US and Iran exchange fire in Strait of Hormuz as Trump threatens escalation

The Strait of Hormuz erupted in violence late Sunday night when American forces struck Iranian rocket launchers on Larak Island, killing three Iranian soldiers and wounding two civilians. The US military said it had detected preparations for a fresh mine deployment in the waterway and acted to prevent it. Within hours, Iran's Islamic Revolutionary Guard Corps fired back, launching ballistic missiles at American airbases in Jordan and the United Arab Emirates. A drone was shot down over the strait. By Monday morning, President Trump was on Fox News promising harder hits to come.

The fighting marked the first direct exchange in a month and underscored a conflict that has fundamentally reshaped global energy markets. The Strait of Hormuz, a narrow passage between Iran and Oman, carried roughly one-fifth of the world's seaborne oil before the war began on February 28. Now it is a contested zone where the US and Iran are locked in a struggle over who controls passage through it. Washington claims repeated attacks on Iranian missile launchers and radar stations have loosened Tehran's grip on the waterway. Iran disputes this entirely, saying it maintains the right to enforce its own rules for shipping and has targeted vessels it deems in violation.

The immediate trigger for Sunday's fighting appears to have been a tanker that caught fire after striking two Iranian naval mines while trying to navigate the southern route near Oman. Iranian state television reported the incident and said the IRGC had subsequently targeted three additional ships attempting to use that same passage. The Guard Corps issued a warning: other vessels that violated its regulations would face identical consequences. Compliance with Iranian rules, it said, was mandatory.

Yet the broader picture is one of economic strangulation. Tanker Trackers, an independent monitoring agency, reported that crude oil flowing through the strait averaged 3.8 million barrels per day over the past week. During a ceasefire period that lasted only 25 days, the figure had been 9.8 million barrels per day. Iranian crude exports have been at zero for some time. Trump's administration has made economic pressure its primary tool, with Treasury Secretary Scott Bessent arguing on Monday that Iran's military response was born of economic desperation—that the country was "lashing out kinetically because they are losing economically." The US treasury secretary said Iran was "in shock at the state of their economy."

Yet even as Trump threatened further military action, a parallel conversation was unfolding in Kyrgyzstan. Iranian President Masoud Pezeshkian told Pakistan's prime minister that continuing the war served no Iranian interest and that he remained willing to implement a memorandum of understanding that Pakistan had brokered in June. Last week, Iran and Oman had reached a verbal agreement on a temporary shipping corridor through the strait, with Oman retaining control over its own waters. But a Western diplomat familiar with the negotiations said the message to Washington was clear: this bilateral arrangement would not be enough to open the strait. For Iran to truly lift its restrictions, the US would need to end its blockade of Iranian oil exports—something Trump is not prepared to do. "There are many in Iran determined to torment Trump right up to the end of his presidency," the diplomat said. "We are stuck."

The economic toll is mounting on both sides. Iran's currency faced renewed pressure Monday, and the inflationary consequences of its rapid depreciation are alarming Iranian lawmakers. The White House signaled last week that Trump had shelved further military operations in favor of a sanctions campaign designed to destroy the Iranian economy. But at a G20 finance ministers meeting in North Carolina, tensions emerged over this strategy. Germany's finance minister, Lars Klingbeil, facing difficult regional elections at home, planned to urge the US to pursue a diplomatic end to the conflict, citing its inflationary impact on global markets. China, a major buyer of Iranian oil, has already opposed the new sanctions regime and will be watching closely as Pezeshkian seeks concrete assurances from President Xi Jinping that Beijing will not allow American economic pressure to destabilize Iran further.

The White House claims the US now controls the strait and that shipping is free to navigate its waters. This assertion is heavily contested. What is clear is that the waterway remains a chokepoint where neither side has achieved decisive advantage, where economic pressure and military strikes have become intertwined, and where the possibility of diplomatic resolution exists in theory but collides with fundamental disagreements about the terms of any settlement.