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The Morning Risk Report: Control Over Strait of Hormuz Will Determine Who Wins the War
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By Richard Vanderford | Dow Jones Risk Journal
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Good morning. Tehran’s ability to control the Strait of Hormuz, through which one-fifth of the worldwide oil supply used to pass, has become Iran’s biggest leverage against the U.S., its Gulf neighbors and the global economy. Whether the war ends in a success or defeat for Iran depends first and foremost on whether Tehran emerges from this conflict still holding the strait—and, with it, the keys to the worldwide energy markets.
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Looking for leverage: The Iranian regime has announced very ambitious plans for the Strait of Hormuz. The Iranian Parliament’s national-security commission has already advanced new legislation that would require passing vessels to pay for the privilege, and that would bar from the Persian Gulf any non-friendly countries. This is a lever through which Tehran hopes to force European nations, Japan and others to drop economic sanctions against it—while also permanently expelling the U.S. Navy from the Gulf’s waters.
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Catastrophe looming? Ending the war in the near future while Iran still controls the crucial waterway would be a geopolitical disaster for America’s allies and partners in the Middle East and beyond, said Hasan Alhasan, a senior fellow at the International Institute for Strategic Studies and a former national-security official in Bahrain.
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Sanctions issue: There is also a practical difficulty. Currently, Iran’s Islamic Revolution Guard Corps is considered a terrorist organization by many states, including the U.S. and members of the European Union. Financial transactions with Iran, including paying for the passage of Hormuz, are subject to U.S. sanctions that would deter major global shipping companies.
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Important islands: Iran’s fortifications on small islands near the strait boost its power to control the key waterway, and reopening shipping there might require U.S. or allied forces to capture some of those same dots of land.
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Content from our sponsor: Deloitte
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Quantum Readiness: The Case for Future-Proofing Infrastructure
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In the not-too-distant future, complex enterprise problem-solving may call for a heterogeneous architecture that integrates CPUs, GPUs, and quantum computers. Read More
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Michael Selig, chair of the Commodity Futures Trading Commission. Photo: Eric Lee/Bloomberg News
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U.S. regulator sues three states in defense of prediction markets.
The Trump administration ratcheted up its defense of prediction markets Thursday, with a federal regulator suing Arizona, Illinois and Connecticut over their attempts to ban sports and elections-related betting on Kalshi and other platforms.
The suits are the latest front in a growing battle between the administration and states over prediction markets, which let people bet on everything from Major League Baseball games to the reopening of the Strait of Hormuz. Several states have sent cease-and-desist orders to the platforms, saying their operations violate state gambling laws.
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Trump ousts Attorney General Pam Bondi.
President Trump ousted Attorney General Pam Bondi, ending a yearlong tenure atop the Justice Department marked by failed efforts to prosecute his favored targets and a view by the president and his advisers that she mismanaged the Jeffrey Epstein scandal.
Trump is considering nominating Lee Zeldin, head of the Environmental Protection Agency, as her successor, although no final decision has been made, according to people familiar with the matter.
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100%
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The tariff the U.S. will impose on branded pharmaceuticals, according to the White House. Nations or drugmakers that strike deals with the Trump administration or commit to build manufacturing facilities in the U.S. can receive lower levies.
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A satellite image of Antelope Reef taken in February. Photo: Planet Labs
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China is building another massive base in the South China Sea.
After a hiatus of nearly a decade, China is jump-starting its island-building campaign in the South China Sea—and turning a once-obscure reef into what could be its largest military base in the disputed waters.
The status of the South China Sea has long been disputed between China and countries in the region. Beijing’s island-building campaign has strengthened its hold on the waterway and given it control of a thoroughfare that would be vital in any conflict over Taiwan, the self-governing island that Beijing claims. The U.S., meanwhile, has supported other countries such as the Philippines in pushing back against the Chinese claims.
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How Trump rewrote the rules of global trade in one year.
President Trump proclaimed Liberation Day one year ago today—rewriting trade relations for virtually every U.S. trading partner.
In the year since, Trump has used tariffs to remake U.S. trade policy, moving from a model of cooperative trade agreements to one that relies on overt economic coercion of allies and adversaries alike.
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Federal regulators plan to take a firmer hand with prediction markets by policing insider trading more closely, even as they battle states for oversight authority. Also, the government is telling banks to pay attention to healthcare fraud. James Rundle hosts.
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