The Next Gulf War

Israel attacking Iran could set off a cascade.

One of the things I’ve had to start getting my head around is that shale oil production here in the U.S. has made us a net exporter. This goes hand in hand with our increasing disinterest in playing policeman to the world. The U.S. was the global guarantor of safe passage on the seas, a role we took on to thwart the Soviet Union. We no longer need to do that for the sake of liquid fuel here, but a global oil market crunch would hit China hard, and that hits our supply chain, so we are by no means perfectly insulated.

What Zeihan suggests is that an Israeli hit on Kharg island, the nexus for Iranian exports, would leave them in a fatalistic mood that would trigger an invasion through the Shia part of Iraq with the goal of seizing Saudi oil production. Conflict like that in the Persian Gulf would affect all of the producers there, and only some have the pipelines needed to divert to ports on the Red Sea. U.S. oil remains at $70/bbl, while the rest of the world sees triple or quadruple that price.

Being somewhat familiar with World War II, each day the news seems to track a little bit closer to that time. We’ve been watching for years as Ukraine struggles to get at the Kerch Strait bridge. Economic interests run counter to national security concerns - mostly notably in the last few days we find that Taiwan’s TSMC has been selling advanced chips to China’s Huawei, while drones hitting Ukraine are built with parts from countries that have sanctioned Russia.

The pandemic taught us things about our supply chains - domestic investment in factories here doubled as a result. We’re going to learn so much more when we try to conduct mid-20th century style industrial scale war over the top of that network.