A “Hormuz Stability Deal” Could Stop War Rhetoric from Becoming a Global Inflation Tax

The most expensive explosion in the world is often the one that never happens.

A threat is issued in Washington, a warning is answered in Tehran, and before a single pipeline is hit, the price at a gas pump in Detroit or a matatu stand in Nairobi inches upward. In early January 2020, as U.S.–Iran tensions spiked after the killing of Qassem Soleimani and subsequent threats of retaliation and further strikes, oil surged to fresh four-month highs—Brent climbing above $70 a barrel and U.S. benchmark WTI topping $64—levels last seen after the September 2019 attacks on Saudi facilities. That jump was driven less by missing supply than by a sudden surge in fear.

This is the quiet mechanism by which geopolitics becomes a household bill. Traders don’t wait for missiles; they price in risk. Insurers raise war-risk premiums. Shipping firms reroute or add surcharges. Fuel costs feed into food, medicine, construction, and airline tickets. Inflation arrives not as an abstract macroeconomic concept, but as a receipt.

And while the world argues about who is bluffing whom, ordinary people absorb the shock first. In Iran, civilians already squeezed by sanctions and inflation live under the compounded stress of economic scarcity and the fear of strikes. Across the Gulf, communities near ports, refineries, and desalination plants understand that “deterrence” can quickly look like fire in the night sky. U.S. troops and diplomats posted across the region face heightened alerts and the reality that escalation can come by drone, proxy rocket, cyberattack—or miscalculation.

Yet the market’s anxiety is rational, because the geography is unforgiving. The Strait of Hormuz, a narrow corridor through which roughly one-fifth of global petroleum liquids transit by many estimates, is a chokepoint with no fast substitute. No serious observer needs to claim that Iran “controls” the strait to acknowledge what matters to markets: Iran has demonstrated an ability to threaten shipping and raise the perceived cost of passage. In energy pricing, perception can be as potent as an outage.

So the question is not whether volatility is understandable. It is why we continue treating it as inevitable.

The workable fix: Insulate the Strait of Hormuz from brinkmanship

The world does not need to solve every grievance between Washington and Tehran to stop paying this “fear tax.” It needs something narrower and more achievable: a binding set of rules, communications channels, and verification procedures that keep commercial energy flows and maritime traffic from becoming the first hostage in every crisis.

Call it a Hormuz Stability Deal—part security architecture, part diplomatic off-ramp. Its core logic is simple: if trust is scarce, build verification; if broader peace is distant, build guardrails. The purpose is not to crown a winner, but to make it harder for threats—whether shouted at rallies or typed into a late-night post—to instantly translate into global price spikes.

The first pillar is mundane but lifesaving: permanent deconfliction. A dedicated naval-to-naval hotline, backed by agreed protocols for identification, approach distances, radio frequencies, and emergency procedures, would reduce the chance that a drone incident or a misunderstood maneuver becomes a cascading crisis. The second pillar is speed and credibility in establishing facts. A standing incident review mechanism—modeled less like propaganda warfare and more like aviation accident investigations—could deliver timely, technical assessments before rumors harden into markets-moving certainties.

The third pillar is incentives designed for political reality. Any economic benefit must be phased, measurable, and reversible: limited sanctions relief or targeted waivers tied specifically to maritime non-interference and cooperation with verification, rather than broad promises untethered from behavior. The message would be blunt: stability has value, and it can be shared—but it cannot be banked in advance.

This framework should not be seen as a purely U.S.–Iran arrangement. The countries with the most to lose from disruption—major Asian importers, European economies, and Gulf states whose infrastructure sits within range of escalation—should be formally invested in enforcing safe passage. A multilateral, internationally mandated maritime safety regime would dilute the ability of any single actor to turn the strait into a bargaining chip, while making attacks on shipping a confrontation with a wider coalition of stakeholders, not merely a bilateral feud.

How it could unfold—quietly, quickly, and with fewer illusions

The public tends to imagine diplomacy as a summit and a handshake. In reality, the stabilizing work would begin in windowless rooms, led by technical experts and intermediaries trusted to carry messages without turning them into theater. Oman and Switzerland have played such roles before; others could, too. What matters is a tight mandate: maritime safety first, broader disputes later.

Within sixty days, negotiators could agree on standardized rules of the water—clear “rules of approach,” transponder expectations for commercial vessels, and an emergency communications chain that does not depend on goodwill in the moment. Within ninety days, the incident review mechanism could be staffed and empowered to issue rapid preliminary findings when something happens: a limpet mine scare, a drone strike, a ship seizure. Markets react to credible information nearly as fast as they react to threats; shortening the fog-of-war window is an economic intervention as much as a diplomatic one.

By six months, the agreement could add a limited compliance-linked economic track: narrowly defined, reversible steps that reduce pressure in exchange for verified reductions in harassment incidents and cooperation with investigations. This is the kind of structure that can survive domestic politics in Washington and Tehran because it is conditional, not sentimental.

Alongside it, consumer nations should adopt a parallel discipline: coordinated strategic petroleum reserve releases triggered by defined disruption-risk thresholds. The aim is not to “fight the market,” but to remove the incentive for speculative panic. When traders know that a sudden surge will meet a predictable, rules-based response, the froth thins.

None of this requires anyone to pretend that nuclear issues, regional proxy conflicts, or human rights disputes do not exist. It simply refuses to let every crisis automatically detonate the world’s inflation rate.

What success would look like by 2027: less drama, lower premiums, more room to breathe

If the Strait of Hormuz is credibly protected from tit-for-tat escalation, the change would be visible first in what stops happening. Fewer abrupt war-risk insurance spikes. Fewer emergency reroutings. Fewer days when central banks and finance ministers brace for a crude-driven inflation jolt. The “geopolitical risk premium” would not vanish, but it would shrink toward something closer to fundamentals.

And that matters. Measured in a few dollars per barrel, the savings can look modest—until you translate them into freight costs, food prices, and household budgets across billions of lives. Stability is not glamorous, but it is distributive: it helps most the people with the least slack.

There is a second-order benefit that is easy to miss. When oil is less hostage to crisis, governments gain political oxygen to do the longer work of reducing dependence altogether—electrifying transport, upgrading grids, building efficiency, diversifying supply chains. The clean-energy transition is the true exit from chokepoint vulnerability, but it is not instantaneous. A Hormuz Stability Deal would be a bridge: lowering the odds that the remaining fossil-fuel decades are punctuated by catastrophic conflict.

The call to action: Treat volatility as a policy failure, not a natural disaster

Oil at a four-month high on words alone should be understood for what it is: a warning flare from a system that still allows improvisation to price the global economy. Washington should pursue narrow, verifiable de-escalation even with adversaries because the alternative is repeatedly importing inflation through crisis. Tehran should recognize that using risk as leverage punishes Iranian households first and hardens the isolation it seeks to escape. Gulf states should press for a framework that protects their populations and infrastructure from becoming collateral in escalation ladders. And major importing nations—from Europe to India, China, Japan, and beyond—should stop acting like spectators when their economies are among the principal hostages.

The world cannot electrify itself overnight. But it can decide, now, that the Strait of Hormuz will no longer be governed by threats and guesswork. The choice is not between perfect peace and perpetual war. It is between building guardrails—or paying, again and again, for the privilege of living without them.