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The war in the Middle East and the on-again, off-again closure of the Strait of Hormuz have dominated news cycles for months. The oft-predicted economic apocalypse hasn’t materialized. Yet.
As one door closes, another opens. For Russia, which lost European markets and relations, the doors of old Soviet allies and fellow pariahs open, this time in Pyongyang. Communist North Korea was Joseph Stalin’s creation, installed under Soviet occupation and formally established in 1948, then pulled back from collapse two years later by Mao Zedong’s intervention in the Korean War—arguably two of the worst dictators of the 20th century. Its actual grandfather is Kim Il-Sung, founder of the ruling dynasty and grandfather of the current ruler, Kim Jong Un.
Russia faces an acute energy and fuel crisis following months of Ukrainian attacks on its refineries and other energy infrastructure. This has created long lines and economic slowdowns in Russia, forcing some regions to ration fuel.
On the first of this month, Ukrainian drones struck three oil refineries in Russia’s Bashkortostan region near the city of Ufa, around 1,600 kilometers from the border. A day later, Rosneft’s Saratov refinery was hit, a plant that processed 5.8 million tons of oil in 2024. These two incidents are part of a long list of damaging attacks on energy infrastructure by Ukraine this summer. These strikes are landing even as the Kremlin insists there are “no immediate prospects for resuming the negotiation process” and resists Ukraine’s calls for a ceasefire while maintaining that Russia remains open to negotiations in principle.
Russia—the petrostate that spent a decade trying to weaponize natural gas against Europe—is now rationing fuel at home as shortages spread across the country. The Crimea has declared a state of emergency, and other occupied Ukrainian territories are struggling to secure adequate supplies as civilians continue to flee the deteriorating conditions. Ukraine’s sustained drone and missile campaign against Russian refineries, depots, and logistics is inflicting real costs on Moscow's capacity to sustain both its war machine and domestic stability. The Schwerpunkt—the breaking point—has not yet been reached. However, the balance of power is shifting toward Kyiv.
As the fighting in the Persian Gulf expands, competition between major region-adjacent powers, including Turkey and Pakistan, is plain to see. While Iran is attacking the U.S., Israel, Kuwait, the UAE, and other Gulf states, the Sunni bloc led by Turkey and Pakistan, with Saudi Arabia and Qatar as its members, is bobbing and weaving. The conflict may weaken the I2U2 (Israel-India-UAE- U.S.) and undermine American influence in the Gulf if Iran is not defeated decisively.
The war with Iran and the recurrent closures of the Strait of Hormuz have rattled financial markets across the globe, but the greatest immediate costs are being borne by the Arab Gulf states, long safe havens of domestic and international investors. Missile strikes and drone attacks have damaged critical facilities, disrupted aviation, and undermined the aura of stability that had long distinguished these states in the often-turbulent Middle East. According to the April 2026 IMFRegional Economic Outlook Update, flight departures fell by roughly one-third in Abu Dhabi, about two-thirds in Dubai, and approximately three-quarters in Doha during the first months of the conflict, while some Gulf airports experienced complete suspensions. Infrastructure of all types was damaged, and the myth of safety was shattered.
This past Saturday, July 4th, saw two major events on the world stage. In America, jubilant crowds celebrated 250 years of independence, replete with fireworks, air shows, sizzling heat, and congratulations from around the globe, including the EU, UK, Germany, Italy, Ukraine, Poland, Russia, India, Saudi Arabia, the UAE, Israel, and many others.
During the opening months of the Second World War, things moved slowly first in the period that became known as the Phony War, or Sitzkrieg in German. Following the fall of Poland in September 1939, and before Germany invaded Denmark and Norway in April 1940, the absence of sustained military operations created the illusion of normalcy. The conflict had not yet escalated, though the belligerents were planning, repositioning, replenishing, and preparing for the next phase. Despite the belligerents’ massive wartime potential, populations and policymakers were lulled into a false sense of control.
As AI drives rising energy demand, the Trump Administration is exploring an unconventional energy source: surplus nuclear-weapons-grade plutonium from the Cold War. In May 2026, the Department of Energy, under its Surplus Plutonium Utilization Program, selected five companies—Oklo, Flibe Energy, Exodys Energy, SHINE Technologies, and Standard Nuclear— to examine whether the excess plutonium can be converted into fuel for advanced nuclear reactors. The initiative provides an opportunity for the country to turn what has long been regarded as a costly disposal challenge into a source of domestic energy. We know the physics works. The question is whether it can be made economically viable.
If the current Gulf War, marked by controversy over control of the Strait of Hormuz, does not end soon, the conflict may shift from attacks on the transport of oil by sea to disrupting vital potable water resources. Just before President Trump announced Thursday, June 11, that the ceasefire is to be signed imminently, the U.S. allegedly bombed water infrastructure in southern Iran. These attacks reportedly hit two reservoirs on SirikIsland, where a port and Iranian naval facilities are located. The Iranian state media claimed that this cut off the water supply to 20,000 residents. Whether this claim is credible is questionable, as the Islamic Republic’s media often dissimilates. However, if these waterworks were supplying Iran’s military infrastructure, they would be legitimate military targets.
Since June 7, Iran and its proxy, the Houthi rebels (with their rallying cry, “God is great, death to America, death to Israel, a curse upon the Jews, victory to Islam”), have launched more than 30 ballistic missiles at Israel, prompting the Israelis to retaliate with airstrikes, and setting the stage for renewed hostilities and escalating instability in the region. Iran’s Parliamentary Speaker, Mohammad Baqer Ghalibaf, said Iran’s response was tied to the U.S. naval blockade and alleged Israeli counterattacks against Hezbollah in Lebanon, and threatened further action against U.S. and Israeli targets. While the attacks have escalated tensions in the Middle East and exposed the fragility of diplomatic efforts, they also highlight the growing economic constraints shaping Iran’s position. Some analysts say that Iran wants a deal to lift the U.S. blockade and allow the export of oil already loaded on tankers stuck in the Gulf.
The world is fighting a two-front energy war. One front runs through the Strait of Hormuz, where Iran and the United States are locked in a standoff. My old acquaintance, International Energy Agency Executive Director Fatih Birol, called this the worst energy shock in history, more severe than the 1970s oil crisis and the Ukraine war combined. The second front runs through the heart of Europe, where Ukrainian drones are systematically dismantling Russia’s oil export infrastructure while Moscow, stung and furious, ispunishing its neighbor and ally, Kazakhstan, and its former energy customer, Germany, for it.
Oil prices collapsed from $119.54 in the Asian intra-day trade on March 9th to $89.88 on April 17th, after Iran announced that, following a ceasefire in Lebanon, it would keep the Strait of Hormuz open for the duration of the ceasefire. While no one knows exactly what will happen next as far as the conflict goes, it is safe to say that oil prices will continue to be on a roller coaster ride in response to developments.While from the President’s point of view, his Administration may be bobbing and weaving as it fights a determined, mendacious, and fanatical Islamic Revolutionary Guard Corps, to many observers, the dance looks more like zigzagging between fear of the economic and political backlash from rising energy prices and the need to terminate Tehran’s nuclear ambitions once and for all.
On April 4th, President Donald Trump posted on Truth Social: “Remember when I gave Iran ten days to make a deal or open up the Hormuz Strait. Time is running out…” Markets have been recoiling amid instability in the Middle East, and it does not appear that jittery investors will experience any relief in the near term. However, this is more than a short-term shock reaction. It signals a deeper shift.
In the wake of American and Israeli strikes against Iran on February 28th, Tehran reacted swiftly, attacking energy infrastructure, water desalination plants, and other soft targets across the Middle East as well as moving to close the Strait of Hormuz. Closure of the vital Strait has long been foreseen by security experts, including this author, who warned about the Iranian regime’s intentions in a 2007 Congressional testimony, but it still shocked markets. Crude oil prices jumped from approximately $70 dollars a barrel to just over $110 a barrel as the crisis entered its second month.
In March 2026, Cuba experienced nationwide blackouts affecting the island’s population of over 10,000,000 and bringing routine economic activity and essential services to a screeching halt. In many media narratives, this state of affairs is laid at the feet of the U.S. energy embargo on the island, often in the context of American policy towards Latin America.
In the Middle East, Iran’s theocratic government is facing an abrupt leadership change as U.S. and Israeli forces launch coordinated military operations, including Operation Epic Fury and Operation Roaring Lion. The conflict has raised concerns among analysts about regional security and potential disruptions to global energy markets. Tehran’s strategic ties with China and Russia further complicate the situation, influencing both military dynamics and international energy flows.
The U.S./Israel-Iran war is not just a confrontation with the Shia theocratic dictatorship in Iran and the Iranian proxies, like the Houthis and Hezbollah, involved in combat operations. Iran’s patrons and backers, primarily China and Russia, factor heavily in the mix. And there is no greater backer of Iran than Russia.
The U.S.–Israeli strikes on Iran that began on February 28th quickly escalated tensions across the Persian Gulf, prompting a range of Iranian attacks against energy infrastructure throughout the region and the closure of the Strait of Hormuz. The Strait, a narrow water passage bordered on the north by Iran through which ships can transit from the Persian Gulf to the Gulf of Oman and the open Arabian Sea/Indian Ocean, accounts for 20% of daily global oil and liquefied natural gas flows. Predictably, global markets reacted immediately. Major equity indexes tumbled on Monday, while gas prices soared. By Thursday, Brent crude approached$84 a barrel, its highest level since July 2024, while West Texas Intermediate climbed roughly 8%, nearing $77 per barrel. Historically speaking, these are manageable increases.
After U.S.-Israeli combat operations began against Iran on Saturday, February 28th, global energy prices surged as the Iranian Revolutionary Guard Corps announced that passage through the Strait of Hormuz was “not allowed.” This narrow body of water (the navigation channel is only two-miles wide) moves 20%-30% of the world’s supply of crude oil and liquified natural gas every day, including the majority of exports from major hydrocarbon-producing countries in the Persian Gulf. Commercial vessels are now avoiding passage through the Strait. On Monday, Iran announced that any ship trying to pass would be attacked. If these disruptions persist through a prolonged blockade, they will seriously threaten global energy supplies.
Since U.S. President Donald Trump took office in 2025, he has launched a full-scale attack on renewable energy, repeating the “climate hoax” accusation many times. The attacks on wind turbines became particularly loud. However, what this really means is not the end of clean energy, but new winners and losers in Trump’s energy economy, with China’s global domination of the renewable industries looming large.
Following last month’s dramatic capture of former Venezuelan President Nicolás Maduro, the Trump Administration is now shifting into high gear to expand the footprint of Western companies in Venezuela’s oil sector. Through the Office of Foreign Assets Control (OFAC), a series of new Venezuela General Licenses (GLs) have been published, including GL 50, which authorizes companies, including BP, Chevron, Eni, Repsol, and Shell to begin oil production operations in Venezuela. These new authorizations come just after U.S. Energy Secretary Chris Wright visited some of the South American nation’s oil-producing facilities, accompanied by its Chavista acting president, Delcy Rodríguez.
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On January 21, 2026, U.S. President Donald Trump announced a framework for a potential deal over Greenland after meeting with NATO Secretary General Mark Rutte. “We have formed the framework of a future deal with respect to Greenland and, in fact, the entire Arctic Region,” Trump wrote. This agreement prompted the U.S. president to back down from earlier threats to impose tariffs on the exports of eight European countries, which were scheduled to take effect on February 1st.
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President Donald Trump promised to reconsider tariffs on India if New Delhi ceases purchasing Russian crude oil. Targeting Moscow’s second-largest crude oil buyer strikes directly at the Kremlin’s financial underbelly in its war of attrition against Ukraine. While this leverage may prove consequential as peace talks are limping, some in Washington worry that pressure on India is strengthening those in New Delhi arguing for “strategic autonomy”, including the India’s Foreign Minister S Jaishankar. Speaking to the media in at the Munich Security Conference, he refused to a give a clear answer to the question whether India is cutting its Russian oil purchases. In the meantime, a political row exploded in New Delhi as the Congress-led opposition has accused Narendra Modi’s government of “selling out under pressure”. Overplaying Washington’s hand could reduce future avenues for cooperation to contain China in Southeast Asia or the Middle East with Indian support, through the I2U2 and other frameworks.
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