Economic Shocks Loom As Iran War Escalates

The Department of Defense is preparing to ask lawmakers for additional funding following the joint US-Israeli strikes on Iran.

It’s far from clear whether there’s enough support in Congress to pass a supplemental funding bill for the Pentagon, as the vast majority of Democrats decry the White House’s new war against Tehran. But the Defense Department plans to ask Congress for more money anyway. But what will this boost in defense spending mean for current the US deficit? Maya MacGuineas, president of the Committee for a Responsible Federal Budget joins to discuss on Balance of Power.  US President Donald Trump is desperate to reopen the Strait of Hormuz to ease a growing global energy crisis. He won’t achieve that easily without a ceasefire in the war on Iran.

Iran’s sporadic attacks on vessels and the threat of mines have cut traffic in the vital waterway to a trickle, effectively putting Tehran, not outside naval forces, in charge of the flow. The strait carries about a fifth of the world’s oil, and the disruption has led to production cuts, fuel shortages and price increases from Asia to Europe.

Trump has been pressing allies to send warships to help reopen the strait, proposing a multinational naval effort to escort commercial ships.

European and Asian partners are reluctant, with governments from Berlin to Tokyo questioning whether a handful of ships would make any difference against Iran’s ability to threaten vessels. Officials say additional navies would add little beyond the substantial US presence already in the region — and still fall far short of what’s needed to meaningfully unblock the strait. “It could take several weeks to secure the Strait of Hormuz,” said Bob McNally, president of Rapidan Energy Group and a former White House official. “Until we’ve neutralized Iran’s layered, asymmetric capabilities — mines, fast attack craft, submarines and drones — we won’t want to put commercial or even escort ships through.”

Trump responded to the lack of enthusiasm from potential partners on Tuesday, saying via social media the US no longer needs assistance, either from NATO countries or Japan, Australia and South Korea. He didn’t specifically mention Hormuz.

Read more: Trump Belittles Allies That Rejected His Iran War Appeals

With the war ongoing, the only transit happening appears to be on Iran’s terms. A handful of vessels have made their way out by hugging the Iranian coast, suggesting passage depends on Tehran’s approval rather than outside protection. The result is a system where the strait isn’t formally closed, but access is controlled — and normal commercial flows remain far out of reach.

Those skeptical of the US escort idea point to the recent history in the Red Sea on the other side of the Arabian Peninsula. There, Houthi militia in Yemen used similar tactics to disrupt traffic through the Bab al-Mandeb strait, despite bombing campaigns from the US and others.

UK Prime Minister Keir Starmer said Monday that his country won’t be dragged into the war and that opening the Strait of Hormuz is “not straightforward.”

“You can see that historically when there’s been other conflicts that have affected the straits,” he said.

On Tuesday, French President Emmanuel Macron said France won’t take part in operations in the current context but he’s ready to work with others on a system of escorts when the situation is calmer.

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