US threatens indefinite Iran blockade as oil supply drops 4%

The United States threatened Thursday to keep its naval blockade of Iran indefinitely, deepening a supply squeeze that has cut the IEA's global oil output forecast by 4.3 million barrels per day this year.

"Indefinitely the United States Navy can maintain a blockade like that because we'll rotate ships in and out, as we have, and we'll continue to," Defense Secretary Pete Hegseth told reporters in Panama City.

The blockade has redirected more than 55 commercial vessels attempting to run it, with U.S. forces disabling three ships and boarding two. Shipping traffic through the Strait of Hormuz — which carried a fifth of the world's oil and liquefied natural gas before the war began in February — fell to eight vessels on Tuesday, compared with 130 to 140 before the conflict. Two Abu Dhabi National Oil Co. vessels were attacked transiting the strait Thursday evening, the UAE state news agency WAM reported.

The escalation carries direct consequences for global growth. The IEA revised its supply shortfall forecast upward by 600,000 barrels per day in just one month, and economists warn the impact will deepen if the war is not resolved. Trump, facing midterm elections in November with high fuel prices eroding his approval ratings, has oscillated between threats of military escalation and claims a deal is imminent.

Iran said in an X post that Trump's assertions of "total control" over the strait "do not change the reality," insisting the waterway "will not be reopened until Iran's conditions are accepted" — including the removal of economic sanctions and release of frozen assets. Washington previously said it would lift the blockade once Iran and Oman reach an agreement to restore commercial shipping.

The U.S. lifted its blockade for a month in mid-June but reimposed it, cutting off Tehran's primary source of hard currency and compounding losses from wartime strikes on its energy infrastructure. The last time the U.S. reimposed a blockade of this scale was during the 2019 tanker crisis, when shipping through the strait fell roughly 30 percent over three months before tensions eased.

Supply Shortfall Widens to 4.3M Barrels

Oil prices settled down more than 2 percent Thursday after a week of gains, as investors weighed signs of weaker global demand and a sharp increase in U.S. crude inventories. But reports that Yemen's Iran-backed Houthis had targeted a Saudi Aramco refinery with drones unsettled the market, renewing concerns about a widening regional war.

The IEA's revised forecast — up from a 3.7 million barrel-per-day drop projected just a month ago — reflects the cumulative impact of the blockade, wartime strikes on Iranian energy infrastructure, and disrupted shipping lanes. Global economists have forecast a sharp drop in world growth as a result of the conflict, with some regions potentially swinging into recession.

Trump has repeatedly threatened to "hit Iran hard" but has resisted deploying ground troops or seizing strategic islands and bombing desalination plants. Earlier this week, he suggested he would rely on economic means rather than military action. The U.S. has poured tens of thousands of troops into the Middle East since the war began, including more than 20 warships.

The blockade's sustainability hinges on whether the U.S. can maintain the naval presence without escalating the conflict further. If Iran continues to attack commercial shipping and the Houthis expand their drone campaign against Saudi infrastructure, oil prices could spike sharply, accelerating the recession risk that economists have flagged.

This article is for informational purposes only and does not constitute investment advice.