The White House declared Operation Epic Fury effectively complete this week, with the Trump administration quickly pivoting to "Project Freedom", a military-backed effort to escort stranded commercial vessels through the Strait of Hormuz after more than two months of disruption. Markets didn't need much convincing. Brent crude tumbled 8% to US$101 a barrel, global equities rallied broadly and hopes grew that US-Iran negotiations could finally stabilise one of the world's most critical trade routes.
Within 36 hours, Project Freedom was paused.
Iran's parliamentary speaker warned the conflict had "not even begun", as US destroyers came under a barrage of Iranian drones, missiles, and small boats. Tehran also established the Persian Gulf Strait Authority — a new body to vet and tax vessels seeking passage, in violation of international maritime law. The operation's fatal blow, however, came from an unexpected direction: Saudi Arabia and Kuwait cut US access to their bases and airspace, stripping Washington of the aerial cover needed to protect ships through the strait. Even its closest regional allies weren't willing to back a forceful reopening.
That matters because roughly 20% of the world's oil and LNG moves through Hormuz. Iran doesn't need to win militarily to hurt global markets, it just needs to keep the strait unstable. The RBA underscored the local stakes this week, raising rates for a third consecutive meeting to 4.35%, explicitly citing the Middle East conflict as a key driver of Australia's inflation problem.
Brent traded around US$116 for much of the week before dropping toward US$97 on Thursday on peace deal hopes, yet the muted reaction to Project Freedom's collapse suggests markets are growing numb to the headlines. Until the Strait is functioning normally and a formal deal holds, it will continue to serve as both an economic and geopolitical pressure point for global markets.
