From Hormuz to Petrodollars: The New Middle East Security Equation

The Iran war appears to be entering a panic phase as US President Donald Trump has reportedly warned Oman that it could also face American military action if Washington moves to capture or control the Strait of Hormuz and Oman becomes involved. Desperate for an exit, Trump’s state of mind appears increasingly disruptive rather than strategic. Just a day earlier, he was addressing a rally and suggesting that the Strait of Hormuz should effectively become American territory. Such rhetoric demonstrates how quickly a military crisis can move from strategic calculation towards dangerous escalation.

Iran and Oman, however, have been working around the question of maritime security and the safe passage of commercial traffic through Hormuz. A possible arrangement could involve tolls or transit arrangements on the northern side of the passage, while the Iranian side would facilitate the movement of container and commercial vessels. Meanwhile, around 20 per cent of Saudi Arabia and GCC-linked energy exports also depend on routes connected to the wider region, including the Bab el-Mandeb, where the Houthis remain a major security factor. If America widens the war instead of securing these maritime routes, it could ultimately damage its own strategic and economic interests.

Why is the Strait of Hormuz so important to America?

The deeper issue is not simply oil. It is the architecture of the petrodollar system. Since the 1970s, particularly following the US-Saudi economic and strategic arrangements, the dollar has remained deeply embedded in international energy trade. As global energy commerce expands, demand for dollar-denominated transactions reinforces the international position of the American currency.

That gives Hormuz an importance far beyond geography. If regional states increasingly move towards settling energy transactions in local currencies or alternative financial mechanisms, the dollar could face additional pressure. The United States already carries enormous public debt, while its economy remains heavily dependent on consumption and financial confidence. A major disruption to the dollar-based energy trade would therefore create consequences extending from currency markets to global investment and American borrowing costs.

Why does J.D. Vance appear to be talking sense?

Vice President J.D. Vance appears to approach the crisis differently from Trump’s more reactive rhetoric. He seems more conscious of the limits of military power and the possibility that continued escalation could produce strategic losses rather than victories. If Washington's objective is ultimately to protect Israel while preventing a wider regional war, the first requirement is to protect American interests themselves.

This is where Pakistan could potentially become relevant. Islamabad has historically maintained channels with multiple sides of the Middle Eastern equation and could offer itself as a mediator. A negotiated settlement involving maritime security, regional guarantees and economic incentives could potentially provide Washington with a more lucrative outcome than an open-ended military confrontation.

How could a Mecca agreement be welcomed by America?

The United States maintains a vast global military footprint, but military power requires enormous financial resources. Washington may increasingly recognise that regional states must eventually assume greater responsibility for their own security. A regional security framework centred on the Muslim world could therefore complement, rather than necessarily contradict, American interests.

In the absence of a large-scale American military presence, Pakistan could potentially emerge as an anchor of such a framework. It could develop into a parallel regional architecture to the Abraham Accords, but with a broader security dimension. Israel, too, would have to recognise that long-term security cannot depend exclusively on military superiority. A guaranteed maritime passage and a regional security mechanism could offer a possible pathway forward while reducing the risk of another destructive confrontation with Iran.

Can Israel, India and the UAE form a counter-bloc?

Such a counter-bloc would face serious limitations. The UAE has its own economic and security interests and has maintained channels with Iran. India, meanwhile, has limited room to assume a direct regional security role without risking its economic relationships across the Gulf.

The Middle East is therefore moving towards a complicated strategic equation in which military alliances alone may no longer be sufficient. The Strait of Hormuz has become more than an oil route: it is a test of whether Washington can still impose order through force or whether the region is entering an era where regional states themselves will define the rules of security.

The real question is no longer who controls Hormuz. It is who can keep it open without turning the entire Gulf into the next battlefield.