Energy

Financial markets so far have reflected the belief that the Iran war will be over soon and that commerce will return to normal. I explain why I think this belief is unwarranted and why President Trump’s latest announcement regarding bombing Iran’s power plants is economic suicide.

Oil price manipulation is taking many forms after the closure of one of the world’s major choke points for oil transport sent oil prices higher.

Hence, the severe restrictions in the flow of oil though the Strait of Hormuz, resulting from the recent US-Iranian attacks, may be seen as a stark rehearsal for the consequences of a severe shock in the global oil supply, as might be experienced from a “peak oil” crisis, with volatile price spikes and supply chain disruptions.

This is the paradox both Saudi Arabia and the UAE are now navigating. The grey war they are waging — economically, culturally, through regional proxies — is a race to secure the post-oil future before the other does.

The 24-mile-wide Strait of Hormuz in the Persian Gulf, through which roughly 20 percent of world oil shipments pass, is an obvious pinch point for a vital industrial resource. But it also serves as an apt metaphor for the brittle global supply chains upon which the entire economy depends.

In this installment, Nate addresses the U.S. and Israeli military offensive against Iran and traces the reverberating effects that extend far beyond the conflict itself, starting with what the closure of the Strait of Hormuz means for a civilization that routes a massive share of its physical economy through a single maritime corridor.