Fought Through Commodities, Not For Them

The Hormuz war shows that power over the physical economy belongs to whoever can impose disruption most cheaply — and that the heaviest costs are landing on the bloc said to be winning.

Eight months after the US and Israeli strikes on Iran of 28 February, the Strait of Hormuz has become a live test of a popular argument: that the world is splitting into a West that controls money and a BRICS bloc that controls things, and that the conflicts of this decade are struggles for command of the physical economy.

The industrial researcher Simon Michaux set out a detailed version of that argument in a CapitalCosm interview released on 22 October. His mapping of reserves, mining and refining is serious work, and his central distinction — between owning money and commanding the physical systems that money must buy — is a useful one. But tested against the war it is meant to explain, the framework points somewhere other than where he takes it.

Three things stand out. Commodities are the medium of this war rather than its prize. The decisive leverage in it is held by an actor that controls neither the world's processing capacity nor its finance. And the heaviest costs are falling on the countries Michaux's framework casts as winners.

What the bloc thesis gets right

Michaux's most important move is to look past reserves and mining to refining. Strength in the ground does not translate into strength in the supply chain; the bottleneck is usually the plant that turns ore into a usable input.

The evidence for concentration at that stage is strong. The International Energy Agency's 2025 assessment found China was the dominant refiner for 19 of 20 strategic minerals it examined, with an average share of around 70%. For magnet rare earths, the IEA expects China still to hold around 80% of refining in 2035. [2]

Nor is this leverage hypothetical. Licensing requirements on seven medium and heavy rare earths, introduced in April 2025, remain in force. [3] Beijing imposed new dual-use export restrictions on Japanese military end users in January 2026, [4] and by May its shipments of controlled rare-earth compounds to the United States had fallen to zero. [5] In July it added 14 European entities to its dual-use export-control list. [6] The lever exists, and it has been pulled.

How it has been pulled matters, though. China's controls are licence-based, targeted at named countries and firms, and adjustable — a valve, not a wall. The broader package announced in October 2025 was suspended for twelve months as part of a deal with Washington; that suspension expires on 10 November. [7] Each use of the valve also accelerates substitution: Western governments are now funding rare-earth separation plants outside China. [8]

This is why Michaux's thresholds — that a supplier can influence price above 30% of a market, influence supply above 50%, dictate terms above 70% — should be treated as heuristics rather than laws. Market share describes potential leverage. Whether it becomes actual control depends on inventories, on how long buyers take to qualify an alternative, and on how much the supplier is prepared to lose in export revenue and goodwill while they do.

Hormuz: the power to tax throughput

Before the war, around 20 million barrels a day — roughly a fifth of global petroleum consumption and more than a quarter of seaborne oil trade — passed through Hormuz, most of it with no alternative route out of the Gulf. [1]

Iran is not exercising leverage over that flow by controlling supply. Its own exports are under a US naval blockade; by 17 October US Central Command said it had redirected 138 commercial vessels. [9] It exercises leverage by making everyone else's supply dangerous, slow and expensive.

The mechanism is insurance and risk, not closure. War-risk premiums for a Hormuz transit have risen from about 0.25% of hull value before the war to between 3% and 10%, the broker Marsh said in July; [10] in mid-October brokers put them at 6–10% for tankers. [11] For a $100 million tanker, that is $6–10 million a voyage. The International Maritime Organization had confirmed 120 incidents across the Middle East, including Hormuz, by 22 October, with 24 seafarers killed. [12] Between 10 and 20 October the Revolutionary Guards claimed mine strikes on at least six vessels; none was identified or independently confirmed, and the multinational JMIC said it found no substantiation for two of the claims. [13] Claims like these are enough to keep cover expensive.

The result is a divergence between volume and security. Kpler data reported this week put oil flows from the region, counting Red Sea and Gulf of Oman routes as well as Hormuz, at just over 24 million barrels a day, above the pre-war average. Yet the head of the IEA said he saw no "credible pathway" to normalisation in 2027, and warned that the strait "can be closed again". [14] Vessel counts tell a different story: UK Maritime Trade Operations said on 17 October that shipping through the strait remained about 70% below pre-conflict levels, [15] and IMF PortWatch's satellite count of visible transits averaged 3.7 a day in the week to 18 October, against 92 a day in 2023 — a floor, since many ships now cross with their transponders off. [16] Barrels are moving, but in fewer, costlier, riskier runs. Brent touched $111 on 20 October, its highest since May, on attacks against shipping and Saudi energy sites. [17]

Iran has also turned the strait into a permission system. Since March it has allowed passage to "friendly" nations including China, India and Russia, [18] and in May Iranian media reported that Chinese ships were being let through under Iranian rules for managing the waterway, after requests from Beijing. [19] Its parliament has legislated transit fees, and in June a lawmaker said fees of $1.5–2 million a vessel were being collected. [20] A chokepoint is becoming a licensing regime.

This complicates one of Michaux's key distinctions. He assigns the West control of insurance and finance — the "virtual" layer. At Hormuz, the price of cover written in London is set by threats issued from Tehran. The financial layer is downstream of the physical threat. Neither side controls the system; one side has found the cheapest point at which to disrupt it.

The coupling: the Gulf is a chemical hub, not just an oil tap

The weakness of treating oil and minerals as separate stories is that the Gulf links them directly. Its refineries and gas plants produce by-products on which mineral processing and agriculture depend.

Sulphur. The Gulf supplies roughly half of the world's seaborne sulphur trade. [22][23] Global sulphur exports fell 45% below end-February levels, and Morocco's OCP — the world's largest phosphate exporter — received its last Gulf sulphur cargo on 10 April. [21] Sulphur becomes sulphuric acid, which is used to leach copper, to process laterite nickel, and to make phosphate fertiliser. Analysts at the Observer Research Foundation have noted that the refining dominance Michaux describes depends on this feedstock: China's mineral processing has taken a double cost shock from the blockade. [22]

Fertiliser. The WTO estimates the corridor normally carries about a third of seaborne fertiliser trade, including 34% of urea, 23% of ammonia and nearly 20% of phosphate exports. [24] A joint ITC, WTO and UNCTAD study found urea exports from Hormuz-dependent economies fell 83% by volume in April compared with a year earlier. [25] Urea prices later eased back towards pre-war levels, partly because China reopened its own exports; phosphate stayed high because sulphur has not normalised. [24]

Helium. Qatar supplies around a third of the world's helium, extracted from LNG processing and exported only by sea through Hormuz. [26] Helium output at the Ras Laffan complex stopped after drone strikes on 2 March, and Iranian missiles struck the complex again on 18 March. [27] South Korea, home to the largest memory-chip makers, sourced 64.7% of its helium from Qatar in 2025, and some Asian chipmakers have been operating under rationed supply. [26]

The implication runs directly against the bloc thesis. Dominance of one processing stage is not command of a chain. A refinery is only as resilient as the reagents, energy and shipping that feed it. Michaux's "physical world" is not a territory one bloc can hold; it is a web of dependencies in which every major node relies on others.

Who pays

The incidence of the Hormuz shock is not ambiguous. In 2024, 84% of the crude and 83% of the LNG moving through the strait went to Asia; China, India, Japan and South Korea alone took 69% of the crude. [1]

The United States, a net petroleum exporter, is the least exposed large economy. Its consumers pay higher prices, but its producers earn them, and its trade balance in energy improves rather than deteriorates. Japan, South Korea and Europe are the most exposed. China and India are heavily exposed but have used diplomacy to buy partial passage — though even China's state-controlled tanker fleets, COSCO and China Merchants, kept their crude carriers away from Hormuz from late July despite Beijing's "friendly" status. [28]

This is the defensible core of Michaux's claim that Washington does not care what happens to everyone else. No plan is required to explain it. The asymmetry is structural: a disruption to Gulf exports is a cost for importers and, net, a much smaller one for an exporter.

The bloc under stress

If BRICS were a coordinated alliance governing the physical economy, this war would be its moment to act as one. Instead it is being fought partly between its own members.

Iran has repeatedly struck the United Arab Emirates — both full BRICS members — and the UAE says it has intercepted nearly 3,000 missiles and drones since 28 February. [30] A BRICS foreign ministers' meeting in Delhi in May broke up without a joint statement after Iran accused the UAE of joining military operations against it. [29]

The bloc's members have also responded to the commodity shock as sovereign states protecting themselves. China reportedly halted sulphuric acid exports from May, cutting off buyers in Brazil — a founding BRICS member — and Southeast Asia who had turned to Chinese supply after Gulf cargoes stopped. [21][22] Russia, which has restricted sulphur exports since late 2025, added helium to its export-licensing list on 14 April, removing an alternative just as Gulf supply disappeared. [21][26]

That is not evidence of a hidden master plan. It is ordinary self-interest under stress, and it is incompatible with the idea of a single command over mines, refineries, ports and export policy.

The debt-erasure theory fails on its own terms

Michaux's most striking claim is that Washington is using the war to engineer dollar hyperinflation, pay off roughly $40 trillion of debt in worthless currency, and leave the rest of the world to default. The objection is not simply that he offers no evidence. The mechanism contradicts itself.

Dollar hyperinflation would reduce the real burden of every dollar-denominated debt, including the large stock owed by foreign governments and companies. It would rescue foreign dollar borrowers, not force them into default; the losses would fall on holders of dollar assets.

It would also destroy the layer of power Michaux says the West still holds. If Western leverage now rests on money, insurance and finance, wrecking the dollar removes the one advantage his own framework assigns to it.

And an oil shock is a poor tool for the job. Inflation erodes debt mainly when it is unexpected and the debt is long-dated and fixed-rate. Much US government debt is short-term and reprices quickly, and an energy shock tends to push interest rates up. A government that wants inflation to erode its debt has older and quieter options — tolerating moderate inflation while holding rates down — none of which requires a war or a currency collapse.

A common version of the hypothesis adds a second step: once the old dollar has been destroyed, Washington replaces it with a central bank digital currency. That changes nothing in the arithmetic. A digital dollar is still a dollar, and moving every contract into the new unit means setting a conversion rate. If debts and assets convert at the same rate, nothing is erased. If the debt is written down while savings are not, that is a default by another name, and the losses fall first on the American banks, pension funds, insurers and households that hold most Treasuries. Nor is it current policy: an executive order signed on 23 January 2025 bars federal agencies from establishing, issuing or promoting a CBDC, though a later order could reverse it. [33] If a digital currency matters here, it is for the quieter route. Programmable money would make it easier to keep savings in place while inflation runs above interest rates.

Errors that matter

Several details in the interview are wrong in ways that bear on the argument.

The Suez Canal is owned and run by Egypt's state Suez Canal Authority, not a Chinese company; Chinese firms hold stakes in terminals in the canal zone, which is a different thing.

The Panama case cuts against the bloc thesis rather than for it. Panama's Supreme Court declared CK Hutchison's concession for the Balboa and Cristóbal terminals unconstitutional, and the state took control of both ports on 23 February, with Maersk's APM Terminals and MSC's TiL appointed as interim operators for up to 18 months; CK Hutchison has begun arbitration. [31][32] Commercial ownership yielded to sovereign authority within weeks.

Ethiopia is landlocked; China's base on the Bab el-Mandeb is in Djibouti. Gibraltar is British, and Spain's enclave of Ceuta does not give whoever holds it control of the strait.

What to watch

The commodity argument is right; the bloc argument is not. The useful version of Michaux's thesis is narrower and testable. Over the coming weeks, five indicators will show whether leverage is consolidating or dispersing:

1. 10 November. Whether China extends, lets lapse, or trades away the suspension of its expanded rare-earth controls.
2. Volume versus security at Hormuz. Whether war-risk premiums and vessel counts converge on the recovering barrel flows, or the gap persists.
3. Sulphur. Gulf sulphur exports and operating rates at acid-dependent plants — Moroccan phosphate, Indonesian nickel, Chilean and Central African copper.
4. Ras Laffan. A confirmed restart of Qatari helium output.
5. Transit permissions. Whether Iran's rules for "friendly" ships harden into a standing fee regime, and whether China and India formalise their own arrangements with Tehran.

If there is a contest for the material foundations of power, Hormuz suggests it will not be won by whoever owns the most mines or the most money. It will be shaped by whoever can keep things moving — and whoever can stop them most cheaply.

Sources

Primary interview: CapitalCosm — "I Got Invited To A Forum Of The ELITE (What I Heard Was INSANE)", with Simon Michaux, released 22 October 2026.

1. US EIA — Amid regional conflict, the Strait of Hormuz remains critical oil chokepoint, 16 June 2025.
2. IEA — Global Critical Minerals Outlook 2025 and executive summary, 21 May 2025.
3. China Briefing — China's rare earth export controls: impacts on businesses, 2026.
4. Nippon.com / Jiji — China widens export ban to Japanese entities, 24 February 2026.
5. Silverado Policy Accelerator — China's Global Exports of Rare Earths: June 2026 Update, 26 June 2026.
6. S&P Global — China bans rare earth exports to 14 European companies, 24 July 2026.
7. Mining Technology / Yahoo Finance — China rare earth export pause nears expiry amid persistent supply concentration, 2026.
8. Mining.com — More governments are warming to rare earths funding, Lynas says, 2026.
9. Kurdistan24 — CENTCOM reports 138 vessels redirected to enforce Iran blockade, 18 October 2026.
10. The National — Shipping insurance surges again as attacks intensify over Strait of Hormuz, 17 July 2026.
11. Insurance Business — Hormuz sinking hands marine war underwriters another total loss as attacks surge, 14 October 2026 (citing brokers to the Financial Times).
12. IMO — Middle East: highlighted incidents, as at 22 October 2026.
13. gCaptain — Iran claims more tankers hit mines in Hormuz, but evidence remains elusive, 20 October 2026.
14. CNN via ABC15 — Oil parked above $110 a barrel as IEA warns energy markets won't return to normal next year, 20 October 2026; Hürriyet Daily News / AFP, 20 October 2026.
15. Middle East Monitor — Strait of Hormuz transits remain 70% below pre-conflict levels: UK maritime agency, 17 October 2026.
16. IMF PortWatch — Strait of Hormuz daily transit calls, seven-day average to 18 October 2026; 2023 baseline.
17. Engineering News / Reuters — Brent hits five-month high as attacks on ships, Saudi sites fuel supply worries, 20 October 2026.
18. News On AIR — Iranian foreign minister says Iran allows India, China, Russia access to Strait of Hormuz, 26 March 2026.
19. Reuters via Internazionale — Iran allowing transit of Chinese vessels in Strait of Hormuz, Fars news reports, 14 May 2026.
20. Middle East Monitor — Iranian lawmaker says Tehran collects transit fees from ships passing through Strait of Hormuz, 8 June 2026.
21. Kpler — Sulphur & sulphuric acid in 2026: the feedstock crisis cascading through copper, nickel & fertilisers, 4 June 2026.
22. Observer Research Foundation — The Sulphur Chokepoint: Hormuz and China's Critical Minerals Vulnerability, 4 June 2026.
23. Argus — Potential Hormuz closure threatens fertiliser, sulphur trade, June 2025.
24. Fertilizer Daily — WTO data confirms Strait of Hormuz fertilizer trade disruption is easing, 24 July 2026.
25. UN News — ITC, WTO and UNCTAD study on Hormuz disruption to fertiliser exports, August 2026.
26. IUMI — Qatari helium shortages, June 2026.
27. Exiger — Iran war disrupts one-third of global helium supply, 2026.
28. bne IntelliNews — Chinese vessels transit Hormuz despite US blockade on Iran, 23 August 2026.
29. Reuters via TimesLIVE — BRICS talks end without joint statement, exposing divisions over war in Iran, 16 May 2026.
30. Anadolu Agency — UAE says it needs no protection from outside, vows to defend sovereignty, 16 May 2026.
31. Seatrade Maritime — Hutchison Panama ports concession formally terminated, February 2026.
32. RTHK — Panama officially scraps CK Hutchison port contracts, 24 February 2026.
33. The White House — Executive Order 14178, Strengthening American Leadership in Digital Financial Technology, 23 January 2025.