What Drives the US Blockade of Iranian Ports? Game Theory and Oil Supply Shock Insights

Chicken Game

Economics and game theory describe a classic model called the Chicken Game (also known as Brinkmanship). Two cars head toward each other; the one who swerves first loses, but if neither swerves both crash.

The key conclusion is that the side that convinces the opponent it is willing to incur extreme costs first is more likely to win.

The US blockade of the Strait of Hormuz is not primarily about direct benefit; it is a signal to Iran that the US has “thrown the steering wheel away” and is willing to risk escalation.

This is an example of a credible commitment—by voluntarily restricting its own options, the US tries to change Iran’s expectations.

Quantifying the Supply Shock

Normal daily oil transit through the Strait of Hormuz exceeds 20 million barrels, representing more than 25% of global seaborne oil trade and a similar share of total consumption.

Existing alternative pipelines (Saudi east‑west pipeline and UAE Abu Dhabi pipeline) have a combined full‑load capacity of about 9 million barrels per day, leaving a large shortfall.

Short‑term oil‑price response to a supply shock can be approximated with a rebound formula: \(\Delta P = \frac{\Delta Q}{\epsilon}\), where \(\epsilon\) is the short‑term price elasticity of demand (very inelastic) and \(Q\) is global daily consumption (approximately 100 million barrels).

Applying the model yields a theoretical upper bound where oil prices could more than double. In practice, strategic reserves, demand compression, and alternative energy sources temper the impact, with most forecasts placing prices between $150 and $200 per barrel.

Who Suffers More?

From the Chicken Game perspective, the blockade is an extreme‑pressure signal action, not a genuine long‑term closure. The goal is to force Iran to concede on the nuclear issue by showing the US has no retreat.

The logic has a fatal flaw: Iran also lacks retreat options. Decades of sanctions have made Iran’s political legitimacy partly dependent on a hard stance against the US, so conceding would carry a higher political cost than the economic cost.

Impact ranking (from most to least affected):

Gulf oil‑exporting countries (Saudi Arabia, Iraq, Kuwait): export routes blocked, revenue essentially zero.

East Asian energy importers (Japan, South Korea): highly dependent on Middle‑East oil with no quick substitutes.

European Union : higher industrial manufacturing costs and renewed inflation pressure.

Iran : export disruption but with alternative routes (Caspian‑land and overland) already prepared.

United States : low direct oil dependence, but higher prices still raise inflation and suppress consumption.

In other words, the blockade harms US allies and the US economy more than Iran itself.

A Bigger Issue

Market reaction was surprisingly calm; US equities rose on the day the blockade took effect and Brent oil briefly fell, suggesting investors view the move as a short‑term pressure tool rather than a long‑term strategy.

First , alternative pipeline capacity is already maxed out. Saudi’s east‑west pipeline runs near full capacity (~7 million barrels/day) and the UAE pipeline adds about 1.5 million barrels/day, far short of the normal 20 million‑plus barrels.

Second , the crisis accelerates the development of alternative routes such as the Caspian‑Central Asia land corridor, the China‑Pakistan pipeline, and North‑Africa‑Mediterranean links, reshaping the global energy map faster than expected.

Third , the US “guardian of the seas” credibility is eroding. Decades of US narrative about securing global energy corridors are undermined when the US itself enforces a blockade, likely reducing other nations’ willingness to rely on US protection for Middle‑East shipping lanes.

From a mathematical‑model standpoint, when one player deliberately breaks the rules, the original equilibrium disappears and a new, uncertain equilibrium must be found, likely at a high cost.

Data sources: US Energy Information Administration (EIA), OPEC monthly report, Xinhua, International Maritime Organization.