In a recent speech, former President Donald Trump suggested the United States might cease military efforts to keep the Strait of Hormuz open, arguing that the waterway primarily benefits European and Asian oil importers, not the U.S., which possesses substantial domestic reserves. This statement highlights a complex geopolitical and economic puzzle: how does a regional disruption in the Middle East translate into higher gasoline prices for American drivers?
The Strategic Importance of the Strait of Hormuz
The Strait of Hormuz is a critical maritime chokepoint. According to the U.S. Energy Information Administration (EIA), approximately 21 million barrels per day of oil and petroleum products passed through it in 2023, representing about one-third of all seaborne traded oil. While the U.S. exports very little oil through Hormuz, global oil markets are interconnected. A threat to this supply route creates immediate uncertainty, which is rapidly priced into the global market.
Why a Local Crisis Hits Global Prices
Oil is often discussed as a single global commodity, but its pricing is nuanced. Two primary benchmarks dominate: Brent Crude (for oil exported to Europe and Asia) and West Texas Intermediate (WTI, for U.S. oil). In a freely competitive market, one might expect these to diverge significantly based on regional supply and demand. Instead, they remain tightly correlated due to a vast network of traders, shippers, and financial instruments that arbitrage away price differences. This creates a de facto global price.
As legal scholar Alan Dershowitz notes, this system can seem counterintuitive. “Why is the wholesale price of oil fixed by global conglomerates?” he asks. The answer lies in market structure, not inherent product qualities. The global oil market functions as an oligopoly with high barriers to entry, where prices are set by major benchmarks influenced by anticipated future supply and demand, not just current spot transactions. This system, while efficient for global trade, means a geopolitical shock anywhere affects prices everywhere, including at the American pump.
Exploring Alternatives to Military Action
Dershowitz proposes two primary alternatives to U.S. military intervention to protect the strait, both aimed at insulating American consumers from price spikes caused by regional threats.
1. Delinking U.S. Oil Prices from the Global Benchmark
The core idea is to sever the automatic link between WTI and Brent prices, allowing U.S. producers to sell domestically at a lower, purely American-determined rate. In theory, this could shield U.S. gasoline prices from Hormuz-related volatility.
Feasibility and Challenges: This would require monumental regulatory or legislative action. It might involve restricting the export of U.S. crude oil or prohibiting financial hedging that ties domestic contracts to global benchmarks. Such moves would face fierce opposition from the oil industry, traders, and likely violate World Trade Organization principles. They could also lead to domestic shortages if producers seek higher prices abroad. As Dershowitz concedes, he is “not an economist,” and most energy analysts view complete delinking as impractical in today’s integrated global economy. A more modest approach might involve strategic use of the Strategic Petroleum Reserve (SPR) to buffer short-term shocks, a tool already in use.
2. Rerouting Oil via Overland Pipelines
Israel has reportedly suggested building alternative pipeline routes bypassing the Strait of Hormuz, such as through Saudi Arabia or other friendly nations. This would physically reduce global dependence on the vulnerable waterway.
Feasibility and Challenges: This is a long-term, capital-intensive project requiring immense regional political cooperation. Pipelines are also vulnerable to sabotage and political pressure from host nations. The historical record is littered with pipeline projects stalled by conflict and diplomacy. While a worthy strategic goal for energy security, it is not a near-term solution to an acute crisis.
The Political and Economic Reality
Dershowitz’s central argument—that the nations most dependent on Hormuz (China, India, South Korea, Japan) should bear the primary burden of securing it—has logical appeal. The U.S. has long urged its allies to take greater responsibility for their own security. However, the nature of global oil markets means that even a “European” or “Asian” problem becomes an American problem through price transmission.
The immediate pain for U.S. voters—higher gasoline prices—is real and politically potent. Iran’s strategy of leveraging maritime threats to influence U.S. domestic politics is a recognized form of asymmetric warfare. While military action carries its own risks, the proposed economic alternatives face steep implementation hurdles.
The Path Forward: A Blend of Approaches
Experts suggest a multi-pronged strategy rather than reliance on a single solution:
- Diplomatic Pressure: Intensify efforts to build a coalition of Hormuz-dependent nations to fund and participate in naval patrols and diplomatic deterrence.
- Market Stabilization: Use the SPR judiciously to signal resolve and calm markets during spikes, while accelerating the transition to electric vehicles and renewable energy to reduce long-term oil demand.
- Allied Burden-Sharing: Explicitly tie continued U.S. security guarantees in the region to tangible financial or military contributions from oil-importing allies for maritime security.
As Dershowitz concludes, American consumers deserve a clear explanation beyond “that’s the way it’s always been.” The reality is that the global oil market’s architecture, forged in the 20th century, makes localized supply threats universally felt. Reform is possible but would require a level of international coordination and domestic political will that is currently absent. Until then, the link between Hormuz and the American pump will persist, making the region a perpetual focus of U.S. foreign policy.
Alan Dershowitz is professor emeritus at Harvard Law School. His latest book is “Could President Trump Constitutionally Serve a Third Term?”
