CPC's Price Shield Is Cracking — and the Strait of Hormuz Offers No Relief

For commuters and small businesses dependent on logistics in Taiwan, one immediate concern has been fuel costs.

Taiwan's state-owned oil firm CPC Corp will raise petrol and diesel prices from midnight Monday, as mounting global supply pressures stemming from the Strait of Hormuz crisis stretch the company's ability to absorb costs.

CPC said prices for 92-octane, 95-octane and 98-octane unleaded petrol would rise to NT$30.7, NT$32.2 and NT$34.2 per liter respectively, while premium diesel would increase to NT$29.5 per liter — increases of NT$1.8 and NT$1.4 per liter for petrol and diesel.

The company acknowledged the adjustments fell well short of what underlying costs would justify. CPC said unsubsidized market prices would have required increases of NT$15 per liter for petrol and NT$16.9 for diesel, with the firm absorbing the difference to cushion consumers and logistics operators.

If the Strait of Hormuz blockade persists, CPC may no longer be able to continue absorbing the cost gap. Whether U.S. forces can reopen the waterway remains uncertain.

Whatever one makes of a per-liter price adjustment of just over a dollar, the impact Taiwanese consumers now face is the result of the state machinery deploying, in effect, heavy armor to shield consumers from the full impact — the real economic damage from the Middle East conflict is far more severe than what the price boards at gas stations suggest.

After the U.S.-Iran conflict erupted — triggered by what Trump dubbed "Operation Epic Fury" — Iran's Islamic Revolutionary Guard Corps (IRGC) moved to tighten its grip on one of the world's most critical maritime chokepoints.

Now in its third week, the conflict has placed the strategic opening of the Strait of Hormuz at the center of global attention. With Iran's Supreme Leader Mojtaba Khamenei maintaining a posture of maximum deterrence, Washington and Tehran are engaged in what analysts describe as a high-stakes game of brinkmanship over the Persian Gulf — with neither side showing a clear path to de-escalation.

On the 16th, the Washington-based Middle East Institute (MEI) convened an online forum titled "Can the US Unlock the Strait of Hormuz?" The session was moderated by Ken Pollock, MEI's Vice President for Policy, and featured retired Vice Admiral Kevin Donegan, former commander of U.S. Naval Forces Central Command and the Fifth Fleet, alongside MEI Senior Fellow Alex Vatanka. The forum assessed the tactical evolution of U.S. military operations and the strategic logic driving Tehran's resistance.

Among the most closely watched questions has been the effectiveness of U.S. military operations to date. Donegan assessed that U.S. Central Command (CENTCOM) has maintained a consistent military objective since the outset: the complete dismantlement of the IRGC's capacity to project military force beyond Iran's borders. This extends beyond neutralizing missiles or drones. The objective, Donegan argued, is to strip Tehran of its leverage over the Strait of Hormuz while eliminating the nuclear threat underpinning Iran's regional posture.

Donegan noted that U.S. air operations have advanced past the most challenging initial phase. Building on the groundwork laid during the preceding twelve-day conflict and in coordination with Israeli forces, the U.S. has conducted what Donegan described as devastating strikes against Iran's Fordow (福爾多) nuclear facility and associated nuclear capabilities. Those results have allowed CENTCOM to shift its operational focus toward neutralizing Iran's remaining air defense infrastructure.

Donegan said U.S. forces have transitioned from standoff munitions strikes — which required large defensive escort formations — to what he described as "sustained, non-formation strike operations." U.S. aircraft can now conduct more flexible patrol and strike missions in or near Iranian airspace. Iran's area-denial and anti-access (A2/AD) air defense network, once a cornerstone of its deterrence posture, has been degraded to the point of producing only sporadic, isolated countermeasures, Donegan said.

CENTCOM Commander Admiral Brad Cooper (庫珀) has reportedly made clear that simply destroying forward-deployed weapons is insufficient. If Iran can reconstitute its arsenal within weeks, the strikes achieve little. Accordingly, U.S. bombing campaigns are now targeting not only the weapons stockpiles Iran is actively drawing from, but the manufacturing infrastructure that replenishes them. Donegan assessed that progress in dismantling Iran's defense industrial base is meeting — and in some areas exceeding — expectations.

During the first week of the conflict, Iran's saturation launches of hundreds of ballistic missiles per day drew global attention. By the third week, that rate has dropped sharply. Donegan cited U.S. military data indicating Iran is now launching between 20 and 40 missiles per day, with the vast majority intercepted by coalition air defenses.

Donegan emphasized that Gulf state partners have achieved interception rates exceeding 90 percent — a performance he described as exceptional. Confronted with those high-efficiency defenses, Iran appears to have recalibrated its targeting strategy, shifting from hardened military installations toward hotels, airports, and financial institutions in an apparent effort to generate panic and exert pressure on the global economy.

Donegan cautioned that reducing Iran's military threat to zero was never a realistic or stated objective. Iran's territory is vast, offering near-limitless concealment options. He noted that Iran has grown increasingly cautious about missile launches, since any launch activity now generates signal trails that U.S. detection systems can follow like antennae, rapidly tracing and striking back at the source.

The more persistent threat, Donegan argued, comes from one-way attack (OWA) drones and naval mines. Iran has produced tens of thousands of drones over recent years — including exports to support Russian operations in Ukraine — and their low cost and dispersed deployment make them extremely difficult to fully eliminate. Between 20 and 30 drones continue to probe coalition defenses daily, Donegan said, and this asymmetric threat is likely to remain the most unpredictable variable throughout any post-conflict reconstruction period.

For Taiwan, which is heavily dependent on energy imports, the blockade of the Strait of Hormuz represents the most acute economic consequence of the conflict. A natural question follows: if U.S. forces have established air superiority, why has the strait not been declared open to commercial traffic?

Donegan, drawing on his experience as Fifth Fleet commander, argued that sequence determines everything. During an active conflict with missiles still in flight, organizing commercial convoy escorts would be operationally reckless — it would divert combat resources and risk unnecessary casualties.

In Donegan's assessment, the most significant physical obstacle to reopening the strait is Iran's minefield. Iran has deployed mines not only within the strait itself but in waters to its north. While U.S. minesweeping capabilities have advanced considerably — with remotely operated vehicles (ROVs) now largely replacing crewed minesweepers, reducing personnel risk — mine clearance remains an inherently slow and labor-intensive process.

The psychological warfare dimension further complicates the challenge. Donegan noted that Iranian authorities have publicly maintained that the strait is not closed, and have selectively allowed Chinese oil tankers and Indian liquefied natural gas (LNG) vessels to transit. In practice, however, Iranian forces have attacked at least 17 commercial vessels, regardless of those ships' nationality or affiliation with the United States or Israel. Supreme Leader Mojtaba's strategy, Donegan argued, is to weaponize the strait as a tool of maximum political pressure.

Under these conditions, even a formal U.S. declaration of completed mine clearance would be insufficient to restore commercial traffic. As long as insurance rates remain prohibitive due to the threat posed by IRGC forces — and as long as shipowners retain concerns about residual floating mines — no shipping company will risk billion-dollar vessels and crew lives on an uncertain passage.

Donegan assessed that the strait will not reopen spontaneously until Iran's offensive operations have fully ceased. Any future reopening process will be phased: armed U.S. naval escorts first, followed by selective access for vessels of specific nationalities, and only then a full resumption of normal traffic. It is, in his framing, a prolonged and costly confidence-rebuilding exercise.

Military progress is only one dimension of the conflict. A separate and more intractable question is why Tehran has shown no visible urgency to negotiate a ceasefire despite sustained U.S. bombardment. Alex Vatanka, MEI's Senior Fellow for Iran affairs, noted that Iranian Foreign Minister Abbas Araghchi has publicly signaled that Tehran has no interest in negotiations with the Trump administration at this stage. Iran's stated position centers on a so-called "permanent peace agreement": it demands a full U.S. military withdrawal from the Middle East and has raised the prospect of seeking war reparations from Washington.

Vatanka observed a sharp divergence between U.S. and Iranian damage assessments. U.S. analysts estimate approximately 6,000 Iranian targets have been damaged in airstrikes. A female spokesperson for President Masoud Pezeshkian, however, has publicly claimed as many as 61,000 targets were destroyed — a figure Vatanka interpreted as a deliberate exaggeration intended to raise Iran's leverage at any future negotiating table.

Vatanka drew a historical parallel to the Iran-Iraq War of the 1980s to illuminate Tehran's current strategic psychology. That conflict — during which Iran's oil output collapsed from approximately six million barrels per day to around 1.5 million — forged the institutional identity of the IRGC.

The junior officers who endured that war are now, in Vatanka's assessment, likely among Tehran's core decision-makers. For that generation, a war economy is not an emergency condition but a familiar operating environment. So long as the regime's governing structure survives, the economic collapse and suffering of ordinary Iranians are regarded as acceptable costs.

Vatanka characterized Tehran's current grand strategy as "acting crazy" — a posture of deliberately burning diplomatic bridges and deploying extreme deterrence to force Western concessions.

While pragmatists within the Iranian system, including President Pezeshkian, are reported to have privately expressed concern about the absence of an exit strategy, Vatanka stressed that the hardline faction retains firm control over Iran's strategic direction.

This faction frames the conflict as an opportunity to accelerate a post-American regional order. It is seeking, through demonstrating its capacity for destruction, to draw China and Russia into active involvement — and ultimately to establish a multilateral security architecture in the Middle East that excludes the United States.

In response to Iran's multi-front strategic maneuvering, the U.S. approach has been to internationalize the conflict's framing. Donegan said Washington is working to recast the war not as a bilateral U.S.-Iran dispute but as a collective defense of freedom of navigation — a principle with broad international resonance.

Over the past two decades, the U.S. has built the Combined Maritime Forces (CMF) in the Persian Gulf region, a coalition of more than 40 nations. Donegan pointed to a concrete economic incentive binding Gulf Arab states to U.S. objectives: their GDP depends overwhelmingly on energy exports, the bulk of which flow to China. That dependency gives Gulf states a powerful material interest in ensuring the earliest possible resumption of open transit through the strait.

Vatanka added a great-power dimension, arguing that Iran's strategic wager is to use this conflict to erode the U.S. military dominance established since World War II — and to entangle both China and Russia in the fallout. If the Islamic Republic survives the war even as its infrastructure lies in ruins, and if U.S. regional influence is visibly diminished, Tehran would declare the outcome a revolutionary triumph for domestic consumption.

As the conflict deepens, Washington faces a problem it has encountered repeatedly in the region: how to end the war on terms that do not generate a worse successor crisis. Destroying missile infrastructure and nuclear facilities is technically achievable. Achieving political regime change in Iran is a different matter entirely — one that even senior U.S. military commanders are reluctant to endorse.

Donegan said he is cautiously optimistic about meeting defined military objectives and stripping Iran of its capacity for external power projection. On regime change, however, he acknowledged it is a concept that resists clear definition.

After decades of institutional entrenchment, the IRGC is not simply a military force. It is deeply embedded in Iran's banking system, construction sector, intelligence apparatus, and social fabric. Even surgical strikes that eliminated Iran's top leadership would not necessarily unravel that network, Donegan argued. The IRGC has demonstrated substantial institutional resilience.

Vatanka offered a notably pessimistic assessment of the conflict's possible endgame. If the outcome is a damaged but surviving Islamic Republic, the most significant losers may be Iran's domestic democratic opposition — once again left feeling exploited and abandoned by the international community.

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