On September 16, 2026, while the financial world waited for the United States Federal Reserve to announce its latest interest-rate decision, one of Iran’s most powerful politicians posted something unusual on social media.
It was a mathematical equation.
Mohammad Bagher Ghalibaf, Speaker of Iran’s Parliament, had taken one of the best-known formulas in monetary economics — the Taylor Rule — and changed it.
Into a formula normally concerned with inflation, interest rates and economic output, Ghalibaf inserted two additional variables:
SOH — the Strait of Hormuz.
And:
BEM — Bab el-Mandeb.
He called his creation the:
“Straits Taylor Rule.”
Then came the line that made the post far more interesting than an economics joke:
“You can’t 25bp a chokepoint.”
The Federal Reserve subsequently raised its target federal funds rate by 0.25 percentage points, or 25 basis points, to 3.75–4.00%, saying inflation remained elevated.
Ghalibaf’s message was essentially this:
The Federal Reserve can increase interest rates. It cannot manufacture oil, rebuild a pipeline, protect a tanker or reopen a shipping lane.
That does not mean Iran controls the Federal Reserve.
It does, however, point toward a genuine weakness in modern monetary policy.
And for Canada, there is another lesson buried in the equation.
In a world increasingly concerned about energy security, shipping chokepoints and geopolitical instability, Canada’s enormous reserves of oil, natural gas, uranium and hydroelectricity may become strategically more important than Canadians sometimes realize.
First, what exactly is the Taylor Rule?
The Taylor Rule is named after Stanford economist John Taylor, who proposed it in 1993 as a relatively simple way of thinking about where a central bank’s policy interest rate should be.
A simplified version looks something like this:
Interest rate = neutral rate + inflation + adjustment for excess inflation + adjustment for the economy’s output gap.
In ordinary language, the idea is straightforward.
If inflation becomes too high, interest rates should generally rise.
If the economy becomes badly overheated, interest rates should generally rise.
If inflation is weak and the economy is struggling, rates may need to fall.
Higher interest rates make borrowing more expensive.
Mortgages become more expensive.
Vehicle financing becomes more expensive.
Business borrowing becomes more expensive.
People and businesses therefore tend to borrow and spend less.
Lower demand can eventually reduce pressure on prices.
There is just one important qualification.
The Federal Reserve does not actually operate like a calculator
The Taylor Rule is not an automatic instruction system for the Federal Reserve.
The Federal Reserve itself says policymakers consult monetary-policy rules as useful benchmarks but do not mechanically follow them. The FOMC considers a much wider collection of economic information when setting policy.
That distinction becomes extremely important when examining Ghalibaf’s argument.
Iran cannot simply manipulate the price of oil and command the Federal Reserve to raise interest rates.
But an energy shock can certainly make the Fed’s job much harder.
And that is where Ghalibaf’s joke becomes interesting economics.
Why put the Strait of Hormuz into an interest-rate equation?
Because the Strait of Hormuz is not just another stretch of water.
It is one of the most important pieces of economic geography on Earth.
The strait sits between Iran and Oman and connects the Persian Gulf with the Gulf of Oman and, eventually, the Arabian Sea.
Major oil and natural-gas exporters including Saudi Arabia, Iraq, Kuwait, Qatar and the United Arab Emirates depend heavily on Gulf shipping routes.
According to the U.S. Energy Information Administration, approximately 20.9 million barrels per day of crude oil and petroleum liquids passed through Hormuz during the first half of 2025.
That represented roughly one quarter of global maritime oil trade.
That is extraordinary leverage concentrated in an extremely small geographic area.
A tanker does not care what the Taylor Rule says.
Neither does a missile.
Neither does an insurance company deciding that sending a $100-million vessel through a war zone has suddenly become far more dangerous.
When shipping risk increases, freight costs can increase.
Insurance can increase.
Oil traders begin pricing the possibility of future disruption into contracts.
That additional cost is often described as a geopolitical risk premium.
That is what Ghalibaf was getting at when he claimed that the neutral interest rate was really carrying a “SOH risk premium” and added:
“We set it.”
The boast goes too far.
But the mechanism he was describing exists.
Then there is Bab el-Mandeb
The second variable in Ghalibaf’s equation — BEM — refers to the Bab el-Mandeb Strait.
It connects the Red Sea with the Gulf of Aden.
Ships travelling between Asia and Europe through the Suez Canal generally need to pass through it.
Before the recent disruptions to Red Sea shipping, it represented another important artery in the global petroleum system.
EIA figures show that approximately 4.2 million barrels per day of crude oil, condensate and petroleum products passed through Bab el-Mandeb during the first half of 2025.
The disruption of Red Sea traffic has already caused substantial volumes of global shipping to divert around Africa’s Cape of Good Hope instead.
That adds distance.
Distance requires fuel.
It requires crew time.
It requires ships.
And ultimately someone pays for it.
Usually the consumer.
“You can’t 25bp a chokepoint”
This is the strongest part of Ghalibaf’s argument.
Central banks are particularly effective at dealing with inflation generated by excess demand.
Imagine an economy where borrowing becomes extremely cheap.
Consumers borrow aggressively.
Businesses borrow aggressively.
People buy houses, vehicles and equipment.
Businesses struggle to produce enough to satisfy all that demand.
Prices rise.
The central bank raises interest rates.
Borrowing slows.
Demand weakens.
Price pressures cool.
That is roughly the situation monetary tightening is designed to address.
But now imagine something completely different.
A major oil route is disrupted.
Oil suddenly becomes more expensive.
Diesel becomes more expensive.
Jet fuel becomes more expensive.
Plastic becomes more expensive.
Fertilizer becomes more expensive.
Truck transportation becomes more expensive.
Farm machinery becomes more expensive to operate.
A supermarket pays more to have food delivered.
Eventually consumers encounter higher prices throughout the economy.
The Federal Reserve can raise rates.
But an interest-rate increase doesn’t create a single barrel of crude oil.
It doesn’t repair a refinery.
It doesn’t remove mines from a shipping lane.
It doesn’t stop a drone attack.
And it doesn’t escort a tanker through the Strait of Hormuz.
That is what:
“You can’t 25bp a chokepoint”
really means.
The difference between demand inflation and supply inflation
This distinction is important because people often talk about “inflation” as though every episode has the same cause.
It doesn’t.
Suppose inflation originates because consumers have too much purchasing power chasing too few goods.
Higher interest rates can attack the source of that problem.
Now suppose inflation originates because an important input suddenly becomes scarce.
Oil is a good example.
The central bank still has tools.
But those tools operate differently.
It cannot increase oil supply.
Instead, the central bank can weaken demand throughout the rest of the economy enough to stop the original price shock from becoming entrenched.
That can prevent businesses and workers from beginning to assume that rapid inflation will continue indefinitely.
But there is a cost.
A central bank can end up effectively saying:
We cannot make energy abundant again, so we must make demand weaker instead.
That can mean slower economic growth.
Less investment.
More expensive mortgages.
Higher business-financing costs.
And potentially higher unemployment.
That is the uncomfortable economic truth behind Ghalibaf’s taunt.
Diesel demonstrates how quickly an oil shock can spread
The connection between crude oil and everyday life becomes particularly obvious with diesel.
Heavy trucks move the enormous majority of goods that eventually reach Canadian and American consumers.
Food.
Construction materials.
Manufacturing components.
Farm supplies.
Retail merchandise.
Almost everything spends at least part of its journey on a truck.
When diesel rises dramatically, trucking companies cannot simply absorb the increase forever.
Fuel surcharges appear.
Freight costs rise.
Those costs eventually work their way through supply chains.
Farmers are exposed as well.
Combines.
Tractors.
Grain trucks.
Construction equipment.
Generators.
Much of the machinery that physically produces and moves commodities still depends on diesel.
That is why an energy shock can spread far beyond the gas station.
It can become a transportation shock, a food shock, a manufacturing shock and eventually an inflation problem.
Then the interest-rate shock reaches households
This is where Ghalibaf’s argument becomes politically powerful.
People can get hit twice.
First:
Energy becomes more expensive.
Then:
Borrowing becomes more expensive because policymakers are trying to contain the inflation caused partly by that expensive energy.
American mortgage rates illustrate the pressure households are experiencing.
Freddie Mac reported that the average U.S. 30-year fixed mortgage rate had reached 7.03% on September 24, 2026.
It had been:
- 6.66% on August 27
- 6.71% on September 3
- 6.76% on September 10
- 6.95% on September 17
- 7.03% on September 24
It would be incorrect to attribute that entire increase directly to the Federal Reserve’s September 16 hike.
American mortgage rates are influenced by longer-term Treasury yields, inflation expectations, bond markets and expectations about future Fed policy.
In fact, mortgage rates were already climbing before the September meeting.
But the broader point remains.
An inflationary energy shock can contribute to a financial environment in which both fuel and borrowing become painfully expensive at the same time.
Does Iran therefore “control the Fed”?
No.
That is where the argument needs restraint.
Iran can potentially influence energy prices.
Energy prices can influence inflation.
Inflation influences Federal Reserve decisions.
But that does not produce a straight line:
Iran → oil → inflation → Fed obeys Iran.
The Federal Reserve has two statutory goals: maximum employment and stable prices.
It examines labour markets, underlying inflation, inflation expectations, economic growth, financial conditions, productivity, global events and numerous other indicators.
And the Fed specifically warns against mechanically following rules such as the Taylor Rule.
A better description would therefore be:
Iran may be able to influence one of the economic conditions the Federal Reserve has to respond to.
That is still significant.
But it is not the same thing as controlling U.S. monetary policy.
Where the bigger geopolitical theory becomes speculative
There is another theory circulating alongside Ghalibaf’s argument.
It goes something like this:
Iran benefits from keeping global energy prices high because expensive oil contributes to U.S. inflation and increases pressure on American interest rates.
Meanwhile, the United States benefits because disruptions affecting competing energy exporters encourage countries to buy more American oil and natural gas.
Therefore both countries supposedly have an interest in expensive energy, albeit for different reasons.
There is a kernel of economic logic here.
But we should distinguish carefully between:
benefiting from an event
and:
deliberately engineering the event.
Those are not remotely the same thing.
If Middle Eastern energy infrastructure becomes unreliable, American LNG exporters may gain customers.
That does not prove Washington deliberately created the disruption.
Likewise, if Iran knows that threatening Hormuz increases global energy prices, it may recognize the economic leverage that gives Tehran.
That does not mean Iran can dictate every movement in oil markets.
Markets are influenced by production throughout the world, strategic inventories, pipelines, spare capacity, demand, economic growth and expectations about the future.
Geopolitics matters.
But geopolitics is not the only thing that matters.
And this is where Canada enters the equation
The debate becomes particularly interesting from a Canadian perspective.
Canada possesses something increasingly valuable in an unstable world:
large quantities of energy located in one of the world’s most politically stable regions.
Canada has:
- enormous crude-oil resources;
- substantial natural-gas production;
- large hydroelectric resources;
- some of the world’s richest uranium deposits;
- established nuclear expertise;
- direct pipeline connections to the United States;
- electricity connections across the Canada-U.S. border;
- and now an operating pathway for Canadian LNG to reach Asian markets from the Pacific Coast.
This does not make Canada independent of global energy markets.
But it does make Canada strategically important.
The Canada Energy Regulator’s figures for 2025 are striking.
Canada supplied 63.4% of U.S. crude-oil imports.
It supplied close to 100% of U.S. imported natural gas.
It supplied 97.9% of imported natural-gas liquids.
And Canada provided 81.3% of the electricity imported by the United States.
Those numbers tell us something important.
The United States talks frequently about “energy independence.”
But the North American energy system is really deeply integrated.
Canada is not simply another foreign supplier.
Pipelines cross the border.
Electricity transmission lines cross the border.
Refineries are configured around particular Canadian crude streams.
Natural-gas networks operate across both countries.
In many ways, Canadian and American energy systems function as one enormous continental machine.
Canadian uranium matters too
Oil receives most of the attention during an energy crisis.
But uranium deserves a place in this discussion.
Natural Resources Canada reports that Canada was the second-largest uranium producer and exporter in the world in 2024, supplying approximately 24% of global production.
About 90% of Canadian uranium production was exported.
Canada also supplied 33% of the uranium purchased by U.S. nuclear reactors in 2024, making Canada the United States’ largest foreign uranium supplier.
That matters because nuclear generation offers something increasingly valuable in an era of geopolitical energy instability:
large quantities of electricity with relatively little dependence on continuous international fuel shipments.
A nuclear reactor requires fuel, obviously.
But uranium has extraordinarily high energy density compared with fossil fuels and can be stockpiled far more easily.
Canada also possesses the CANDU nuclear technology chain, uranium mines in Saskatchewan, refining and conversion facilities in Ontario and decades of operating expertise.
Energy security is therefore not simply an Alberta oil story.
It is also a Saskatchewan uranium story.
An Ontario nuclear story.
A Quebec and Manitoba hydroelectricity story.
A British Columbia natural-gas story.
A Newfoundland and Labrador offshore-energy story.
And increasingly, a national-security story.
Geography suddenly matters again
For several decades globalization encouraged the assumption that energy was fundamentally a commodity problem.
If one supplier became expensive, buy from another.
If one region produced cheaply, build a supply chain around it.
Tankers would arrive.
Markets would balance everything.
The last several years have repeatedly demonstrated the weakness of that assumption.
A commodity does not exist in isolation.
It needs infrastructure.
Oil needs wells.
Then pipelines.
Then storage.
Sometimes tankers.
Then ports.
Then refineries.
Then product pipelines and trucks.
Natural gas may require pipelines or enormous LNG plants.
Electricity requires generating stations and transmission lines.
Every link creates another potential bottleneck.
This is why the geography surrounding Hormuz and Bab el-Mandeb matters.
And it is why Canadian geography has enormous value.
Nobody has to sail through the Strait of Hormuz to move Alberta crude through a pipeline into the American Midwest.
No ship has to pass Yemen to send Canadian electricity into New York, Michigan or Minnesota.
A Saskatchewan uranium shipment does not depend on Persian Gulf crude production.
That does not eliminate geopolitical risk.
But it changes the kind of risk.
Canada’s biggest weakness may be infrastructure
Having resources underground is not the same thing as having usable energy security.
Canada has enormous resources.
But resources become strategically valuable only when they can reach customers.
That requires:
pipelines;
transmission lines;
ports;
LNG facilities;
rail infrastructure;
refineries;
nuclear facilities;
uranium-processing capacity;
storage;
and connections between provinces.
This may be the most important Canadian lesson from the entire “Straits Taylor Rule” episode.
The question is not simply:
How much energy does Canada possess?
The better question is:
How much energy can Canada reliably produce, process and deliver when the world actually needs it?
That is a completely different measurement.
Canada should think about energy as strategic infrastructure
For years Canadian energy debates have often been framed almost entirely around two questions:
What will this cost?
and:
What are the emissions?
Both matter.
But a third question deserves far more attention:
What happens if the international system stops working normally?
What happens if Hormuz closes?
What happens if Red Sea shipping becomes unreliable?
What happens if another major natural-gas supplier is knocked offline?
What happens if electricity demand from AI, industry and electrification grows faster than expected?
What happens if allies urgently need energy that does not pass through politically unstable regions?
A resilient country should be able to answer those questions before a crisis arrives.
Energy security does not mean choosing only one fuel
This does not need to become another argument where Canadians are forced to choose:
oil or renewables;
nuclear or hydro;
natural gas or electrification.
Energy security is almost the opposite.
Resilience generally comes from having multiple systems.
Oil for transportation, industry and petrochemicals.
Natural gas for heating, industry, backup generation and export markets.
Hydroelectricity for enormous quantities of dispatchable low-carbon power where geography permits.
Nuclear for reliable large-scale electricity.
Wind and solar where they are economical and can be properly integrated.
Transmission connecting regions together.
Storage and flexible generation supporting the system.
The point is not ideological purity.
The point is that when one part of the system fails, another can continue operating.
Ghalibaf’s equation accidentally makes the Canadian argument
The irony is that an Iranian politician trying to mock the American Federal Reserve may have made a compelling argument for Canadian energy development.
If a narrow waterway thousands of kilometres away can influence:
diesel prices,
food prices,
airfares,
inflation,
interest-rate expectations,
mortgage markets,
government borrowing costs,
and eventually economic growth,
then secure energy production is not merely an industrial issue.
It is economic infrastructure.
And potentially national-security infrastructure.
Canada possesses enormous quantities of exactly the resources countries begin searching for when geopolitical supply routes become uncertain.
The opportunity is obvious.
Whether Canada takes advantage of it is another question.
What Ghalibaf got right
He got this right:
A central bank cannot solve a physical shortage by changing the price of money.
Interest rates can suppress demand.
They cannot create supply.
And if inflation is being pushed upward by energy scarcity, monetary policy may impose significant costs on households while doing relatively little about the original source of the problem.
That is worth understanding.
What Ghalibaf got wrong
Where his argument becomes propaganda is the suggestion that controlling a chokepoint means controlling America’s monetary policy.
It does not.
The Federal Reserve doesn’t mechanically follow the Taylor Rule.
American energy production matters.
Alternative pipelines matter.
Strategic reserves matter.
Demand matters.
Other oil-producing countries matter.
Technological change matters.
And markets eventually adjust.
A country can possess leverage without possessing control.
Iran unquestionably has geographic leverage.
That is not the same thing as having its hand on the Federal Reserve’s interest-rate lever.
But the warning should still be taken seriously
Strip away the Iranian bravado.
Strip away American political rhetoric.
Strip away the conspiracy theories.
What remains is a surprisingly simple lesson.
Modern economies look digital.
Financial markets move trillions of dollars electronically.
Central bankers alter rates with announcements.
Governments issue bonds at the push of a button.
Algorithms move capital around the planet in milliseconds.
Artificial intelligence consumes and processes unimaginable amounts of information.
But underneath that entire system remains something extraordinarily old-fashioned:
physical stuff.
Oil.
Gas.
Uranium.
Copper.
Fertilizer.
Electricity.
Pipelines.
Ships.
Railways.
Ports.
Transmission lines.
And narrow pieces of geography through which some of those things must travel.
A central bank can create liquidity.
It cannot create a barrel of diesel.
It cannot create a cargo ship.
It cannot repair a pipeline with an interest-rate decision.
And it cannot widen the Strait of Hormuz.
That is the real meaning of:
“You can’t 25bp a chokepoint.”
And perhaps the most important lesson for Canada is this:
Countries that can reliably produce energy without depending on the world’s most dangerous chokepoints possess something more valuable than a commodity.
They possess leverage.
Canada already has the resources.
The real question is whether we will build the infrastructure necessary to use them.
The Bottom Line
Mohammad Bagher Ghalibaf’s “Straits Taylor Rule” should not be interpreted literally.
Iran does not control the Federal Reserve.
But the joke exposed a genuine economic problem: monetary policy is a blunt instrument when inflation originates from disrupted physical supply.
Higher interest rates can reduce demand.
They cannot reopen Hormuz.
And that should cause Canadians to think differently about our own energy resources.
In a stable world, Canadian oil, natural gas, hydroelectricity and uranium are valuable commodities.
In an unstable world, they become something else.
Strategic assets.
The world may increasingly be willing to pay for not only energy itself, but for something Canada is unusually well positioned to provide:
energy that actually arrives.
Sources
The Indian Express — Explanation of Ghalibaf’s “Straits Taylor Rule”
Discusses Mohammad Bagher Ghalibaf’s modified Taylor Rule and his “You can’t 25bp a chokepoint” message.
U.S. Federal Reserve — September 16, 2026 FOMC Statement
Confirms the Federal Reserve’s September 16, 2026 interest-rate decision.
Federal Reserve — Policy Rules and How Policymakers Use Them
Explains how the Fed uses Taylor-type rules as reference points rather than mechanically following them.
U.S. Energy Information Administration — World Oil Transit Chokepoints
Provides data on the Strait of Hormuz, Bab el-Mandeb and other major global oil-shipping chokepoints.
Canada Energy Regulator — Overview of 2025 Canada-U.S. Energy Trade
Documents Canada’s role in supplying U.S. crude oil, natural gas, natural-gas liquids and electricity.
Natural Resources Canada — Uranium and Nuclear Power Facts
Provides Canadian uranium production, export and U.S. nuclear-fuel supply data.
Freddie Mac — Primary Mortgage Market Survey
Tracks average U.S. mortgage rates, including the rise in 30-year fixed mortgage rates during September 2026.
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