Recently, the Strait of Hormuz has become a flashpoint in the escalating conflict between the United States and Iran, with the Trump administration alternating between military strikes and threats of further attacks amid negotiations.
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This waterway is one of the world’s most important shipping corridors. It connects Persian Gulf energy producers to global markets and carries a substantial share of the world’s energy trade. This applies further pressure on the need to keep it “open,” even as that story is far more complicated than it appears.
The strait is more than a physical waterway. It is also an institutional and commercial corridor sustained by trust, pricing, financing, commodity markets, and insurance premiums. In a modern economy, a waterway like the Strait of Hormuz allows merchant ships to function as part of the circulatory system of global commerce. But passage requires more than the physical opening of the waterway. It also depends on whether insurers, lenders, shipowners, crews, and governments are willing to price, bear, and distribute the risks associated with the passage.
The Trump administration is focusing primarily on one end of the problem: suppressing Iran’s ability to alter the threat landscape in the strait. Crucially, it has paid far less attention to the other end of the equation: owning, transferring, or guaranteeing the residual risk that American military forces cannot eliminate. The history of the Suez Canal crisis shows the consequences of a similar conceptual mistake. It demonstrates how military control of a strategic waterway can prove insufficient when broader risks remain unresolved.
In 1956, Egyptian President Gamal Abdel Nasser nationalized the Suez Canal after the United States and Britain withdrew their financial support for the construction of Aswan High Dam. Nasser announced that, in the absence of external financing, canal revenues would be used to fund the project. Suez was vital for European trade and Middle Eastern oil supplies, so Britain and France saw these actions as a direct challenge to their strategic influence in the region. And so, in coordination with Israel, they took military action against Egypt to seize control of the Canal Zone. Their calculation was that if Nasser were removed and the canal returned to British and French control, then their broader geopolitical problem would be resolved.
Militarily, this plan worked. Their forces advanced rapidly. Israel swept across the Sinai while British and French troops established air superiority and took Port Said at the northern mouth of the canal.
Despite this success, the broader strategic goal remained beyond their reach. Britain’s military might masked a far weaker financial position. The sterling was still a major international currency, but defending its value depended on Britain’s dwindling gold and dollar reserves. American opposition to the invasion, mounting pressure on sterling, disruptions to oil supplies, and Britain’s dependence on external financial support ultimately made the operation unsustainable. As the dollar and oil reserves declined, London increasingly needed the very international financial cooperation, especially from the United States, that the invasion had put at risk.
The crisis left both European powers, particularly Britain, politically humiliated. They had been willing to assume the military risks of invading Egypt, but they overlooked the financial, diplomatic, and alliance risks that also had to be absorbed to sustain the operation and turn their military success into durable strategic control of the canal.
Three decades later a comparable problem surfaced in the region, but this time, the United States responded differently. In 1987, during the “Tanker War” phase of the Iran-Iraq War, Kuwait’s oil exports were increasingly threatened by repeated Iranian attacks on its tankers. With limited options, the Kuwaiti government sought protection from both the United States and the Soviet Union because neither Kuwait nor any private commercial actor could adequately absorb or manage the risk alone.
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By July of that same year, Ronald Reagan took action, but he did not rely on warships alone. Instead, he approved Operation Earnest Will, under which eleven Kuwaiti tankers were reflagged as American vessels and escorted through the Persian Gulf. This action did not eliminate Iranian mines, missiles, or the possibility of further attacks. In fact, during the first convoy, one of the reflagged tankers struck a mine. Although no one died and the tanker completed its voyage, the incident made clear that the danger remained real.
Certainly, reflagging the vessels changed the legal and political meaning of these voyages. Sailing under American colors placed U.S. sovereignty and military credibility behind the Kuwaiti vessels. The United States did not absorb every commercial loss, but it assumed enough of the political and strategic residual risk to make continued passage more credible. Operation Earnest Will did not eliminate risk. It instead gave the residual risk a more capable owner.
This does not mean that the military dimension is insignificant. But military measures are not the only instruments available. Washington can also strengthen the ability of governments, private firms, and financial markets to absorb the risk that remains through tools like sovereign war-risk insurance or reinsurance, multinational risk pools, and lender guarantees. These mechanisms can help distribute, transfer, and absorb the residual risk that remains, even when real danger persists.
The region has changed significantly since Operation Earnest Will. Through the 1990s and early 2000s, the United States established an enduring presence in the Persian Gulf while Iran increasingly relied on asymmetric capabilities to offset its conventional military disadvantage. The result is a different strategic environment with the same underlying problem. Even with a superior military presence, Iran’s asymmetric capabilities continue to inject uncertainty into the region in ways that American military power alone cannot eliminate.
As it has done before, the United States can use military power to make Iran less capable of creating risk. But it must also make insurers, lenders, shipowners, and governments more capable of carrying the risk that will inevitably remain. Force can make passage possible, but a durable strategy for keeping Hormuz commercially open will require both.
Oscar Blanco is a historian who teaches history and cybersecurity risk management at Miami Dade College and Florida International University. He holds a Ph.D. in history and researches U.S. foreign policy and United States relations with Latin America.
Made by History takes readers beyond the headlines with articles written and edited by professional historians. Opinions expressed do not necessarily reflect the views of The Inquirer.