It’s not quite “3 days to Kyiv,” but President Donald Trump’s misadventure in the Persian Gulf hasn’t gone well. Now he’s negotiating to get something, anything, out of the Iranians that looks better than the status quo before the war began.
In Foreign Policy magazine, Ravi Agrawal discusses a number of embarrassing outcomes from the Iran war, including failure to change the regime, failure to effectively degrade Iran’s missile capabilities, and failure to limit its control over the Strait of Hormuz. Agrawal also notes America’s losses in men and materiel, and its loss of the moral high ground when other countries seek to make war and assassinate leaders.
But probably the most harmful outcome to noncombatants has been the economic pain caused by the various restrictions on traffic through the Strait of Hormuz, both those enforced by Iran and by the American blockade. Agrawal explains:
Then there’s the energy crisis. The price of gasoline in the United States is up by nearly half since this time last year. Diesel, which is used by commercial vehicles, is up by 59 percent. The obvious reason is the war; the closure of the Strait of Hormuz has constrained a previously oversupplied market. As I’ve written previously, the pain is even more acute in Europe and Asia. Countries such as Pakistan and the Philippines have ordered public offices to reduce their workweeks and shut down universities to conserve energy. Even India, the world’s fifth-largest economy, requested its 1.4 billion citizens last week to reduce their usage of fuel and stop panic-buying gold. Bad as all of this is, the worst is yet to come. Energy prices would have risen far higher by now were it not for the United States ramping up oil exports and drawing on its Strategic Petroleum Reserve. China, which is experiencing a period of reduced internal demand, has also been using up its immense cache of petroleum. If Washington cuts exports or if Beijing were to start dipping into the market instead of its reserves, prices could spiral upward. As always, smaller economies will suffer the most.
Other commodities are also experiencing severe shortages, with a range of ripple effects in store for the world. In addition to ferrying a fifth of the world’s crude and natural gas in normal times, the Strait of Hormuz is also responsible for a fifth of the world’s supply of fertilizer and a third of its helium. A global food crisis and a shortage of semiconductors, which rely on helium, is already baked into economists’ projections for the next year. The longer the crisis drags on, the higher the costs.
Global growth is already faltering. In April, the International Monetary Fund (IMF) cut its forecast for growth from 3.4 percent to 3.1 percent. A fresh projection today would likely merit an additional cut of a third of a percentage point. The IMF expects growth to fall to 2 percent by next year if energy supplies do not return to normal, a scenario that feels increasingly likely. To put this eventuality in perspective, the world has grown by less than 2 percent only four times since 1980. The world has experienced a global recession only twice since 1950, during the 2008 global financial crisis and the 2020 COVID-19 pandemic. If the Iran war took its place among these two unforeseen shocks, it would represent an own goal of historic proportions for Trump and the United States.
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