US–Israel–Iran War: Second‑Order Coercion And Strategic Fragmentation – OpEd

March 12, 2026 
 Observer Research Foundation
By Kartik Bommakanti


The escalation in hostilities between the United States (US), Israel, and Iran began on 28 February 2026, following a large-scale attack on Iran’s leadership, nuclear facilities, and conventional forces. Two issues merit attention. The first is second-order coercion, which Iran is pursuing against both Israel and the United States. Second, the administrations of US President Donald Trump and Israeli Prime Minister Benjamin Netanyahu appear to be leveraging domestic instability and fragmentation as part of their strategy.

At present, nearly all Gulf Cooperation Council (GCC) countries have been targeted by Iran. These operations have ranged from missile strikes to one-way drone missions. The GCC states affected include the United Arab Emirates (UAE), Qatar, Oman, Bahrain, Saudi Arabia, and Kuwait. Iran’s escalation has compelled these countries to respond, primarily through defensive measures such as intercepting ballistic missiles and shooting down drones using surface and airborne assets. In addition, Qatar has arrestedsleeper agents of the Islamic Revolutionary Guard Corps (IRGC) operating on Qatari soil. To date, Oman remains the only GCC country not targeted by Iran, largely because it does not host any American base and remains resolutely neutral. Although reports indicate its oil tankers were struck off the Omani coast by Iran.

Iran’s decision to target the Gulf Cooperation Council (GCC) states, despite their limited role in the conflict, warrants closer examination. The simple answer is that Iran believes GCC states suffering material and economic losses are more likely to wield influence in Washington and Tel Aviv than direct Iranian assaults on American bases in the Middle East and Israel.

The Iranians are currently resorting to second-order coercion to compel the Americans and the Israelis to back down and cease their military assault. Fundamentally, second-order coercion involves a coercing state pressuring a third party or secondary target that wields influence over the primary target to yield and comply with the coercer’s demands. Iran has done precisely this by launching missile and drone attacks not only against American military bases in the region and Israel, but also against civilian targets in Arab states in the GCC. Tehran has gambled that military assaults on GCC states will compel them to pressure Washington and Tel Aviv.


However, for the moment, Tehran’s assault appears to be working against itself, with the Americans, Israelis, and their GCC partners rallying to defend themselves. Yet, as the conflict unfolds over the coming days and weeks, the costs for the GCC states could become difficult to sustain, potentially compelling them to pressure Israel and the United States to halt hostilities. For Israel and the United States, it is therefore a race against time. President Donald Trump initially indicated that the military campaign could last at least four to five weeks, although the United States may be facing a more protracted engagement.

For Iran’s clerical regime, the objective is to hold out against the joint US–Israeli air campaign while inflicting sufficient pain on Washington’s GCC partners. If attacks against the GCC states diminish significantly or cease, and the economic pressure on them eases, Iran’s strategy of second‑order coercion may fail to compel a swift end to the hostilities.

Secondly, the American–Israeli military campaign may not be aimed explicitly at regime change, but the degradation or elimination of Iran’s military capabilities—including its nuclear and ballistic missile programmes—is a stated objective. At most, regime change may be an Israeli objective, while the United States remains conflicted over this goal, creating challenges for US–Israeli unity and coordinated military action. Israel may therefore be compelled to act independently. More broadly, the current military campaign appears, at a minimum, aimed at limiting Iran’s ability to project military power beyond its borders. However, a secondary objective—one that remains unstated—may be to stoke internal instability through insurrection and support for disaffected groups such as the Kurds. The latter could potentially be armed and trained by the Central Intelligence Agency (CIA). In such a scenario, the Islamic Revolutionary Guard Corps (IRGC) would be compelled to respond to a Kurdish offensive, forcing its forces into the open. This would allow Israel and the US to target IRGC fighters from the air.


Apart from the Kurds—who constitute around 10 percent of Iran’s population and are unlikely to be effective on their own—the Israelis and the Americans would also need to identify and militarily support Iranian dissidents and ethnic groups opposed to the regime. Taken together, these efforts would need to be sustained for several weeks, and potentially months, to produce significant internal chaos and fragmentation within Iran. A former Israeli official familiar with the Netanyahu government’s military strategy conceded: “…this will take time…There is a lot of work to be done. Iran is huge.”

The domestic chaos, fragmentation, or even civil war that Israel may be seeking to trigger could prevent any surviving elements of the regime from reconstituting a credible military and nuclear capability that threatens Israel, the United States, and their regional partners and allies. If Israel and the United States succeed, they could significantly undermine the clerical regime. However, at this stage of the war, it remains far from clear whether the objective of substantially weakening Iran’s revolutionary regime can be achieved.

Further, if Iranian military capabilities are significantly degraded while the regime remains intact, Iran may redouble efforts to rebuild its nuclear and ballistic missile programmes, posing a long‑term threat to its neighbours. Preventing this outcome is therefore essential. The US–Israeli military campaign will consequently need to be conducted with considerable discipline and sustained effort. At the same time, Israel and the United States will need to maintain domestic cohesion and public support for what is likely to be a prolonged military campaign unless they capitulate or prematurely terminate hostilities due to rising costs. Iran is mining the Strait of Hormuz and has signalled it will not relent in its attacks, rejecting calls for a ceasefire. The country may also face long‑term consequences with the GCC states, which are unlikely to overlook its strikes and may deepen military cooperation against it.

About the author: 

Kartik Bommakanti is a Senior Fellow with the Strategic Studies Programme at the Observer Research Foundation.

Source: This article was published by the Observer Research Foundation.


Observer Research Foundation

ORF was established on 5 September 1990 as a private, not for profit, ’think tank’ to influence public policy formulation. The Foundation brought together, for the first time, leading Indian economists and policymakers to present An Agenda for Economic Reforms in India. The idea was to help develop a consensus in favour of economic reforms.

Oil Shocks And Crashes: Where Are We Headed With The 2026 Crisis? – Analysis

March 12, 2026 

360info
By Professor Peter Newman AO and Professor Ray Wills

On March 9, oil prices crossed US$ 100 a barrel for the first time in almost four years as the war in the Middle East between the US and Israel on one side and Iran on the other continued to escalate with no immediate end in sight.

Oil price shocks triggered by conflict in the Middle East have historically reshaped global energy systems. But the latest tensions around the Strait of Hormuz are unlikely to produce a long-term return to high oil prices.

The first oil crisis in 1973 shaped the lives of baby-boomers. The price of oil quadrupled overnight as Arab oil exporters targeted Canada, Japan, the Netherlands, the UK and the USA. The second oil crisis, in 1979, followed the Iranian Revolution and panic buying set in as the oil price shot up. Then the 1980-88 Iran-Iraq war reduced global oil supply even further, so the price rose dramatically right through the 1980s.

The latest outbreak of war in the Middle East has led to oil tankers being trapped in the Straits of Hormuz, and key producers such as Qatar, Iraq and Kuwait cutting production.


Our reading of both the data and history is that this crisis will reinforce the shift away from oil. If the current war blows out and creates a prolonged oil crisis of months rather than weeks, there will be more downward pressure on oil use – and an equal acceleration in China of electric car production at home, with an associated surge in exports.

The first oil shock disrupted daily life across many Western countries. Fuel shortages led to rationing, long queues at petrol stations and emergency conservation measures in several cities in the United States and Europe.

One of us experienced the oil crisis in the USA where San Francisco fell apart as fuel became scarce, 5 km long queues started at gas-stations and people began stealing from neighbours’ cars.

Australia was not targeted. But the ensuing global inflationary spiral began the pressure to look at using less oil. Former prime minister Malcolm Fraser hooked Australia to global oil prices to help us keep more aware of volatility in the market.

Fuel efficiency standards became mainstream and drove public awareness of oil dependence to new heights.

Long term plans to get off oil were dropped in 1990 when oil prices crashed back to the $40 range and business-as-usual returned to car sales and use. But in 2008 it rose to a record $147 as China began its growth spurt and US production declined. The resulting global inflation again triggered a collapse in economies and oil fell to the $30s in a few months.

These crises and crashes were not good for economies and thus the need to get off oil became a major global concern. Market volatility in critical functions like transport is never good for economies and when it was clear that a global climate policy also required oil to be replaced then the logic to get rid of fossil fuels became overwhelming. In 2016 the Paris Agreement accelerated the race to electrify transport through the net zero transition.
Towards a decline for oil?

An article by Professor Hussein Dia in The Conversation suggests we must accelerate the switch for all transport from oil to electricity. Certainly, there are plenty of people now driving big oil-guzzlers that will be very worried about their decision.


Others saw that the situation had changed as demand was now much less than in previous decades and there was indeed ‘a global glut of oil’.

It is possible that the days of sustained triple digit oil prices may be over.

Our approach to the future is to trace fossil fuel use and renewables to see how rapidly the energy transition is happening and to predict the future by taking the trends forward using the inflections to guide the exponential trends rather than taking simple linear predictions. The figure shows these trends.

Fossil and renewables consumption 1990-2025 and projection to 2030. Wills and Newman, 2025.

From our projections, renewable energy is quickly gaining momentum and will become the dominant global fuel source by 2030. The decline in oil as transport systems become electrified and fuelled by renewables, suggests oil is headed for dinosaur status.

As demand erodes, oil prices are likely to trend back towards something like $US 40-60 per barrel in the 2030s, not because the world has become more secure for oil, but because oil simply becomes less and less central to how we move people and freight.

For governments, cities and firms, the strategic response to the latest oil crisis cannot simply be to ride out the spike and hope for another crash. They must double down on electrification of transport, backed by rapidly expanding renewable generation and storage.

The world is choosing to depend on sunshine, batteries and wires rather than on unstable sea lanes and combustible geopolitics. The sooner we complete that choice, the less each new oil shock will matter.

About the authors and editors:

Professor Peter Newman AO is John Curtin Distinguished Professor of Sustainability, Curtin University.

Professor Ray Wills is Adjunct Professor at The University of Western Australia, and Managing Director of Future Smart Strategies.

Samrat Choudhury, Commissioning Editor, 360info

Source: This article was published by 360info

360info

360info provide an independent public information service that helps better explain the world, its challenges, and suggests practical solutions. Their content is sourced entirely from the international university and research community and then edited and curated by professional editors to ensure maximum readability. Editors are responsible for ensuring authors have a current affiliation with a university and are writing in their area of expertise.

 

IEA Approves Record Oil Reserve Release, Keeping a Lid on Prices

Pixabay

Published Mar 11, 2026 8:07 PM by The Maritime Executive

 

On Wednesday, IEA members approved a record-setting coordinated release of 400 million barrels from global reserves, helping to keep an expected increase in Brent crude prices to just five percent. Brent closed at $92 per barrel, well under the $100 benchmark and far short of the $120-per-barrel levels it approached briefly on Monday. 

The continued increase in pricing reflects market expectations that the Strait of Hormuz will remained closed, pending major geopolitical or military developments. The effective shuttering of the waterway has bottled up about 15 million barrels of supply (net) out of a total global oil trade of 100 million barrels a day, creating immediate problems for the region's producers. Iraq, Kuwait and Saudi Arabia have all throttled back production to match their respective export and storage capabilities; the UAE is expected join next with well shut-ins as early as next week, according to analysts at Societe Generale. 

To reduce its exposure, Saudi Aramco has maximized use of the East-West pipeline, sending an additional four million barrels per day of Saudi crude overland to its Red Sea terminal at Yanbu. More than two dozen tankers have rerouted from the Gulf to Yanbu to meet the supply at the new location - but Yanbu's lower rate of loading at the pier will limit its near-term capability. At present Yanbu is achieving just 2.2 million bpd, compared to the 7 million bpd potential of the East-West pipeline. 

The White House has urged tanker owners to make the run through the strait and resume unescorted operations to and from the Gulf, but several factors continue to deter shipping. The first is the continuing risk to crewmembers: three ships were hit overnight Tuesday, resulting in one major casualty and three missing personnel. The second is the cost of insurance, reported to be running as high as one to two percent of hull value for a Gulf voyage. The third is the absence of naval escorts, which the U.S. Navy has told owners it will not provide because it considers the risk too high. 

The IEA reserve release was intended to reassure the market and keep oil price increases within tolerable limits, but a protracted closure is expected to result in rising costs for energy consumers. Iran's Islamic Revolutionary Guard Corps - the most powerful political force within the country - has stated that this is its objective. 

"You [the U.S. government] will not be able to artificially lower the price of oil. Expect oil at $200 per barrel," an IRGC spokesperson said in a statement Wednesday. "The price of oil depends on regional security, and you are the main source of insecurity in the region."

Energy executives and analysts  have predicted severe disruption in the event of a protracted closure, lasting well after the strait reopens. Repositioning tankers, restarting shut-in oil wells and rebooting shuttered refineries will take time, and unwinding the effects of the crisis will not happen overnight. 

Aramco Chief Executive Officer Amin Nasser warned in an earnings call this week that there "would be catastrophic consequences for the world’s oil markets" if the shutdown persists. 

"While we have faced disruptions in the past, this one by far is the biggest crisis the region’s oil and gas industry has faced," Nasser warned. 

Neil Atkinson, the former chief of oil at the International Energy Agency, told CNBC this week that the world faces a "game-changing and unprecedented energy crisis" in the event of a long shutdown in the strait - especially as production gets shut in at an increasing number of oil fields. While he declined to predict future prices in round numbers, he said that "the sky is the limit." 

How US-Israel War On Iran Exposes Weaknesses In Gulf Missile Defense Systems – Analysis

March 12, 2026 
Arab News
By Dr. Turki Faisal Al-Rasheed

As US President Barack Obama left his country’s embassy in Dublin in his fully armored limousine, his convoy hit an unexpected snag. The vehicle’s underside scraped on a simple ramp and became stuck at the gate — a multimillion dollar machine defeated by an ordinary piece of pavement. The image is hard to forget — enormous investment, but poor design for real world conditions. Our region risks making the same mistake if we pour money into “exquisite” defenses that fail at the critical moment.

The US Defense Innovation Unit, created in 2015 by then Defense Secretary Ash Carter, was meant to prevent exactly that kind of failure in the military domain. It was designed to break through Pentagon bureaucracy and connect the armed forces with fast-moving technologies from Silicon Valley, shifting from slow, traditional contractors to agile private firms. In reality, this has meant experimenting with autonomous systems, microsatellites, and artificial intelligence, while fighting the inertia, over-centralization, and rent-seeking that often plague big defense programs. The core lesson is simple: if you do not reform how you buy and use technology, you end up with very expensive systems that are not fit for the next war.

That next war is now unfolding over our heads. The ongoing US–Israel war on Iran has exposed a dangerous vulnerability in the US-led missile-defense architecture in the Middle East. Iran has executed a sequenced, systems-level campaign that, in a matter of days, blinded and degraded core elements of the US missile-defense network in our region. By destroying the Qatar-based AN/FPS 132 early-warning radar and at least three AN/TPY 2 X band radars linked to THAAD batteries in Saudi Arabia, the UAE and Jordan, Tehran has turned what was designed as a layered, redundant sensor web into a patchwork with serious gaps.

This tactical success has strategic consequences. It accelerates the depletion of high-end interceptors, exposes critical bases and energy infrastructure, and destabilizes key partners such as Jordan. It also erodes US deterrence credibility in the Indo Pacific, because the same finite interceptor stockpile is supposed to help defend Taiwan and Japan. In other words, the Middle East is consuming systems that Washington also counts on for other theaters — a risk Gulf policymakers must factor into any calculation about escalation.

Iran’s approach follows a three-step logic familiar from suppression of enemy air defenses, but applied to missile defense. First, “kill the eyes” by striking early warning radars. Second, “kill the aim” by targeting fire control radars that guide interceptors. Third, “destroy the batteries” by hitting the launchers themselves. Each step attacks a different dependency in an integrated system. Once enough eyes and aim points are removed, the remaining batteries operate in a fog, with compressed and uneven timelines for detection, classification, and engagement. There is no safe “rear area” if long range missiles and drones can reach radars in places like Jordan, which many once assumed were relatively secure.

For years, the US doctrinal concept in the Gulf has been layered missile defense: early warning from the AN/FPS 132 in Qatar and space-based sensors; upper tier defense by THAAD guided by AN/TPY 2 radars; lower tier coverage by Patriot PAC 3; and a maritime layer from Aegis equipped destroyers. On paper, this looked robust. In reality, Iran has shown how quickly a determined adversary can degrade it, especially when it can attack multiple layers at once.

Worse, Tehran is exploiting a cost exchange crisis. Cheap drones and relatively low-cost ballistic missiles are being mixed in large salvos, forcing defenders to fire interceptors that cost millions of dollars per shot at any track that might be lethal. The political and moral cost of a single “leaker” — a missile that gets through and causes mass casualties — pushes commanders to “engage everything.” Over time, that is a losing game, especially for states that rely heavily on imported interceptors and have limited local production capacity.

For Saudi Arabia, this is not an abstract debate. Vision 2030 rests on three interlinked pillars: diversifying the economy, transforming the Kingdom into a global investment hub, and building an “ambitious nation” with secure, resilient infrastructure. At the same time, Saudi Arabia is pursuing an ambitious energy transition, aiming to source around half of its power from renewables by 2030 and to build more than 100 GW of new solar and wind capacity while maintaining its role in oil and gas. All of this depends on the basic condition: physical security for legacy oil facilities, new gas and petrochemical projects, and a rapidly expanding network of renewable plants, industrial zones, and transmission corridors.

The 2019 Abqaiq–Khurais attacks were an early warning. Iran and its proxies temporarily knocked out roughly half of Saudi crude production and about 5 percent of global daily supply, despite existing air defenses. Today, the Kingdom’s new “air defense shield” — a mix of Patriot, THAAD, and AN/TPY 2 radars to protect Riyadh, Eastern Province oil facilities, and key military sites — is partly dependent on the same regional sensor and interceptor web that Iran is now degrading. As US high-end interceptors are consumed to defend bases across the Gulf, there is growing pressure on the availability and prioritization of defensive assets for Saudi energy and power infrastructure, especially if the conflict widens.

This creates a dangerous trap for the Gulf Cooperation Council. A scheme appears to be unfolding in which the US and Israel, driven by their confrontation with Iran, risk pulling the Gulf deeper into a direct clash with Tehran without fully accounting for our long-term security and development priorities. External actors know that their war with Iran will, one way or another, eventually end. They also know that a prolonged Gulf–Iran confrontation would drain our resources, destabilize our societies, and open the door to deeper foreign intervention under the pretext of “assistance.”

We have seen this movie before. During the Iran–Iraq war, “disaster capitalism” thrived on chaos, arms sales and reconstruction contracts, while regional states paid the human and economic cost. The most dangerous outcome of escalation today is not necessarily regime change in Tehran, but the possible disintegration of the Iranian state into prolonged anarchy. That would unleash refugee flows, militia spillover and sustained disruption in energy markets, directly threatening Saudi stability, Vision 2030, and the security of the entire Gulf.

In this context, the GCC has no choice but to close ranks. The recent GCC positions on the Iran–Israel war has emphasized de-escalation and diplomacy, reflecting a growing recognition that war on Iran’s territory would pose an existential risk to regional stability. Saudi Arabia’s clear declaration of support for Kuwait against potential Iraqi threats has shown what principled solidarity can look like; that spirit must extend to every GCC member and every emerging crisis. Unity is not a slogan. It is our first line of defense against being pressured, divided and targeted one by one.


What should a Saudi-centered response look like? First, we need more autonomous sensor coverage and command and control networks that do not collapse if a handful of US owned radars are destroyed. Second, we must protect and, where possible, localize stocks of critical interceptors, while investing in layered defenses that combine high-end systems with cheaper interceptors and passive protection (hardening, dispersal, deception). Third, we must deliberately shield key Vision 2030 assets — oil, gas and power infrastructure, as well as strategic industrial zones — as priority targets for defense planning, not afterthoughts.

At the same time, the GCC must resist being dragged into a direct US–Israel war on Iran. This does not mean accepting aggression or remaining silent in the face of violations of our sovereignty. It means insisting that any response serves our security, our economies, and our long-term vision for regional stability, rather than the short-term agendas of others. It means rejecting blackmail, hidden agendas and opaque “coalitions” that treat Gulf states as logistics hubs and targets rather than partners.

We stand at a fork in the road. One path leads to escalation, exhaustion and dependence — a future where our defense budgets balloon while our development goals shrink, and where Vision 2030 becomes a casualty of someone else’s war. The other path demands courage, discipline and regional unity: saying “no” to being used, “yes” to self-reliant defense innovation, and “always” to protecting our people and our development first.

In the end, the choice before the GCC is stark: either we become the ramp that wrecks someone else’s armored car, or we build the road that safely carries our own future forward.

• Dr. Turki Faisal Al-Rasheed is an adjunct professor at the University of Arizona’s College of Agriculture, Life & Environmental Sciences, in the Department of Biosystems Engineering. He is the author of “Agricultural Development Strategies: The Saudi Experience.” X: @TurkiFRasheed

Arab News

Arab News is Saudi Arabia's first English-language newspaper. It was founded in 1975 by Hisham and Mohammed Ali Hafiz. Today, it is one of 29 publications produced by Saudi Research & Publishing Company (SRPC), a subsidiary of Saudi Research & Marketing Group (SRMG).

 

Tanker Burns in Arabian Gulf After Suspected Strike

Courtesy UKMTO

Published Mar 11, 2026 10:33 PM by The Maritime Executive

 

[Breaking] Two tankers have reportedly been hit by unknown projectiles in the Arabian Gulf, according to UK Maritime Trade Operations (UKMTO).

A third party reported that two ships had been struck at a position south of Basrah, Iraq. Aboard at least one of the ships, the strike started a fire; the crew of the burning tanker evacuated safely, and no injuries were reported, according to the operator's company security officer (CSO).  

The status of the second reported vessel is as-yet unknown, and it has not been identified. No pollution effects have been reported.

The strike would align with a pattern of Iranian attacks on merchant shipping in the Arabian Gulf; more than a dozen vessels have been hit so far, resulting in multiple fatalities. 

This story will be updated as more information comes in.

 

The Strait Is Closed, the Story Keeps Changing, and You're Paying for It All

By Michael Kern - Mar 11, 2026

• The effective closure of the Strait of Hormuz, through which 20 percent of global oil supply normally flows, has driven tanker traffic down roughly 90 percent, created a net daily supply shortfall of approximately 15 million barrels, and pushed U.S. gasoline prices to their highest level under either of Trump's terms in office.
• 
  
• Proposed fixes including a Strategic Petroleum Reserve release, Russia sanctions relief, and naval tanker escorts are temporary measures that do not address the underlying problem, which is a war with no fixed objective, no coalition, and a partner in Israel whose war aims extend well beyond what Washington has publicly committed to.
• 
  
• Iran's strategy of horizontal escalation, widening the conflict across nine countries rather than fighting to win militarily, mirrors historical playbooks from Vietnam and Kosovo that cost the United States dearly, and every week the war continues without a defined endgame locks more inflation into the global economy through energy, LNG, fertilizer, and food supply chains.
• 
  

There's a particular kind of dread that sets in when you're watching an official tweet get deleted in real time.

On Tuesday, the Energy Secretary posted that the U.S. Navy had successfully escorted an oil tanker through the Strait of Hormuz.

Markets moved on it... 

Brent crude swung 17 percent in a single session, briefly crashing below $80. 

The White House press secretary then clarified: no armed escort had actually taken place. The tweet disappeared. Brent recovered toward $90. And somewhere, a few hundred traders made a lot of money on that gap.

This is where we are on Day 12 of Operation Epic Fury. 

The war that started February 28 with the assassination of Supreme Leader Khamenei and a series of precision strikes the administration described as a "decisive blow" to Iran's command structure is, twelve days later, still producing: daily waves of Iranian missiles aimed at nine countries, a global oil shock that briefly hit $120 a barrel, and a White House that cannot decide what the goal of the war actually is.

Let me try to explain what this means for your wallet. And I'm warning you upfront: it's a lot.

The Math That Doesn't Care About Press Briefings

The Strait of Hormuz is 21 nautical miles wide at its narrowest point. That is roughly the distance from Midtown Manhattan to JFK Airport. 

Through that gap flows more than 20 million barrels of oil per day, one-fifth of global petroleum consumption, one-quarter of all oil traded by sea. It also carries a meaningful share of global LNG and a third of the world's seaborne fertilizer exports.

 In other words, it isn't just an oil route. It's the circulatory system of the global food and energy economy.

Before February 28, roughly 138 vessels transited the Strait on an average day. Right now, that number is approximately two. 

Not because Iran built a wall across it. Because it didn't need to. 

War-risk insurers pulled coverage. Without insurance, no shipowner sends a vessel through. It's not the missiles that closed the Strait. It's the actuarial tables.

The result: 150 tankers sitting at anchor in open Gulf waters, 147 container ships trapped inside the Persian Gulf with nowhere to exit, and every major container line, Maersk, CMA CGM, Hapag-Lloyd, MSC, suspending operations entirely. 

Goldman Sachs estimates tanker traffic has fallen roughly 90%, temporarily removing about 18 percent of global oil supply from the market.

The bypass options that get thrown around in briefings sound good until you look at the numbers. 

Saudi Aramco's East-West pipeline and the UAE's Fujairah pipeline together offer alternative capacity of about 4.7 million barrels per day. But of the 7.2 million barrels Saudi Arabia exported in February, 6.38 million relied on the Strait. 

Gavekal Research estimates Gulf exporters could reroute at most an additional 3.5 million barrels per day to terminals outside the strait. Which means the world is still staring at a net shortfall of around 15 million barrels a day with nowhere to go.

To put that in context: the entire daily oil output of Russia is about 10 million barrels. We have a missing-Russia-sized hole in global supply.

And it isn't just oil. 

Qatar's LNG production halt, combined with the effective Hormuz closure, has removed roughly 20 percent of global LNG supply from the market. Asia is getting hit first given its dependence on Qatari LNG, but Europe is feeling the secondary shock as Asian buyers outbid Europeans for every available spot cargo. 

The JKM-TTF spread, which measures the Asian premium over European gas prices, just hit multi-year highs. LNG freight rates recorded their largest single-day jump ever. And as analysts at Wood Mackenzie noted, U.S. LNG export infrastructure is already running at capacity, meaning there is no American cavalry coming to fill that 20 percent gap.

The IMF has a formula for what oil price shocks do to economies: every 10 percent rise in oil prices equals a 0.4 percent increase in inflation and a 0.15 percent reduction in economic growth. 

Oil is still about 17 percent above pre-war levels, after briefly touching 50 percent higher. That means we've already imported roughly 0.68 additional points of inflation into the system... and that's a floor, not a ceiling, if the disruption continues. 

WTI posted its biggest weekly gain in the entire recorded history of oil futures trading, dating back to 1983. Diesel jumped 17 percent in a single session. The national average price of gasoline has already surged to $3.262 per gallon, the highest recorded under either of Trump's terms in office, with the number of states averaging above $3 jumping from 8 to 33 in less than a week.

Grocery prices follow energy prices with a lag of roughly six to eight weeks. 

The fertilizer that grows the food, the diesel that moves it, the plastic that packages it, the refrigeration that preserves it... all of it is downstream of this. 

Fears of stagflation are not fringe analysis anymore. Every significant oil shock since 1973 has been followed, in some form, by a global recession. 

Plugging a Dam With Scotch Tape

Here's the thing about the solutions being offered. They are not solutions. They are buying time with money we don't have.

The Strategic Petroleum Reserve currently holds 415.4 million barrels, about 20 days of normal American consumption, and roughly 310 million barrels below maximum capacity. 

The IEA dropped a bombshell earlier today, releasing 400 million barrels from its 1.24 billion barrels in public emergency stocks. 

That is the largest reserve release in history. And it didn’t really push prices down, because the Strait of Hormuz is still contested. The war doesn't end because we opened a valve in Louisiana.

The Russia sanctions relief idea is its own kind of theater. 

Trump has floated easing sanctions on Russian oil exports to flood the market. Russia produces about 10 million barrels a day, some of it still constrained by Western pressure. Unlocking even a fraction would move prices. 

But consider: Russia is the single country benefiting most directly from skyrocketing fossil fuel prices right now. Russia's state budget breaks even at around $70-80 per barrel. Prices are sitting well above that. 

We started a war that is actively enriching the country we've been sanctioning for four years, and now we're considering giving them a sanctions pass to help clean up the mess.

The tanker escort program? Analysts were quick to note that escorting a single tanker doesn't materially change the supply equation when well over a hundred vessels typically move through the strait on a normal day. 

And even that framing is now outdated: Iran has begun actively laying naval mines in the Strait, a development intelligence officials say could extend the effective blockade for weeks beyond any ceasefire. Tehran still possesses 80 to 90 percent of its mine-laying craft. It can deploy hundreds more. A destroyer escort means very little when the floor of the channel could be a minefield.

Meanwhile, OPEC+ agreed to raise output by a modest 206,000 barrels per day in April, a number analysts dismissed as largely symbolic given the scale of the Hormuz disruption. 

Traders said prices would depend less on quota decisions and more on whether oil can physically move through the Gulf. It cannot.

A War Still Looking for Its Own Reason

Conservative estimates from congressional sources put the cost of this war at roughly $1 billion a day. That's on top of a federal budget already structurally stressed. 

Seven American service members have been killed, approximately 140 have been wounded, per the Pentagon. 

Iran says U.S. and Israeli forces have bombed nearly 10,000 civilian sites and killed more than 1,300 Iranian civilians. 

More than 43,000 American citizens have been evacuated from the Middle East on commercial and State Department-chartered flights.

All of that is the cost column. The benefit column is genuinely hard to identify... because the goals keep changing.

Trump started the war by calling for regime change, urging the Iranian people to seize power. Within days, Pete Hegseth said this was "not about regime change." The White House press secretary didn't mention regime change when listing the war's aims. Then Trump said the goal was "unconditional surrender." Then he hinted at being open to negotiations with Tehran's current leadership. Then he said the war was "very complete, pretty much." Then he said attacks would continue "until the enemy is totally and decisively defeated."

All of that happened in less than two weeks.

Here's the structural problem underneath all the messaging chaos… Iran's foreign minister has said publicly that Tehran sees no reason to negotiate with the U.S., pointing out that two previous negotiations were used as cover for attacks. So Iran's definition of winning is narrow and achievable: the regime survives. America and Israel's definition of winning is unconditional surrender. 

Those two definitions are not compatible with a short war. 

Every time the stated objective shifts in Washington, the market has to reprice the timeline for resolution. Resolution is when the Strait reopens. Resolution is when tankers move. Resolution is when insurance premiums fall back down and the fertilizer ships and the grocery bill stops climbing. Every contradictory statement from the administration is a small tax on that timeline. Every deleted tweet is a few more hours of uncertainty baked into futures contracts.

The Partner Who Controls the War

Here's the thing about having one partner in a coalition. You don't control the war. Your partner controls the war.

U.S. officials have essentially acknowledged this. 

As the Economist has reported, American and Israeli war aims are already diverging, and the American position in that divergence is the weaker one. Netanyahu came into this conflict with regional ambitions that extend well beyond Iran's nuclear program. He sees a generational opportunity to reshape the Middle East's power structure. 

That's a much longer war than the one Trump is describing.

The U.S. reportedly informed Israel that it was "not happy" with Israeli strikes on Iranian energy infrastructure and asked them to stop without Washington's approval. That request arrived after the Ruwais refinery in Abu Dhabi, one of the world's largest, had already been forced to halt operations following a drone attack on the facility. 

Iran's Revolutionary Guard has now launched 37 waves of attacks since the war began, including strikes on U.S. bases in Erbil, Manama, and Bahrain, while the UAE intercepted 26 drones in a single day, nine of which fell inside its territory.

Iran's strategy is not to win militarily. It can’t. The strategy is to widen the conflict until the political costs become intolerable for everyone who isn't Iran. 

Strike the Gulf. Shut the airports. Burn the hotels. Make Dubai feel unsafe. Make Kuwait nervous. Make Saudi Arabia choose, visibly, between Washington and domestic stability. 

Iran earned somewhere between $46 and $65 billion in oil revenues in 2024-2025... but even a crippled Iran with a contested strait has shown it can inflict global economic costs that vastly exceed its own.

The comparison that keeps surfacing is Vietnam. By 1967, the U.S. had dropped three times the bomb tonnage used in all of World War II on North Vietnam. They had total air superiority. 

Then Tet happened anyway, coordinated attacks on more than 100 cities, a breach of the U.S. embassy compound in Saigon, weeks of fighting in Hue. The United States never lost a single battle in Vietnam. It lost the war.

The decisive arena was never the battlefield. It was the politics of an expanding conflict that had no clear endpoint. 

Twelve days in, the U.S. has struck more than 5,000 targets in Iran per the White House. Iran is on its 37th wave of retaliatory strikes. There are friendly-fire incidents under review. And the administration is still workshopping the rationale for why the war started in the first place.

What This Means, Specifically, For Your Life

The war is costing America $1 billion a day. Oil hit $119 a barrel during the peak of the disruption. Gas is at its highest price of Trump's entire presidency. Diesel, the fuel that moves food across America, jumped 17 percent in a single session. 

The IMF formula puts us at 0.68 additional points of inflation already locked in at current prices... and again, that's a floor, not a ceiling, if the disruption continues.

The 1973 oil shock produced a recession that lasted 16 months and permanently restructured the American relationship with energy. The 1978-79 shock contributed to double-digit inflation and the Volcker rate hikes that crushed the economy to kill it. We got out of that by raising rates to 20 percent. The Fed funds rate right now is nowhere near equipped for that kind of fight. And that was before we had $38 trillion in federal debt on the balance sheet.

Trump was reelected in 2024 largely because people were angry about inflation. He promised to bring prices down. He promised to avoid forever wars. He promised cheap energy.

The Strait of Hormuz is mined.

The war's goals change daily.

The Energy Secretary is deleting tweets.

And somewhere, a trader is watching the gap between what we're being told and what the tanker data actually shows... and making a lot of money on the difference. The market, at least, has no illusions. The rest of us are still catching up.

By Michael Kern for Oilprice.com