The Strait Has Become the War’s Cash Register

The United States says it took “limited, precise action” against two rocket launchers on Larak Island after observing Iranian forces preparing rockets and sea mines for the Strait of Hormuz. Iran says the strike killed two people and injured two more, then claimed retaliation against US bases in Jordan; Jordan said it intercepted eight missiles. The immediate facts remain partly under wartime fog, but the strategic fact is plain: the pause in direct US attacks did not create peace. It created an interval in which everyone restocked their vocabulary for the next escalation.

Larak is not merely a dot off Bandar Abbas. It sits beside the waterway that carried roughly a fifth of the world’s oil and liquefied natural gas before this war began. Iran has effectively closed normal marine traffic, according to the BBC, and is reportedly demanding that tankers submit to checks near Larak and pay $2 million to cross. That is less a blockade in the old naval sense than a hostile acquisition of the checkout lane. The reported mining threat, US naval interdictions, and tanker restrictions make every barrel a diplomatic cable with an insurance premium attached.

Washington’s theory appears to be that selective force can prevent Iran from turning Hormuz into an enduring weapon while avoiding a wider war. Tehran’s theory appears to be that the threat of wider disruption is precisely what gives it leverage. Both theories have a familiar defect: the other side gets a vote. Iran’s president said, “We are not seeking war, but we will deliver a decisive response to the aggressors.” In this conflict, as in many before it, the word decisive is mostly a way of declining to specify the exit ramp.

The war’s geography is steadily refusing to respect its nominal belligerents. The UAE said it intercepted an Iranian drone over its territorial waters, reported no damage, and denied Tehran’s claim that Dubai’s Al Minhad Air Base had been targeted. The episode is officially contested, as much of this war is, but it underscores the practical position of the Gulf states: they are trying to remain commercial hubs while becoming air-defence perimeters. The UAE’s account is here.

That balancing act is already costly. The UAE suspended all trade with Iran two weeks earlier after alleging Iranian missiles had splashed into the Persian Gulf; Iran denied that accusation. Meanwhile Brent crude had risen above $90, around 25% higher than at the war’s start, according to the report. Energy markets do not require a full closure of Hormuz to panic; they merely require enough ambiguity to price in the possibility that a drone, mine, missile, or official communiqué will make the next voyage inadvisable.

Abu Dhabi’s diplomatic adviser Anwar Gargash offered the most concise description of the regional trap: “the state of neither war nor peace cannot be a sustainable solution.” Quite. But neither is the alternative currently on offer: a war whose participants treat neighboring sovereign airspace and shipping lanes as an extension of their own argument. The Gulf’s great achievement was turning geography into commerce. Its current misfortune is being reminded that geography can always repossess the asset.

The most consequential evidence in a war often emerges after the briefing slides have been filed away. An Associated Press report, drawing on Airwars’ open-source investigation, imagery and weapons experts, found evidence that three missiles which struck Lamerd on the war’s first day may have been US Precision Strike Missiles, or PrSMs. Iranian officials said at least 21 civilians, including seven children, were killed. Airwars located detonations over a sports complex and residential neighborhoods, estimating lethal effects as far as 50 meters away and damage extending farther. The AP’s detailed account is here.

The attribution is disputed, and it matters that it is disputed. US Central Command confirmed using PrSMs in Iran but denied firing any weapons into Lamerd, suggesting footage showed an Iranian cruise missile; experts cited by AP said the footage did not match that Iranian model. Israel also denied striking so far south on the first day. Neither AP nor Airwars identified a clear intended target, and neither found reports of military or security personnel killed or military infrastructure hit. Certainty is not available here. Serious suspicion, however, is not nothing—especially when the suspicion concerns a weapon designed to scatter tens of thousands of tungsten pellets.

PrSM is being promoted as the successor to ATACMS, with greater range; after Lamerd, the Pentagon signed a contract worth more than $4 billion to quadruple production. That creates the usual modern contradiction: procurement speaks the clean language of capability, while civilian-harm investigations reconstruct what capability did on a particular street. As former Pentagon adviser Wes Bryant put it, “Its proper use should be reserved for things like large concentrations of enemy personnel with hard and soft armor.” A missile can be technically advanced and morally indiscriminate in the wrong postal code. Those propositions are not rivals.

The administration is trying to run a second campaign through the financial system. Treasury Secretary Scott Bessent said another unnamed bank would be sanctioned this week, following a proposed rule that could cut the Emirati branches of Egypt’s Banque Misr off from the US financial system if finalized. The policy aims to isolate Iran economically, but its architecture also reveals Washington’s constraint: the measures announced so far have stopped short of directly sanctioning major trading partners that conduct business with Iran. The report on the planned bank action is here.

China is Iran’s largest trading partner and leading oil buyer, according to the report, and Bessent planned to raise Iran with Chinese counterparts at the G20. He said “all options are on the table” regarding Beijing. This is the grammar of secondary sanctions: the United States uses access to dollars and its financial system to make distant commercial relationships an American security question. It can be formidable. It can also become an invitation for other powers to build workarounds, particularly when the targets include states large enough to have their own ideas about who gets to set the terms of trade.

That broader hedging was visible in Bishkek, where China, Russia and India gathered at the Shanghai Cooperation Organization summit, with Putin expected to meet Iranian President Masoud Pezeshkian. The SCO is no cohesive anti-Western alliance—India’s frictions with China and Pakistan alone prevent that fantasy from surviving contact with a seating chart—but it is a venue for states that prefer options to obedience. The summit report is here. The war at Hormuz is therefore being fought in launch zones, airspace, oil markets and bank compliance departments. Empires once sent gunboats to collect customs. The contemporary version sends gunboats and a spreadsheet, then calls the combination restraint.