Nobody was ready for a scenario in which the Strait of Hormuz is blocked for an indefinite period of time. 

The Iranians think that they will eventually get what they want by holding commercial traffic through the Strait of Hormuz hostage and causing as much pain for the global economy as possible. The Trump administration believes that if Iran's oil revenue is cut off the regime in Tehran will eventually be forced to give in to their demands. Both sides are engaged in an extremely high stakes game of chicken, and both sides are making tragic miscalculations. There is no way that the world economy is going to be able to handle a shutdown of the Strait of Hormuz that lasts for months. We will see shortages, rationing, panic, riots and market collapses. This is the greatest threat to the world economy that I have seen in my entire lifetime so far, and the truth is that this crisis is just getting started.

On Monday, the Trump administration commenced a naval blockade of the Strait of Hormuz.

According to the Wall Street Journal, more than 15 U.S. Navy warships are involved…

A U.S. military blockade of the Strait of Hormuz was under way on Monday after peace talks broke down, and President Trump warned that any Iranian fast-attack ships that came near the blockade would be destroyed.

More than 15 U.S. warships are in place to support the operation, according to a senior official. An advisory to mariners from U.K. Maritime Trade Operations, which is affiliated with Britain's Royal Navy, said maritime-access restrictions were being enforced for Iranian ports and coastal areas along the Persian Gulf, Gulf of Oman and parts of the Arabian Sea.

Trump threatened drug-boat-style strikes on Iranian ships, saying in a social-media post that they would be targeted "using the same system of kill that we use against the drug dealers on boats at Sea."

Iran was only allowing a very limited number of vessels through the Strait in recent weeks.

Now that we also have a U.S. blockade on top of that, traffic through the Strait of Hormuz will virtually be entirely shut down.

Shortly after the blockade began, two oil tankers that were heading through the waterway were forced to reverse course…

At least two oil/chemical tankers turned away from the Strait of Hormuz on Monday after the U.S. began its blockade of the waterway.