The current crisis between Europe and the United States marks the end of an era. The trans-Atlantic bond rested on specific features at the global level and within the U.S. and Europe. It was an order in which laws and norms were often violated, but they were recognized and shared on both shores of the Atlantic. The liberal order is now gone. The United States is no longer a leviathan or a liberal one.
The Strait of Hormuz was closed because of the war between the US, Israel and Iran. The U.S. is the largest exporter of energy through the strait and is in no hurry to re-open it. The technology crowd promised that artificial intelligence would create new efficiencies in global trade, but the market didn't price it.
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President Donald Trump’s tentative Iran framework has its own Mexican standoff: Washington wants the Strait of Hormuz reopened, Tehran wants relief, and Moscow wants the crisis to keep making Russia useful. For Vladimir Putin, the result is good for his theory of power, bad for his balance sheet, and ugly for his long-term leverage.
Washington and Tehran have reached a ceasefire-linked agreement to reopen the Strait of Hormuz and suspend tolls. The deal is due to be signed on Friday, but questions remain over mine clearance, traffic control, insurance, security arrangements and the durability of the ceasefire. Industry experts warn that the security situation for the shipping industry remains volatile. The biggest operational winners from a credible reopening would be LNG carriers, LPG/VLGCs, Gulf container and feeder services and product tankers.
Geopolitical Futures is a free newsletter with weekly analysis from New York Times bestselling author George Friedman and a global team of analysts. It includes special offers and reports on Turkey, Iran, and the future of the Middle East. Sign up now to receive the special report on Turkey and Iran.
The agreement between the U.S. and Iran to open the Strait of Hormuz is good for the German and international economies. The economic head of the Institute for the World Economy (IfW) in Kiel, Stefan Kooths, spoke of a “significantly improved situation” for the global economy. The damage from higher energy prices has already occurred, but with the framework agreement a recession is now ruled out.