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The Strait of Hormuz · The Infographics Show Podcast

• 0:11
  Speaker 1: So if we look back at twenty twenty six, it
• 0:14
  Speaker 1: didn't take a massive fleet of battleships to bring the
• 0:17
  Speaker 1: global economy to its knees a hole. I mean, it
• 0:20
  Speaker 1: didn't take some protracted ocean war. It took a piece
• 0:23
  Speaker 1: of paper. Welcome to beyond infographics. I am so thrilled
• 0:26
  Speaker 1: you could join us today.
• 0:27
  Speaker 2: Yeah, glad to be here.
• 0:28
  Speaker 1: Our mission for this exploration is to well to unpack
• 0:32
  Speaker 1: the staggering realities of the February and March twenty twenty
• 0:36
  Speaker 1: six straight of horror mooze crisis.
• 0:37
  Speaker 2: It's a fascinating one, it really is.
• 0:40
  Speaker 1: My insight on this whole thing is just it's mind blowing.
• 0:43
  Speaker 1: How a waterway that is just twenty one miles wide
• 0:46
  Speaker 1: at its narrowest point can effectively paralyze twenty million barrels
• 0:51
  Speaker 1: of oil a day.
• 0:52
  Speaker 2: It's incredible. And you know the true weapon of this
• 0:55
  Speaker 2: modern blockade wasn't a hypersonic missile, right, It wasn't a destroyer.
• 0:59
  Speaker 2: It was quite literally an insurance policy.
• 1:01
  Speaker 1: Yeah, an insurance policy. But before we get into the
• 1:04
  Speaker 1: absolute weeds of how this paper blockade actually happened, a
• 1:07
  Speaker 1: quick reminder to you listening, if you enjoy these detailed
• 1:10
  Speaker 1: explorations on beyond infographics, Please take a moment to drop
• 1:13
  Speaker 1: us a five star rating on your podcast app. It
• 1:15
  Speaker 1: really helps us out. So to really grasp the mechanics
• 1:19
  Speaker 1: of this, we have to start with the spark right
• 1:22
  Speaker 1: in late February twenty twenty six.
• 1:24
  Speaker 2: Yeah, the context is everything.
• 1:26
  Speaker 1: Here from my understanding, looking at the timeline, the US
• 1:29
  Speaker 1: and Israel launched Operation Epic.
• 1:31
  Speaker 2: Fury, right, that massive air campaign exactly.
• 1:34
  Speaker 1: And I don't want to gloss over this because this
• 1:36
  Speaker 1: wasn't just a surgical, single night's strike. This was a sustained,
• 1:40
  Speaker 1: highly coordinated thing. And the biggest outcome of those initial
• 1:44
  Speaker 1: strikes was the death of Uron's supreme leader.
• 1:48
  Speaker 2: Which is I mean, that's the ultimate inflection point. Yeah,
• 1:51
  Speaker 2: when you have a decapitation strike like that, the immediate assumption,
• 1:54
  Speaker 2: at least historically is that you're about to see a
• 1:57
  Speaker 2: massive symmetrical.
• 1:58
  Speaker 1: Retaliation, right, like ballistic missiles, raining down, naval clashes.
• 2:02
  Speaker 2: That sort of thing, exactly, a direct military confrontation. But
• 2:05
  Speaker 2: my analysis of their strategy shows they knew they couldn't
• 2:08
  Speaker 2: win a conventional war against the combined air and naval
• 2:11
  Speaker 2: power of the US and Israel.
• 2:13
  Speaker 1: No, of course not so.
• 2:14
  Speaker 2: Instead they target the strait of horn Moves. It's a
• 2:16
  Speaker 2: classic asymmetric pivot.
• 2:18
  Speaker 1: But here is the staggering disparity that I noticed when
• 2:21
  Speaker 1: I was analyzing the shipping logs from that period. Over
• 2:24
  Speaker 1: about twenty five days, there were only around twenty one
• 2:27
  Speaker 1: confirmed attacks.
• 2:27
  Speaker 2: On merchant vessels, just twenty one.
• 2:30
  Speaker 1: Right, twenty one ships on a waterway that usually sees
• 2:33
  Speaker 1: thousands of transits. Yet commercial transit dropped by ninety eight percent. Okay,
• 2:39
  Speaker 1: let's unpack this. How does a relatively small number of
• 2:42
  Speaker 1: attacks shut down ninety eight percent of traffic?
• 2:45
  Speaker 2: Well, it defies traditional military logic, doesn't it. I mean,
• 2:48
  Speaker 2: if someone attacks twenty cars on the interstate, traffic doesn't
• 2:51
  Speaker 2: drop by ninety eight percent.
• 2:52
  Speaker 1: Right, People still drive to work.
• 2:54
  Speaker 2: Exactly, But maritime logistics operates on a totally different set
• 2:58
  Speaker 2: of rules. From my analysis, the mechanism at play here
• 3:01
  Speaker 2: was an insurance blockade.
• 3:03
  Speaker 1: An insurance blockade.
• 3:04
  Speaker 2: Yeah, the Iranian Revolutionary Guard Corps the IRGC. They didn't
• 3:08
  Speaker 2: actually need to physically block the straight They didn't need
• 3:12
  Speaker 2: a net of c mines across all twenty one mile.
• 3:14
  Speaker 1: They just needed to spook the insurance market completely.
• 3:17
  Speaker 2: They introduced a level of risk that broke the mathematical
• 3:20
  Speaker 2: models of the underwriters in London. Within days, war risk
• 3:24
  Speaker 2: premiums surged four thousand percent.
• 3:27
  Speaker 1: Four thousand percent, that is just wow.
• 3:30
  Speaker 2: Yeah, it went from roughly zero point one to five
• 3:33
  Speaker 2: percent of a ship's hull value to a flat five percent.
• 3:36
  Speaker 1: So wait, let's make that real for you listening. If
• 3:39
  Speaker 1: you're operating a very large crude carrier of VLCC.
• 3:43
  Speaker 2: Right, those massive ship.
• 3:44
  Speaker 1: Valued it say one hundred million dollars, that means you
• 3:47
  Speaker 1: suddenly have to wire five million dollars in cash just
• 3:51
  Speaker 1: for a seven day transit.
• 3:52
  Speaker 2: Five million dollars straight off the bottom line, just for
• 3:55
  Speaker 2: the insurance exactly, and that obliterates the profit margin. But
• 3:59
  Speaker 2: what I find truly terrifying is that it wasn't just
• 4:03
  Speaker 2: the price spike, right, The real kill switch was that
• 4:05
  Speaker 2: the major P and I clubs canceled war risk cover entirely.
• 4:09
  Speaker 1: Okay, p and I clubs, the protection and indemnity clubs.
• 4:13
  Speaker 1: I was looking into these, and they aren't traditional insurance right, No, they're.
• 4:16
  Speaker 2: Basically mutual insurance associations. Ship owners pool their resources to
• 4:21
  Speaker 2: cover third party liabilities.
• 4:22
  Speaker 1: Like oil spills.
• 4:24
  Speaker 2: Precisely, if a VLCC hits a mine and skills two
• 4:28
  Speaker 2: million barrels of crude, the cleanup costs are in the billions.
• 4:32
  Speaker 2: The P and I clubs hold a bag for that.
• 4:34
  Speaker 1: So they just noped out.
• 4:35
  Speaker 2: Yeah, they looked at the IRDC attacks and said, this
• 4:38
  Speaker 2: risk is unquantifiable. We're canceling cover for the whole Persian Gulf.
• 4:43
  Speaker 1: And without that p and I certificate, the ship is
• 4:46
  Speaker 1: legally paralyzed totally.
• 4:48
  Speaker 2: Port authorities will flat out refuse you entry. You can't dock,
• 4:51
  Speaker 2: you can't load, your flag state will suspend your permission
• 4:54
  Speaker 2: to sail.
• 4:55
  Speaker 1: I mean, it's exactly like owning a high performance sports
• 4:58
  Speaker 1: car with no car insurance. Right, it doesn't matter if
• 5:00
  Speaker 1: the road is perfectly clear or if you have an
• 5:03
  Speaker 1: armored escort. If you legally can't be on the road,
• 5:05
  Speaker 1: you are grounded. The insurance market closed the straight before
• 5:09
  Speaker 1: the Iranian Navy even had to.
• 5:10
  Speaker 2: I love that analogy. It was a financial reality drafted
• 5:13
  Speaker 2: in boardrooms, not on the bridge of a warship.
• 5:16
  Speaker 1: Now, to really appreciate how unprecedented this is, I was
• 5:19
  Speaker 1: looking at the nineteen eighties tanker war during the run
• 5:23
  Speaker 1: Iraq War.
• 5:23
  Speaker 2: Oh yeah, that was incredibly chaotic.
• 5:26
  Speaker 1: Right, And here's a fascinating personal observation. During that four
• 5:30
  Speaker 1: year war in the eighties, four hundred and fifty one ships.
• 5:34
  Speaker 2: Were attacked, four hundred and fifty one, Yes.
• 5:36
  Speaker 1: Ships hitting mines, taking RPG fire. Yet shipping traffic only
• 5:41
  Speaker 1: dropped by about two percent over four years. It's wild
• 5:45
  Speaker 1: it is in twenty twenty six, twenty five days, twenty
• 5:49
  Speaker 1: one attacks and traffic drops ninety eight percent. Why did
• 5:53
  Speaker 1: the playbook work in the eighties but fail so spectacularly
• 5:56
  Speaker 1: in twenty twenty six.
• 5:58
  Speaker 2: Well, if we connect this to the bigger picture, it's
• 6:00
  Speaker 2: about the nature of the threat. In the nineteen eighties,
• 6:03
  Speaker 2: the US Navy ran Operation Earnest Will escorting tankers, and
• 6:07
  Speaker 2: it worked because the threat was predictable. Predictable how like speedboats? Yeah, speedboats,
• 6:13
  Speaker 2: shore based silkworm missiles. A US destroyer could establish a
• 6:16
  Speaker 2: clear perimeter. It was a linear defense.
• 6:18
  Speaker 1: But in twenty twenty six, from what I was seeing,
• 6:20
  Speaker 1: Iran uses what's called a mosaic defense.
• 6:23
  Speaker 2: Exactly. A mosaic defense is a nightmare encounter. It's multi domain.
• 6:26
  Speaker 1: Brace that down for me.
• 6:27
  Speaker 2: So imagine you're a US destroyer. You aren't just looking
• 6:29
  Speaker 2: at the surface. You've got explosive laden drone boats that
• 6:32
  Speaker 2: sit incredibly low.
• 6:33
  Speaker 1: On the water, barely any radar signature.
• 6:35
  Speaker 2: Right. Then you have advanced sea mines, not the rusty
• 6:38
  Speaker 2: old ones, but acoustic mines on the seafloor that shoot
• 6:42
  Speaker 2: torpedoes upward. Oh wow, and then layer on aerial loitering
• 6:45
  Speaker 2: munitions and anti ship ballistic missiles. The radar of one
• 6:49
  Speaker 2: destroyer can't guarantee one hundred percent interception rate against a
• 6:53
  Speaker 2: three hundred and sixty degree swarm.
• 6:55
  Speaker 1: But wait, I have to push back here, because the
• 6:57
  Speaker 1: US deployed over forty warships into twenty twenty six. They did, Yeah,
• 7:01
  Speaker 1: carrier strike groups, destroyers. Are you telling me forty advanced
• 7:05
  Speaker 1: warships can't clear a twenty one mile path?
• 7:08
  Speaker 2: They can clear the water, sure, But remember the insurance
• 7:10
  Speaker 2: under writers, the IRGC doesn't need to sink the whole
• 7:14
  Speaker 2: US fleet.
• 7:14
  Speaker 1: They just have to prove one drone might get through.
• 7:17
  Speaker 2: Exactly if one drone hits a VLCC, the P and
• 7:20
  Speaker 2: I Club pays for the oil spill. The US military
• 7:23
  Speaker 2: can shoot down ninety nine drones, but they can't force
• 7:26
  Speaker 2: a private insurance syndicate in London to underrate the risk
• 7:29
  Speaker 2: of that one drone slipping through ah. I say, the
• 7:32
  Speaker 2: threshold for military success is totally different from the threshold
• 7:35
  Speaker 2: for commercial confidence, right.
• 7:37
  Speaker 1: But the US government did try to step in. I
• 7:39
  Speaker 1: saw President Trump announced a twenty billion dollar plan through
• 7:43
  Speaker 1: the US Development Finance Corporation to provide state backed war
• 7:47
  Speaker 1: risk insurance.
• 7:48
  Speaker 2: Which is the correct macroeconomic response. Theoretically, if London won't
• 7:53
  Speaker 2: insure it, Washington will.
• 7:55
  Speaker 1: But it failed.
• 7:56
  Speaker 2: It's just too slow. Establishing a sovereign guaranteed insurance facility
• 8:01
  Speaker 2: takes months. You have to draft legislation, assess liabilities, and the.
• 8:05
  Speaker 1: Global economy didn't have months.
• 8:07
  Speaker 2: Exactly, Supply chains run on just in time delivery. The
• 8:10
  Speaker 2: delay itself became the weapon.
• 8:12
  Speaker 1: Which brings up this fascinating legal ambiguity. I noticed Iran
• 8:16
  Speaker 1: never actually formally declared a blockade.
• 8:19
  Speaker 2: Yeah, because legally a formal blockade is an act of war.
• 8:23
  Speaker 1: It violates the international laws of armed conflict, right.
• 8:25
  Speaker 2: And it would invite a massive, un sanctioned military response.
• 8:28
  Speaker 1: So my read on it is they just issued VHF
• 8:31
  Speaker 1: warnings over the radio saying these waters are unsafe. Turn back,
• 8:34
  Speaker 1: creating a de facto closure without the legal paperwork.
• 8:37
  Speaker 2: It's strategic ambiguity at its finest.
• 8:40
  Speaker 1: By the way, if you are finding these insights as
• 8:41
  Speaker 1: mind blowing as we are, please take a second to
• 8:44
  Speaker 1: rate beyond infographics five stars. We'd really appreciate it. So
• 8:48
  Speaker 1: moving on, they issued these warnings, but then Iran's parliament
• 8:51
  Speaker 1: did something totally unprecedented.
• 8:53
  Speaker 2: The Horror Moves Management Plan.
• 8:55
  Speaker 1: Yes, they approved this plan, requiring a transit fee of
• 8:59
  Speaker 1: two million dollar per ship.
• 9:01
  Speaker 2: A two million dollar toll for a natural waterway.
• 9:04
  Speaker 1: Right, and the payment methods to bypass US sanctions and swift.
• 9:09
  Speaker 1: My understanding is they demanded payment in Chinese yuan via
• 9:12
  Speaker 1: Kumun bank.
• 9:13
  Speaker 2: Or cryptocurrecy currency yeah, dollar peg stable coins.
• 9:16
  Speaker 1: I was trying to imagine a Greek shipping magnate. His
• 9:19
  Speaker 1: ship is burning thousands of dollars a day idling, and
• 9:22
  Speaker 1: he has to somehow source two million dollars in crypto
• 9:25
  Speaker 1: to pay off a sanctioned state actor.
• 9:28
  Speaker 2: The compliance departments must have been tearing their hair out seriously.
• 9:31
  Speaker 1: But I want to clarify the legality here. Because Egypt
• 9:34
  Speaker 1: charges for the Suez Canal, Panama charges for the Panama Canal.
• 9:38
  Speaker 1: Why is Iran charging for Hormuz any different?
• 9:41
  Speaker 2: Well, the seu is in Panama Canals are artificial waterways.
• 9:44
  Speaker 2: They were built and maintained at massive.
• 9:46
  Speaker 1: Costs, so they're providing a service exactly.
• 9:49
  Speaker 2: But the Strait of Hormuz is a natural strait. Under
• 9:52
  Speaker 2: UN slays the UN Convention on the Law, the sea
• 9:54
  Speaker 2: transit passage cannot be suspended.
• 9:57
  Speaker 1: So you can't charge a toll just for sale.
• 10:00
  Speaker 2: Through the ocean, not unless you provide a service like
• 10:03
  Speaker 2: a pilotage fee.
• 10:04
  Speaker 1: But Uran was charging for security, security from a threat
• 10:08
  Speaker 1: they themselves created.
• 10:09
  Speaker 2: It's essentially a protection racket, extortion on a global scale.
• 10:12
  Speaker 1: And the economic shock waves of this extortion were just brutal.
• 10:16
  Speaker 1: I've been analyzing the data and twenty million barrels of
• 10:19
  Speaker 1: oil a day basically vanished.
• 10:21
  Speaker 2: Red crude spike thirty four percent instantly.
• 10:24
  Speaker 1: Right over ninety six dollars a barrel. And who hurts
• 10:27
  Speaker 1: the most here? Because the US is somewhat insulated with
• 10:30
  Speaker 1: domestic production.
• 10:31
  Speaker 2: Yeah, the real vulnerability is in Asia, China, India, Japan.
• 10:34
  Speaker 1: I was looking at India specifically. They rely heavily on
• 10:38
  Speaker 1: LPG liquified petroleum gas carriers from the Gulf for cooking
• 10:42
  Speaker 1: fuel for hundreds of millions of people exactly, and those
• 10:45
  Speaker 1: ships were suddenly trapped. But it's not just oil and gas.
• 10:49
  Speaker 1: When I dug into the second order effects, it gets terrifying,
• 10:52
  Speaker 1: like the global fertilizer shortage.
• 10:55
  Speaker 2: Which is huge. The timing was February in.
• 10:57
  Speaker 1: March, right before the planting season.
• 11:00
  Speaker 2: If farmers missed that window, you're looking at a global
• 11:04
  Speaker 2: food security crisis later in the year.
• 11:06
  Speaker 1: Plus you had over two thousand vessels and twenty thousand
• 11:09
  Speaker 1: seafareres just stranded in the Gulf, caught in this legal void.
• 11:14
  Speaker 2: And because all that shipping capacity was trapped, freight rates
• 11:18
  Speaker 2: skyrocketed worldwide, even.
• 11:20
  Speaker 1: On routs completely disconnected from the Middle East, right like Asia,
• 11:24
  Speaker 1: Europe or the Transpacific.
• 11:25
  Speaker 2: Yeah, because the global supply chain has zero slack.
• 11:28
  Speaker 1: But honestly, amidst all these numbers, the human toll is
• 11:31
  Speaker 1: what really got me. Like the tie flagged Mayor Nori,
• 11:34
  Speaker 1: it was struck and crew members were missing.
• 11:37
  Speaker 2: It's tragic. These were working class people.
• 11:38
  Speaker 1: And the al saw Me VLCC, which was hit well
• 11:41
  Speaker 1: inside the Dubai anchorage.
• 11:43
  Speaker 2: Right, not even in the open strait just sitting in
• 11:45
  Speaker 2: a supposedly safe harbor.
• 11:47
  Speaker 1: It's a stark reminder to you listening that there are
• 11:49
  Speaker 1: real human lives at the center of this economic chess game.
• 11:53
  Speaker 2: Absolutely, you can't sanitize economic warfare.
• 11:55
  Speaker 1: So obviously the Gulf States aren't just sitting still through
• 11:58
  Speaker 1: all this. I've been analyzing their countermeasures, and Saudi Arabia
• 12:02
  Speaker 1: and the UAE have been fast tracking pipeline.
• 12:05
  Speaker 2: Projects bypassing the choke point entirely right.
• 12:08
  Speaker 1: Pumping oil directly to the Red Sea or the Arabian
• 12:11
  Speaker 1: Sea so ships never have to enter the Persian goal.
• 12:13
  Speaker 2: But what's fascinating here is how Iran adapted. Because pipelines
• 12:18
  Speaker 2: and refineries are stationary targets.
• 12:20
  Speaker 1: You can't move a refinery, nope.
• 12:22
  Speaker 2: So Iran just struck the bypass infrastructure. Drones hit Saudi
• 12:27
  Speaker 2: Arabia's Ross to Nora.
• 12:28
  Speaker 1: Facility, which is massive.
• 12:30
  Speaker 2: They hit Kuwait Shoait complex and the UAE's Hubshone Gas complex, proving.
• 12:35
  Speaker 1: That you can bypass the water, but your multi billion
• 12:38
  Speaker 1: dollar infrastructure is still sitting in the open, exactly, But
• 12:41
  Speaker 1: there were diplomatic bypasses too. My geopolitical insight on this
• 12:44
  Speaker 1: revolves around Italy Prime Minister Georgia Maloney actually flew directly
• 12:49
  Speaker 1: to Jetta on.
• 12:50
  Speaker 2: A unilateral mission.
• 12:51
  Speaker 1: Yeah, she secured a ten billion euro deal to get
• 12:55
  Speaker 1: LNG directly from Saudi Arabia, basically creating a parallel tomatic
• 13:00
  Speaker 1: track just for Italy.
• 13:02
  Speaker 2: It shows how quickly international unity fractures when a country's
• 13:06
  Speaker 2: energy security is acutely threatened.
• 13:08
  Speaker 1: Definitely, and eventually, all this pressure led to the Islamabad Accords.
• 13:13
  Speaker 1: Pakistan stepped in to mediate, bringing about a.
• 13:16
  Speaker 2: Very fragile ceasefire.
• 13:17
  Speaker 1: But the strait isn't truly open, is it. From my
• 13:20
  Speaker 1: read of the current situation. Iran is still demanding its tolls.
• 13:24
  Speaker 2: They are, they're coordinating transit through their military.
• 13:27
  Speaker 1: They essentially franchised the blockade.
• 13:29
  Speaker 2: That's a perfect way to put it. They prove they
• 13:31
  Speaker 2: could paralyze the global economy, and now they are monetizing
• 13:34
  Speaker 2: that capability.
• 13:35
  Speaker 1: It's wild. So to synthesize my core insight from this
• 13:38
  Speaker 1: entire episode, I mean, this entire deep exploration we've done today.
• 13:42
  Speaker 1: Military superiority doesn't guarantee open seas anymore. The twenty twenty
• 13:46
  Speaker 1: six crisis proved that if you can manipulate commercial risk logic.
• 13:50
  Speaker 2: If you can panic the insurance markets, Yes.
• 13:53
  Speaker 1: You can freeze global trade without winning a single naval battle.
• 13:56
  Speaker 2: It's a profound shift in global security.
• 13:59
  Speaker 1: It really now. If you value this kind of deep
• 14:03
  Speaker 1: personal insight into complex global issues, please take a second
• 14:07
  Speaker 1: to rate Beyond Infographics five stars on your podcast app,
• 14:10
  Speaker 1: and you know.
• 14:11
  Speaker 2: I want to leave you the listener with a lingering
• 14:13
  Speaker 2: question to ponder.
• 14:15
  Speaker 1: Let's hear it.
• 14:16
  Speaker 2: If a localized conflict can shut down twenty percent of
• 14:18
  Speaker 2: the world's oil simply by spooking the insurance underwriters, what
• 14:22
  Speaker 2: does this mean for other vital global choke points? Oh Man,
• 14:26
  Speaker 2: If actors realize they only need to threaten a few
• 14:29
  Speaker 2: ships to trigger a paper blockade in the Malacca Strait
• 14:32
  Speaker 2: or the Panama Canal, is any global supply chain truly secure?
• 14:36
  Speaker 1: That is a terrifying but necessary question ask. Thank you
• 14:39
  Speaker 1: so much for joining us on Beyond Infographics. We will
• 14:41
  Speaker 1: see you next time.