The challenge will come when the U.S. effort to bring Iran's oil exports to zero failsand most observers believe this will be the case. Iran's Foreign Minister Javid Zarif has bragged that "Iran has a PhD in sanctions busting," and historical precedence is on his side. If the Trump administration proves unable to shut down Iran's ability to sell oil through sanctions, and therefore fails to blunt what it describes as Iran's "malign activities" in the Middle East, there will be increased pressure to be seen as doing somethinganythingto effectuate policy objectives, especially during the lead up to the 2020 presidential election, where the Trump administration would be loath to provide any fodder to its political opponents.
Because any effort to restrict or deny transit through the Strait of Hormuz would be rightfully seen as a provocative act worthy of military intervention, it is highly unlikely that Iran would take any precipitous action in that regard. Instead, Iran would most likely seek a gradual escalation of restrictions grounded in its legal interpretation of the 1982 United Nations' Convention on the Law of the Sea, which grants Iran control over "territorial waters" extending to a maximum of 12 nautical miles beyond its coastline. Any ships using the northern and eastern routes through the Strait of Hormuz to gain access to the Persian Gulf would have to transit through Iranian waters.
Under the convention, Iran is permitted to deny free transit passage to nations, like the United States, which have not ratified the agreement. If the United States interdicts Iranian shipping involved in the transit of oil, then it is most likely Iran will close the Strait of Hormuz to U.S. shipping, citing the 1982 convention as its justification. The United States would either be compelled to back down (unlikely), or resort to military force, certifying it as the aggressor in the eyes of international law.
The military debate over Iran's ability to close the Strait of Hormuz, and the U.S. ability to respond to such a threat, is mootno insurance company will cover any oil tanker seeking to transit contested waters. The economic impact of any closure will be immediate, catastrophic and sustained. Even if the United States prevailed in a military conflict over the Strait of Hormuz (and it is not certain it would do so), any victory would be pyrrhic in nature, with the United States sacrificing its national economic health, and that of the rest of the world, on an alter of hubris that fails to advance the national interest in any meaningful fashion.
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