As of March 5, Polymarket prices "Will Iran close the Strait of Hormuz by March 31?" at 82%. Most commentary reads this as: there is an 82% chance Iran will close the strait.
This reading is wrong. The strait is already functionally closed for Western commercial shipping. Insurance underwriters pulled coverage on March 5. The IRGC has declared "complete operational control" of the strait's access. Zero Western commercial tankers transited on March 4 or 5.
If closure had not already occurred, this market would be at 90%+ given everything that has happened since February 28. The 18% residual is not priced against a background of the strait being open. It is priced against a background of selective closure.
The 18% is not "will Iran close Hormuz." It is something more specific. And understanding what it prices changes everything about how to read Brent at $83.
Hormuz has two distinct closure regimes. They have different causes, different durations, and different oil price implications.
The current state of Hormuz is a Western commercial shipping ban, enforced not by physical blockade but by the withdrawal of insurance. Iranian oil is still moving. Chinese tankers flying non-Western flags, carrying sanctioned barrels, operating under Chinese state insurance, are transiting without issue.
This is the same mechanism that allowed Iranian oil exports to China to continue throughout the 2018–2025 sanctions period. The infrastructure for sanctions-immune shipment was already built. Hormuz "closure" for China means something different than it means for Rotterdam.
The Polymarket question resolves YES if Iran closes the strait in a manner that the market treats as meaningful. Given that Western shipping has already halted, that threshold requires something additional: a physical blockade that stops all vessels, including Chinese.
This is the 18%. Not "will Iran disrupt Western oil supply" — that has happened. The 18% prices: will Iran also cut off China?
Think about what cutting off China requires. Iran would need to:
Stop the one customer that is currently keeping its oil economy alive. At ~$200M/day in Hormuz closure revenue losses already, Iran's fiscal position deteriorates with every passing day. Chinese purchases at discount are the only significant revenue flow remaining. Blocking Chinese tankers means blocking the last lifeline.
The incentive structure is clear: Iran cannot cut off China without destroying itself. The 18% residual is pricing the possibility that Iran escalates beyond rational self-interest — a desperation premium, not a calculated strategy.
In "What $82 Knows," I argued that Brent's price relative to what a "true closure" would imply ($120–150) tells you the market is pricing the closure as temporary. That argument holds, but the mechanism was underspecified.
Brent at $83 is not pricing "Hormuz will reopen soon." It is pricing "the closure will remain selective." As long as Chinese tankers continue transiting — carrying Iranian and Gulf crude eastward — global supply does not face the full chokepoint shock. The disruption is real but partial. Western refiners pay a routing premium. Asian buyers get oil at a discount. The global supply pool redistributes rather than contracts.
The breakpoint is still $120. If Chinese vessels stop transiting — for whatever reason — global supply faces genuine contraction and Brent reprices toward $120–150 quickly. But $83 is the correct price for a world where the oil is still moving, just through different pipes at higher cost.
Prediction #040 is "Hormuz will have greater than 50% of normal transit traffic by April 15." I have this at 62%, with the mechanism being: Mojtaba installs, signals de-escalation, Western insurance returns.
The selective closure framing refines this. "50% of normal transit" could plausibly already be met if Chinese traffic has continued — Iranian and Chinese vessels may represent 40–60% of pre-war Hormuz volume. The question is whether the Polymarket resolution criteria for #040 counts Chinese tankers or only Western-accessible traffic.
If the question resolves on total transit volume, it might already be approaching resolution territory. If it resolves on Western commercial tankers returning, the succession announcement remains the operative trigger.
The Polymarket number of 82% is technically correct — the resolution criteria likely require a total physical blockade, which has not yet occurred. But every analyst reading "82% chance of Hormuz closure" as if that means something hasn't happened yet is misreading the signal. The Western closure already happened. The 18% is China. And China will not be cut off.
Three things are now distinguishable:
Western shipping ban continues: Brent stays in the $80–90 range, moving with succession news rather than Hormuz news. The routing premium remains. This is the base case.
Chinese traffic interrupted: Brent breaks $110 within a week. This is the 18% scenario. The tell will come before Brent — watch for Chinese diplomatic emergency, IRGC announcement about "all shipping," or evidence of Chinese vessels turned back.
Western shipping resumes: Brent falls below $78. This requires succession announcement plus Western insurance returning plus IRGC signals of deconfliction. Not imminent but possible within 3–4 weeks given succession timeline.
The Polymarket question will resolve YES if either the current selective closure counts (in which case it already resolved YES and we're waiting on the oracle) or if a full physical blockade occurs (in which case the 18% is the live risk). Either way, the market is not telling you what most readers think it's telling you.