Chokepoint

It’s unclear how long the United States’ war against Iran will last. Some reports suggest President Trump might declare victory and cease attacks within days; others foresee a long campaign with American boots on the ground. The lack of clear US objectives invites speculation. Even if hostilities end soon, the war highlights a perennial vulnerability of industrial societies: their systemic dependency on fossil fuels.

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.

The US/Israel/Iran conflict has led to dramatic oil price volatility, with a swing of nearly 40 percent recorded on a single day. Most economics commentators understand that higher oil prices can be a drag on the economy, but prices are only part of the story. The war is likely to lead to long-term damage to oil production, storage, and shipment infrastructure in the Middle East. In the best-case scenario, if hostilities end immediately, the world’s crude deliveries could be stabilized in six months. But stability would likely resume at a lower level of output, since the ongoing oil production capacity of Iraq and other Middle Eastern producing countries is likely being compromised.

Iraq is the second-largest producer in the region after Saudi Arabia. If oil can’t be shipped or stored, production must be cut—not a light decision, as shutting in oil production can damage wells. But that is what’s happening: Oil production from Iraq’s main southern oilfields has dropped by 70 percent thanks to the effective closure of the Strait of Hormuz. Saudi Arabia, the UAE, Kuwait, and Qatar have also reduced production due to the war. Iran even hit oil facilities in their closest ally in the region, Oman.

While spot prices for crude oil have spiked and fallen in recent days, futures prices are stubbornly high. Savvy oil investors and industry analysts don’t expect this oil crisis to be resolved quickly. A week and a half after the start of the war, US gasoline prices were up nearly 60 cents per gallon on average; historically, higher gasoline prices driven by oil shortages have persisted for weeks or months after oil prices normalized.

Then there are secondary impacts, largely overlooked by the economics commentariat. So far, the Iran war has effectively closed off one-third of the world’s helium supply. Helium is a depleting non-renewable resource, like fossil fuels. Qatar’s Ras Laffan facilities, which produce 17 metric tons of helium daily, are now offline. Experts warn that if the Strait is closed to shipping for longer than two weeks, months-long global helium shortages could ensue. Helium is indispensable in advanced semiconductor production processes.

While semiconductors are staples of high tech, food is a more basic necessity for humans. Roughly one-third of the world’s fertilizer supply passes through the Strait of Hormuz, and fertilizer prices are spiking. Unless the war ends within days and shipments resume quickly, global food prices will inevitably rise throughout the year.

These developments underscore a message that we at Post Carbon Institute have been repeating for over two decades. Oil and other fossil fuels are the basis of the modern industrial economy. They’re polluting but they’re also depleting. And in the case of oil (and, increasingly, natural gas) they’re internationally traded at massive scales, raising geopolitical risks. This is a system destined to fail.

But when? During and shortly after the US invasion of Iraq in 2003, the all-time peak in world conventional oil production seemed to be at hand. Indeed, in the last two decades, conventional global oil output has exceeded its 2005 rate in only a couple of years.

However, total oil production has continued rising largely due to the soaring contributions of tight oil from the US, oil sands from Canada, and deepwater oil from Brazil. These unconventional sources of crude entail higher production (and environmental) costs than conventional oil. Indeed, oil prices have generally remained higher, in inflation-adjusted figures, than was the case pre-2005, though low enough to enable global economic expansion to continue at a slower pace.

During the same time, efforts to battle climate change took the form of an energy transition from fossil fuels to renewable energy sources—mainly solar and wind power. While a shift toward renewables makes sense on many levels, the messaging from renewables promoters was sometimes overoptimistic: they promised that the world could replace fossil fuels with solar and wind quickly and completely, while still growing the economy. Our analysis suggests instead that the shift will take decades, during which energy consumption for non-transition purposes will have to decline significantly, and that total energy usage over the long haul, especially in highly industrialized countries, will be a fraction of current levels if civilization is to be sustainable. Further, supplies of minerals essential to the renewable energy transition are again globally traded and pose still more geopolitical chokepoints.

And here we are, 20 years past the effective conventional oil production peak, with the energy transition still in an early phase (fossil fuels now provide 82 percent of world energy, down from 85 percent five years ago). Installation of solar panels in the US fell in 2025, due to Trump administration anti-renewables incentives and penalties. Fracking is nearing its limits, with US tight oil production set to possibly begin its inevitable decline this year. The electrification of the economy (electricity currently accounts for about 21 percent of all energy usage) is essential to the energy transition, but the sudden growth of electricity demand for new data centers threatens to delay if not defeat the goal of shifting all energy usage—for transportation, manufacturing, agriculture, and more—to wires.

So, what a fine time for a war in the Middle East! If the war drags on for weeks or months, the economy and politics, local and global, will likely come unglued. If you want a longish analysis of what’s at stake, Craig Tindale has the best I’ve seen. Short version: an extended energy crisis will lead to global stagflation, food shortages, and increasing political instability. This could all get very ugly on many levels at once.

Even if Trump TACOs and ends the attacks early, the war represents a significant shift in the trajectory of the modern industrial economy. Financial bubbles are likely to get punctured by increased overall economic uncertainty. The US Federal Reserve’s plans to reduce interest rates will likely be derailed by higher energy and food prices. Robust oil prices will surely incentivize more investment in high-cost petroleum drilling, slowing the decline of tight oil production, thus putting off the energy transition even longer.

And remember, from the US perspective this is a war of choice, not necessity.

The current fixation of world attention on the Strait of Hormuz should remind us of the inherent brittleness of an economy in which our food and energy security, and our livelihoods, are intertwined with depleting and polluting resources and expectations of perpetual growth. More chokepoints loom.

As always, we advise community resilience as the best strategy for coping with what’s coming. Localize production and consumption, reduce your dependency on global supply chains, and get to know your neighbors.

This is going to be an interesting year.