Sanctions, sovereignty, and the Strait of Hormuz: Understanding the war on Iran

The conflict currently unfolding between the United States, Israel, and Iran did not begin with artillery shells. It began with a bid to control oil, with decades of economic strangulation, and with a blueprint drawn long before the first strike was ever launched. To make sense of what is happening today, we must resist the temptation to treat this recent geopolitical conflict as a sudden eruption and instead examine the structures of pressure that had been built around Iran over four decades.

A History Written in Oil

Iran’s modern political tragedy begins with a story that will resonate with anyone from a country that has attempted to persevere under different forms of colonial extraction. In Iran’s case, the British-owned Anglo-Iranian Oil Company controlled the extraction, refining, and export of Iran’s most valuable resource since the early 1950s. The profits from such extraction went overwhelmingly to Britain while Iranian workers and the Iranian state received a fraction of the wealth drawn from their own land. When Prime Minister Mohammed Mosaddegh moved to nationalise the oil sector in 1951, an action that was considered enormously popular among ordinary Iranians, the response from Britain and the United States was swift but predictable. 

In 1953, the Central Intelligence Agency (CIA) and MI6 orchestrated a coup that removed Mosaddegh from power and reinstated the Shah, Mohammad Reza Pahlavi, who was widely seen as a Western-backed ruler. Iran was then reorganised into a client state, exporting raw materials and importing finished goods, slotted neatly into the global economic order on fundamentally unequal terms. The 1979 revolution turned the tables of that arrangement. A broad coalition of workers, students, and civil society overthrew the Shah regime and ended Iran’s role as a Western proxy in the region. From US’s perspective, this was not merely a geopolitical setback. It also represented the loss of a critical regional asset, and it triggered one of the most sustained campaigns of economic warfare ever waged against a single nation in the modern era.

The Architecture of Sanctions

Following the revolution, a systematic project of financial and industrial strangulation of Iran and its economy was initiated. President Carter froze $12 billion of Iranian assets held in American banks within days of the revolution—these were the same assets that Iran had deposited precisely because it had operated as a Western ally. That irony was not lost on Iranian policymakers and became one of the central lessons driving the global shift toward financial diversification away from Western banking systems.

Iran was subsequently labelled by the U.S as a state sponsor of terrorism, which led to strict bans on certain technology exports, especially tools and machines that could be used for both everyday industries as well as for military purposes. This greatly hindered Iran’s economic development while the Iran and Libya Sanctions Act set the threshold limit for investment in Iranian oil at $20 million, thereby, effectively shutting the door on meaningful energy development. Iran was then expelled from the Society for Worldwide Interbank Financial Telecommunication (SWIFT) international banking system in 2012, making international trade virtually impossible. 

Sanctions were extended to refined petroleum, to iron, steel, aluminium, and copper, to the central bank, and eventually to 18 additional commercial banks. The Iranian currency itself was targeted. The effects were not accidental. They were engineered. Sanctions are not inconveniences. As the restrictions and control imposed on Iraq demonstrated in the 1990s, they are instruments capable of killing more people than bombs potentially could. The intention was to destroy Iran’s production capacity so thoroughly that the choice became either a regime collapse or capitulation to terms dictated by the Western centres of power. This is the same structural logic that is applied to dozens of nations across the Global South, i.e., first dismantle sovereign economic capacity, then offer reintegration into the global system on conditions that benefit the creditor rather than the debtor.

In this regard, Iran did attempt a negotiated path in several ways. Under the 2015 Joint Comprehensive Plan of Action (JCPOA), it agreed to strict limits on its nuclear program, reducing its stockpile of enriched uranium, cutting down thousands of centrifuges, and allowing international inspections of its facilities. By 2016, Iranian compliance had been verified by international monitoring bodies. But in 2018, the Trump administration unilaterally withdrew from the agreement and brought back the full sanctions architecture. European countries were unable to provide the economic relief they had promised. For Iran, this demonstrated with great certainty that such agreements can change with shifting political leadership. Many argue that while deals such as JCPOA limited Iran’s nuclear program, it did not actually change the broader U.S. goal of keeping Iran economically and politically isolated, and limiting its regional influence.

Why Iran, and Why Now

In order to better understand the most recent military escalation, which began in late February of this year, it is important to recognise the larger power struggle between the United States and China. This conflict between the two nations is often presented to the public with a focus on nuclear weapons and regional stability (which certainly provide useful public framings). However, the conflict between these two nations—with the top two economies in the world—is driven by energy, by the need to command the future of the global financial system, and by geography and geopolitical strategy.

In geopolitical terms, Iran occupies a very important place on the map. It sits between different regions and serves as a land bridge that connects Central Asia with the Persian Gulf. It is also integral to China’s Belt and Road Initiative (BRI), a large network of roads, railways, and trade routes designed to connect Chinese factories to European and West Asian markets while bypassing the maritime chokepoints that are controlled by the United States. Iran is also one of the six new members of the BRICS (Brazil, Russia, India, China, and South Africa) intergovernmental organisation, which has enabled it to conduct oil trade in non-dollar currencies like the Chinese Yuan (RMB). In this mode, Iran directly challenges the petrodollar arrangement as the system through which oil has been priced globally in American dollars, thereby increasing the global demand for the dollar that helps maintain its dominance as the world’s reserve currency.

By targeting Iran, the U.S. is simultaneously trying to disrupt China’s access to oil outside the Western system, weaken key land trade routes (BRI), and prevent the consolidation of an economic bloc that is capable of trading outside dollar-denominated systems. Israel’s role in this equation is not fully independent. It acts as what many strategic analysts describe as an “unsinkable aircraft carrier” which serves as a high-tech military and intelligence base in the region, allowing the U.S. to project power across West Asia without requiring permanent deployment of troops on the ground.

What the Missiles Have Already Changed

Iran’s response has targeted (with notable precision) the logistical and defence infrastructure that is linked to U.S. power in the region. Strikes on oil and refining infrastructure have pushed energy prices to increase significantly in neighbouring nations such as Qatar, Bahrain, Kuwait, UAE, and Jordan. For three decades, the United States had sold the Gulf countries a simple promise: buy our weapons, and your cities will stay safe. That guarantee has now been publicly broken.

Iranian missiles and drones have managed to get through the most advanced air defence systems on earth, showing that American military technology cannot guarantee immunity, even against a heavily sanctioned country such as Iran whose gross domestic product (GDP) is a fraction of the United States’. This has put the Gulf governments in a difficult position, given that their populations are often critical of Israel and wary of American involvement. As a result, many are now hedging and trying to balance their approach by quietly building ties with countries like Russia and China, and exploring alternatives in finance and defence. Even though that process was already underway in more subtle forms, given the current geopolitical situation, it has now become accentuated considerably.

The Economics of Escalation

The partial closure of the Strait of Hormuz through which a large share of the world’s oil passes (approximately 20 percent of global oil supply and nearly 50 percent of China’s oil imports) is not just a regional issue. It is a systemic shock that reverberates through the entire global economy. Oil prices have already risen sharply, and that increase eventually spreads into everyday costs like fertiliser prices, transport costs, plastics, heating, and every sector that depends on energy inputs. For ordinary people, this means rising expenses, falling real incomes, and a worsening cost-of-living crisis.

Europe is especially vulnerable. After cutting off cheap Russian gas in 2022, it is now facing another energy shock from a conflict it does not control but supports (albeit quietly). The low cost energy that once supported its industries is no longer available. Instead, Europe is becoming more dependent on expensive alternatives like, American liquefied natural gas (LNG). Ironically, policies meant to reduce Russian leverage and reliance on Russian energy have ended up creating new dependencies and vulnerabilities.

Sovereignty Is Not a Western Gift

Western intervention in Iran is often presented by mainstream Western media as being about human rights, with a deeply invested concern for Iranian women and the lack of democratic freedom in the country. This framing warrants direct examination. The governments and commentators who invoke the rights of Iranian women are the same ones that have supported the systematic destruction of Palestinian lives, the dismantling of Iraqi civil society, multiple “regime changes” across the globe, and have maintained strict and authoritarian laws in their own countries. As a result, such framing comes across as if built upon colonial-era rhetorical devices with a consistent record of supporting invasions and extractions that result in direct destruction. The commitment to such rhetoric of “regime change” as intervention is instrumental, deployed when it aligns with geopolitical objectives and discarded when it does not.

At the same time, the reality inside Iran is more complex than is often portrayed. Female literacy in Iran was roughly at a 30 percent in 1976 when the U.S-backed Shah in power was celebrated as a moderniser and has risen since to near-universal rates today. Iranian women now represent over 60 percent of the students enrolled at university and comprise approximately 70 percent of the graduates in science, technology, engineering, and mathematics (STEM). These figures exceed those of the United States and most European nations. This level of growth and progress within the field of education and within the university system does not mean that Iranian society does not face any problems or challenges. On the contrary, Iranian women and civil society are leading the struggles for expanded rights and democratic representation. However, those struggles belong to the Iranian people and they cannot be advanced by destroying the infrastructure on which Iranian society depends and subsists. In fact the mere thought of advancing freedom and fundamental rights in Iran by destroying key infrastructure and bombing civilians is as absurd as it is despotic and perverse. As the Iraqi experience demonstrated, external military intervention does not necessarily lead to democracy. It leads to state collapse, to instability, to economic disruption, and to long-term irreparable social, political and cultural damage.

The Longer Arc

What is happening over the Persian Gulf is not just a military conflict between Iran and the United States and its allies. It is a stress test for how strong U.S. global power architecture really is, and that architecture is visibly under strain. The petrodollar system, the use of sanctions, and the security guarantees given to regional allies (all tools of unipolarity of the United States) are all being tested simultaneously, and they are not performing as advertised.

Iran’s strategic position is, in a certain sense, straightforward. It just needs to hold on. Every week the conflict continues, oil prices rise, trust in U.S. protection in the Gulf weakens, and efforts to move away from the dollar (de-dollarisation) accelerate. The trade routes linking Asia and Europe (BRI) have also become more important to the countries that rely on it.

This conflict is not writing an ending. It is setting new money rules, for power, and for what sovereignty actually means in a world that is slowly but surely becoming multipolar. No amount of messaging from Washington or Tel Aviv can contain that shift. The question for those watching from the edges of empire is not which great power to support. It is what kind of world becomes possible when the old guarantees finally stop working, and whether the people most harmed by those guarantees are ready to imagine something different.

References

[1] UNESCO Institute for Statistics data on female tertiary enrolment rates in Iran — the primary international source for comparative education statistics. UNESCO Institute for Statistics – Iran Education Data

[2] Quartz analysis drawing on UNESCO and OECD data showing Iran and Saudi Arabia lead the world in the share of women among science and engineering graduates. Quartz – The West Is Behind Iran and Saudi Arabia in Women in Science

[3] Bruegel Institute (Brussels) analysis of what the conflict in Iran means for Chinese energy strategy, European energy exposure, and global financial realignment. Bruegel – What the War in Iran Means for China