I. Overview

A. Pointed Summary

• A 2026 U.S.–Iran military escalation has placed the Strait of Hormuz at the center of the conflict.
• The Strait carries roughly 20% of global oil exports, making it a critical chokepoint.
• Iran claims domestic control of the passage and the right to levy transit fees; the U.S. demands unrestricted freedom of navigation under maritime law.
• Iran's tactics include naval harassment, drone swarms, and sea mines, which have disrupted global energy markets.

B. Executive Summary

After U.S. and Israeli operations against Iran in February 2026, Iran retaliated by threatening to close the Strait through naval harassment, drone swarms, and sea mines, disrupting global energy markets. The crisis is the latest in a cycle dating to the 1979 Iranian Revolution. Two positions collide: the U.S. and its allies treat the Strait as an open, toll-free corridor under maritime law, while Iran asserts domestic control and the right to charge transit fees.

C. Relevance

A sustained closure risks oil price volatility, economic instability, and recession in import-dependent economies. The crisis also tests the limits of international maritime law and raises the danger of miscalculation, regional proxy conflict, and nuclear brinkmanship, making a diplomacy-first response urgent.

II. History

The historical context of the current conflict between the United States and Iran traces back to the 1979 Iranian revolution, an event that set in motion decades of economic and diplomatic tension between the two countries. In this time period, Iran regularly threatened to shut down the Strait of Hormuz in response to United States actions, frequently using its navy to harass vessels that would go through the waterway. For instance, during the Iran-Iraq War, both nations routinely tried to target merchant shipping in the Persian Gulf. This led to US naval intervention in what is now known as Operation Earnest Will, where the US military escorted and protected oil tankers from Iranian naval attacks. These standoffs would happen almost cyclically in the years that followed and ultimately helped to set the stage for the 2026 escalation. The deadly nature of this conflict has severely disrupted global energy markets and spiked volatility across the international economy.

A. Current Stances

The current stance of the United States centers on maintaining the Strait of Hormuz as a completely open, toll-free international corridor, with themselves and their allies flatly rejecting any regional attempts to restrict traffic or levy transit fees based on established maritime law.

On the other hand, Iran has continuously asserted their own domestic control over the Strait of Hormuz, positioning themselves as the route’s gatekeeper with the right to impose fees on commercial vessels that pass through the waterway.

B. Tried Policy

Historically and throughout the recent 2026 crisis, both parties have leveraged a mix of military deterrence and economic coercion to achieve their own personal and political objectives. The United States has primarily relied on a strategy to economically isolate Iran. They have done so by deploying aggressive sanctions against their companies to choke off Iranian oil revenue. Additionally, the US Navy has executed a counter-blocade on Iranian commercial ports to coerce compliance. Meanwhile, Iran has utilized asymmetric warfare and regional leverage to apply pressure on its adversaries, deploying various weapons to physically disrupt shipping lanes in the Strait. Through their actions, Iran is essentially holding global energy markets hostage in an attempt to counter Western economic pressure.

III. Policy Problem

The U.S. - Iran conflict and the Strait of Hormuz crisis presents a complex policy problem with far- reaching implications for global energy security, regional stability, and international law. At its core, the crisis revolves around competing claims to control the Strait of Hormuz, a critical passage for 20% of global oil exports. Iran wants to assert domestic authority, specifically through the imposition of transit fees. Alternatively, the U.S. and its allies demand unrestricted freedom of navigation under international maritime law. This standoff has escalated into a dangerous cycle of military posturing and economic coercion. The stakes are very high: a prolonged blockage could trigger severe disruptions in global oil supplies, leading to a significant global increase in oil prices and widespread economic instability. Meanwhile, the risk of miscalculation or unintended escalation only grows, as both sides navigate a landscape of deep mistrust, regional proxy conflicts, and nuclear brinkmanship. Internationally, the challenge lies in striking a balance between upholding maritime law and preventing  broader conflict. Failure to resolve these issues diplomatically risks not only a humanitarian and economic catastrophe but also the erosion of trust in international institutions. The policy problem, therefore, demands a nuanced, multi stakeholder approach that prioritizes de-escalation, dialogue, and sustainable solutions to avert disaster.

IV. Policy Options

A. Military Confrontation

The United States could conduct a sustained aerial campaign against Iranian nuclear and military facilities. It requires no boots on the ground, and so it would be the least politically costly. It is also least likely to succeed over the long term because of how deeply Iran’s nuclear material is buried. The other option when it comes to the military is a boots on the ground style operation, invading these facilities physically. It is incredibly risky, however, due to uncertainty that all nuclear material would be destroyed. Furthermore, attacks on possible Iranian nuclear stockpiles could encourage further Iranian obstruction of the Strait. This option is also flawed because it ensures an even more severe escalation of the conflict. 

B. Diplomacy

The United States and Iran could come to an agreement that Iran is allowed to enrich under guarantee that they would not be using enriched nuclear material for weapons ambitions. They could follow a model similar to the JCPOA, also known as the Iran deal, from 2014. This possibility is unlikely, though, as the US pulled out of this agreement in 2018. 

Another option is for Iran and other Middle Eastern countries such as Saudi Arabia and the United Arab Emirates to jointly develop enriched nuclear arms under international supervision. However, this solution fails to consider religious tensions between the Sunni and Shia sects of Islam present in Saudi Arabia and Iran, respectively. While these solutions address the nuclear side of the continued US-Iran conflict, economic negotiations must remain front and center. Both nations must arrive at a reasonable trade agreement factoring in both domestic claims and international maritime law that will allow oil and other commodities to pass through the strait, at the risk of global economic disaster. 

C. The Fig Leaf Option

This option involves returning to the status quo. However, this solution leaves Iran with a potential nuclear stockpile and unresolved tensions with the United States, opening up room for further escalation. 

V. Conclusions 

The Strait of Hormuz crisis illustrates how a decades-old structural rivalry can rapidly convert a regional dispute into a global economic threat. None of the policy options reviewed offers a clean resolution: military confrontation risks failing to neutralize Iran's nuclear capacity while inviting further escalation; a multilateral enrichment-sharing arrangement collides with entrenched Sunni-Shia tensions; and a return to the status quo merely postpones the next crisis without addressing its root causes. Given the scale of economic exposure tied to the Strait, and the danger that miscalculation could trigger a broader regional war, a verified, supervised diplomatic settlement remains the option least likely to produce catastrophic outcomes. This solution, likely the best in the long-run, demands sustained trust-building that neither party has shown much capacity for to date. Absent such a settlement, the Strait of Hormuz will likely remain a recurring flashpoint, and global energy markets will continue to price in a persistent geopolitical risk premium.

VI. Acknowledgement

The Institute for Youth in Policy wishes to acknowledge Sarah Hutchison for editing this policy brief.

VII. References

Britannica. “2026 Iran war | Deal, Explained, United States, Israel, Strait of Hormuz, Map, & Conflict.” Britannica, 3 March 2026, https://www.britannica.com/event/2026-Iran-war. Accessed 27 June 2026.

Congress. “Iran Conflict and the Strait of Hormuz: Impacts on Oil, Gas, and Other Commodities.” Congress.gov, 11 March 2026, https://www.congress.gov/crs-product/R45281. Accessed 27 June 2026. 

Gordon, Philip H. 2026. “How The Iran War Will Change the Middle East.” Brookings, June 10, 2026. https://www.brookings.edu/articles/how-the-iran-war-will-change-the-middle-/.

Ferragamo, M. (2025, June 16). What Are Iran’s Nuclear and Missile Capabilities? | Council on Foreign Relations. Cfr.org. https://www.cfr.org/articles/what-are-irans-nuclear-and-missile-capabilities.

Planet Volumes. Strait of Hormuz between Iran and Oman. Published April 7, 2026. Photograph. Unsplash. https://unsplash.com/photos/strait-of-hormuz-between-iran-and-oman-8koWngCqqzM.

Torbati, Yeganeh. “Vague Language of U.S.-Iran Deal Comes Back to Haunt Peace Efforts.” https://www.nytimes.com/2026/06/27/world/middleeast/us-iran-deal-vague-language.html, 27 June 2026, Vague Language of U.S.-Iran Deal Comes Back to Haunt Peace Efforts. Accessed 27 June 2026. 

Williams, Heather, and Joseph Rodgers. 2026. “Options for the United States to Resolve the Iran Nuclear Challenge.” Center for Strategic and International Studies, April 8, 2026. 

https://www.csis.org/analysis/options-united-states-resolve-iran-nuclear-challenge.