets, aviation and maritime industries. Bessent warned that countries and entities helping Iran circumvent the embargo could face secondary sanctions, including losing access to the US dollar and US banking systems. "Everyone should expect that we know who you are, you know who you are," he said. Bessent added that the US is also examining whether to target aircraft leasing companies as part of its broader effort to isolate Iran economically.

China remains central to the calculus

More than 90% of Iranian oil exports go to China, according to Bessent. Despite US calls for countries to sever financial and commercial ties with Tehran, Washington has not publicly taken similar action against Beijing over its purchases of Iranian oil. The Treasury secretary defended the administration's approach, saying he had held private discussions with Chinese officials about Iran during the G20. He emphasized that Washington does not want to sever economic ties with Beijing. "We do not want to pull apart from China," he said, while adding that the US needs to "derisk" its relationship with Beijing. Bessent argued that sanctions are more effective when combined with restrictions on Iran's ability to move goods and generate revenue. "When everyone says, 'Well, sanctions don't work,' I can tell you, sanctions plus a blockade work," he said. "We are burying the head of the Iranian snake," he added. "The snake doesn't know it's dead yet, but it will stop wiggling when the sun goes down."

Market reaction

Oil prices climbed as the comments and ongoing tensions weighed on markets. WTI futures maturing in October rose 2.4% to above US$87.83 a barrel, while Brent futures maturing in November gained nearly 2% to US$92.26. The United States Oil Fund (USO) was up more than 2% in morning trade. Meanwhile, US indices opened September in the red as inflation worries and Middle East tensions pressured equities. The SPDR S&P 500 ETF (SPY) fell 0.3%, while the Invesco QQQ Trust (QQQ) moved 0.98% lower. Any prolonged disruption to the Strait of Hormuz could push up global energy prices and add to inflationary pressures. The recent attacks on tankers have already raised concerns among traders and shipping companies about whether the recovery in oil flows through the strait can continue. - BigGo Finanace