Iran War: The Chokehold Tightens
A blockade to end all blockades?
More war to come
The ceasefire, hastily announced last week, and the sea blockade announced this week largely seems to be holding for now. There is a high chance, however, that these actions will prove to be nothing more than (another) ruse; a brief pause to rearm and resupply before an overwhelming attack could be carried out. The west needed a breather after a massive 6 week bombing run and a barrage of Iranian projectiles having depleted their long range guided munitions and air defense arsenal. The US had no other choice than to pretend that its negotiating while it was shuffling ammo and military hardware around the world to restock for another bombing run.
You see, after the “roaring success” of saving one aircrew member of the US Air Force (in fact a high ranking officer possibly leading the charge in what many analysts believe to be a botched special ops attempt to seize Iran’s uranium supplies from Isfahan), the US desperately needs a real victory. And negotiating an end to hostilities doesn’t seem to belong to that category. Is it any wonder that the US delegation stood up after 21 hours, and announced that the talks failed due to Iran’s refusal to give up its nuclear program?
Thank you for reading The Honest Sorcerer. If you value this article or any others please share and consider a subscription, or perhaps buying a virtual coffee. At the same time allow me to express my eternal gratitude to those who already support my work — without you this site could not exist.
Spoiler alert: this whole war, and thus “peace negotiations” were never about enriching Uranium or finding a long-term solution. More so about regional hegemony, the petrodollar and ultimately: about controlling the flow of oil to China. You see, if China can control rare earth exports, we can control the only energy source there is no substitute for: oil.1 As for a cue look no further than the recent announcement from US Treasury Secretary Scott Bessent: "We believe (that with) this blockade ... there will be a pause of Chinese buying." He has also written to two Chinese banks and "told them that if we can prove that there is Iranian money flowing through your accounts, then we are willing to put on secondary sanctions." Finally, and to remove the last scintilla of doubt: Bessent accused China with “hoarding” healthcare products, rare earth metals and oil, calling China an “unreliable global partner” for good measure.
Holding the entire world economy hostage has thus become a tool for both sides. Iran uses it’s blockade of Hormuz as a leverage to sway US allies and the voting public in America in the run-up to the mid-terms. (See? They can also play the regime change game…) The US, by blocking Iranian linked oil cargoes leaving and Chinese payments arriving to the Islamic Republic hopes to gain leverage over China. And if allies, such as Australia, start to run low on fuel and are forced to curb raw material exports (bauxite, lithium) to China, as a result, then well, all the better. This is how a distant blockade,2 imposed on the “second largest” economy of the world looks like.
The blockade, hitherto restricted to the Strait of Hormuz has got another layer, positioned well outside the range of drones and anti shipping missiles of the IRGC (that is further than 300 km). The U.S. military’s Central Command said the blockade would be “enforced impartially against vessels of all nations” entering or leaving Iranian ports in the Persian Gulf and Gulf of Oman. Results are mixed, though. Until Thursday at least eight vessels have crossed the US blockade line, heading for Iranian ports or to load Iranian cargo. In the outbound direction, however, so far no ship has passed both blockades successfully. US‑sanctioned Chinese‑linked tanker, Rich Starry, is a case in point. It sailed out of the Strait of Hormuz apparently unchallenged, but then later was forced to make a U-turn. Centcom’s Cain said they forced another 13 vessels to turn around and re-enter the Gulf of Oman. The US apparently hasn’t got enough forces in the area to enforce an airtight blockade but has a credible deterrence—at least on some ship operators. For those undeterred leakers, expect a return to Venezuela-style tanker chases across the Indian Ocean.
This is an existential fight for both sides. For Iran it’s either security for all or security for none. If Iran cannot export, neither should other Gulf countries. Iran’s army has warned on Wednesday that it will block trade through the Red Sea along with the Persian Gulf and the Sea of Oman if the US naval blockade on Iranian ports continues. For the US it’s also all or nothing: Iran either unblocks the strait and gives up its ballistic missile program—effectively rendering itself defenseless—or face maximum pressure sanctions. Although Iran has announced today (Friday, April 17) that the strait is open (for the remainder of the ceasefire, after a truce has been brokered between Lebanon and Israel), that doesn’t mean oil cargoes will now flood the market. Iran still insists that ships follow a route coordinated with the IRGC, which has to approve each transit beforehand. In other words the strait is as open as it was before the US-Iranian ceasefire… At the same time, and as a sign of things to come, the US is sending another ten thousand additional troops into the Middle East, along with the USS George H. W. Bush carrier battle group, scheduled to arrive on the 22nd of April—the last day of the two week ceasefire… If you were hoping for a real de-escalation, as opposed to the usual Friday market-manipulation-tweet-storm (MMTS), don’t hold your breath.
By forcing the US into a ceasefire one and a half weeks ago Iran has won an important battle simply by surviving and by imposing a high cost on US allies in retaliation for their aggression. And no it was not the high cost of oil, but the material cost of running such a high intensity military campaign. It would take at least a decade to manufacture all the missiles consumed. Shortages are now on a systemic level: there are not enough raw materials (from aluminum to rare earth metals), factory capacity or labor to fight prolonged high intensity conflicts. Ever wondered why the Pentagon seeks help from US automakers? Neoliberalism undermined the very military it needed to stay successful. In a long war of attrition Iran has the upper hand.
More strikes on civilian and oil infrastructure
Last week, just before the ceasefire was announced, Iran’s South Pars gas field was hit (again) by Israel together with it’s oil terminal on Kharg island. Attacks then continued with UAE jets bombing Iranian energy infrastructure. The strike on Iranian gas fields, however, was also a strike against Turkey which receives 15% of its gas from Iran. (By the way, Iraq’s electricity production, also happens to depend on Iranian gas.) South Pars is more than a gas field, though. It is the Iranian part of the world’s largest gas field, with the other half belonging to Qatar. It is also the central hub keeping Iran’s oilfields alive, as well as a source of feedstock for Asia’s petrochemical industry, and fuel powering the majority of Iran’s electric grid. It’s complete loss (should we get to that point) would be a major blow not only for Iran and it’s oil and petrochemical industry, but to the entire region.
In retaliation to these and prior strikes, last week Iran struck Saudi Arabia’s Yanbu pipeline, hitting a pumping station and cutting throughput by 700,000 barrels per day. Early April attacks on the Saudi’s Manifa production facility have also slashed the kingdom’s output by 300,000 barrels per day, on top of previous 300,000 barrels per day lost due to damage done to the Khurais site. Current estimates indicate that Saudi output is now hovering around 6 million barrels a day (down from 10 in February) with recent attacks on oil infrastructure further constraining the kingdom’s ability to produce and export crude. Refining capacity has also been hit, including Ras Tanura, Jubail, Yanbu, and Riyadh. Processing sites at Ju’aymah were affected by fires, reducing exports of liquefied petroleum gas and natural gas liquids as well. Jubail Industrial City—the Middle East’s largest industrial hub and the 4th largest petrochemical complex globally, which used to produce 7% of all refined oil products made in the world—was also hit. According to the energy ministry, ongoing attacks are also drawing down operational and emergency inventories, reducing the country’s ability to offset losses.
As a result of Iranian retaliatory strikes Kuwait’s two desalination plants (supplying 90% of the sheikdom’s drinking water) were also hit. In the Emirates the Habshan site (producing 80% of the UAE’s domestic gas), together with the Asab and Bu Hasa sites, also suffered damages, with Habshan effectively remaining offline since April 3. Significant damage was reported at the Khalifa Port industrial zone, including Aluminum Plants. Bahrain’s BAPCO and GPIC were also hit. Major regional transport hubs, too, have sustained damage: including international airports in Dubai, Abu Dhabi, Kuwait, and Bahrain.
On the Iranian side US-Israeli airstrikes have damaged bridges, railway lines, and major highways, such as the route linking Tabriz to Tehran. Thousands of civilian locations, including residential areas, schools, and hospitals, have been hit, with over 20,000 buildings being damaged. The destruction of 442 health facilities in Iran, including the destruction of the Pasteur Institute and Tofigh Darou pharmaceutical facility, halting vaccine production and causing severe medical shortages, has led to an unfolding humanitarian crisis in the region. As Alex Kimani from oilprice.com explains:
The Iran war has caused severe and lasting environmental damage, including massive oil spills in the Persian Gulf, toxic smoke from burning refineries, and widespread contamination from pulverized debris. Soot and toxic chemicals from strikes on the Tehran Refinery and other fuel hubs mixed with atmospheric moisture fall as acidic rain. The inhalation of microscopic soot and pulverized building materials (including potential asbestos) from damaged residential and commercial areas in Iran and elsewhere poses long-term risks for lung disease, heart problems and cancer.
Meanwhile, the conflict has caused a massive spike in emissions, with estimates that the U.S. military alone released nearly 2 billion metric tons of greenhouse gases in the first couple of days of the war. Destruction of buried pipes has led to wastewater discharges in several cities. These pollutants can leach into groundwater, potentially contaminating water resources for years. Heavy metals and toxic chemicals from munitions, as well as the release of highly reactive uranium hexafluoride from damaged enrichment plants like Natanz, can settle in the soil, making farmland unfit for agriculture for decades.
More market insanity
As Fatih Birol, executive director of the International Energy Agency told Le Figaro, the current energy crisis is worse than those of 1973, 1979 and 2022 combined. The “world has never experienced a disruption to energy supply of such magnitude” as he put it. According to data from Kpler crude export volumes from the Gulf have fallen from 15 million to 7 million barrels per day as of April 7, and cuts at refineries have added a further 3 million barrels per day to the supply shortfall. Crude oil production in the region, as a result, was cut by approximately 11 million barrels per day so far. Analysts at Morgan Stanley put the estimated oil production cut to around 13 million barrels a day. Jeff Currie of Carlyle believes daily losses are even higher.
Now, with Iranian oil supplies also being blocked by the US military, we can add a further 1.8 million barrels per day to that shortfall. Combined with the US waiver on Iranian and Russian crude on sea not being extended (scheduled to expire on April 19), and with Iran considering a short-term pause on shipments, that number can only rise. Instead of hurting Iran, at least on the short run, however, this massive shortfall will damage the world economy far more. Crude runs at the world’s refineries were forecast to hit an average 84.6 mb/d for 2026 back in January. Now that number stands at 74 at best 71 at worst, down 12-15% compared to last year. That is an unprecedented supply shock.
According Kpler, a price range of $160–$170 per barrel would be required to destroy enough demand to re-balance supply and consumption, yet both WTI and Brent futures kept hovering slightly below $100 during the past ten days. Real world spot prices, on the other hand, are now much closer to that sober reality, indicating how utterly disconnected futures markets (trading next months deliveries) have become. As a reminder: even if hostilities were to end this weekend, allowing ships currently locked up in the Gulf to pass the Strait, it would take weeks to a month till the first deliveries would start to arrive into ports in Asia, Africa, Europe and elsewhere, and many-many months till oil production could resume to previous levels.
Considering present geopolitical and military realities, even conservative analytic firms such as Kpler, regard “continued pressure without a decisive breakthrough” as a base case with a probability of 50–60%. However, should the conflict extend beyond two to three months, which seems more likely by the day, several Asian and African economies could experience “genuine fuel scarcity.” Countries in Asia are already starting to run out of jet fuel, and Europe will most likely find itself in a similar situation by the end of April. And just as with kerosene, diesel markets are already flashing a warning sign about possible shortages in Asia, with Europe coming up next.3
The last of the cargoes that passed the Strait of Hormuz heading to Europe are discharging now. Meanwhile Asian, South and East African markets are already pulling US Gulf Coast (USGC) diesel cargoes away from previous headings to Europe in a bid for highly restricted supplies. And what’s the EU Commission’s response? “Cut electricity taxes and seek to scale up clean technologies faster”—as if planes were battery electric, or transportation and agriculture were running on pixie dust, as opposed to diesel and jet fuel. It’s hard to see, how this is going to end well.
As University of Chicago professor Robert Pape explains (starting at 7:01):
“In the early weeks of a blockade what you end up with is disruption of goods, which increases the price of the good inside of the entity that’s being blockaded. In this case, the world is being blockaded. So, it increases the price and the reason is because there’s stuff left in that country. There’s material, there’s stock piles. And that’s why the blockades increase price.
But then after about four or five weeks, maybe 45 days, you get a different stage. That’s the stage where those stockpiles run out. And that’s where you get true shortages. Now you’ve had fear of shortage. That’s why the price went up in the first 45 days. But after the first 45 days, now you actually have shortages. And you really see those shortages materializing because you have South Korea, you have the Philippines, uh you have Asian states already going to Pakistan to four day work weeks now because they’re actual shortages occurring.
Well, after the next stage beyond that, say days 60 to 90 here, now you get to the third stage which is contraction of commodity production because you don’t have some alternative supply source for 20% of the world’s oil, 30% of the world’s fertilizer. There’s nothing like that just sitting around lying idle to be plugged in. So what you end up with is a three stage which is price rise, shortage, contraction.”
For now, most economies in the West are still in stage one, with stage two rapidly approaching. Asia has already transitioned into shortages, having to face contraction in the not so distant future. All across the world every business is hammered by rising costs for literally everything they buy to operate, and since the discretionary income of the bottom 80% is already under pressure, they can’t raise prices much without losing sales. Consumption now depends on the spending of the top 10%, who just so happen to own the lion’s share of income-producing assets such as real estate, stocks, corporate bonds and enterprises.
Consumer sentiment, as measured by the University of Michigan, has hit 47.6—its lowest level in the metric’s recorded history, following a steady decline of -50% since early 2020, the onset of the Pandemic. (Previous record lows were 51.7 during May 1980, and 50.0 in June 2022). At the same time, the S&P500 is trading just 3% from its all-time high, following a rally of +205% in the past 5 years. If that’s not insane—especially in light of the things to come—nothing is. But wait, it gets worse. If high energy prices, raw material shortages and a general producer cost increase kills businesses (some of them financed from private credit) it could bring the whole private credit business down… How about a GFC 2.0?
Harvard economist Jason Furman calculated that more than 90% of GDP growth in the first half of 2025 was driven by AI and related investments. Much of the data center build-out, however, was powered by Gulf financing, while US companies were also busy building out heavily in the Gulf. Now, what happens to those investments when drones and missiles hit them in Dubai, or when Gulf investors decide they no longer have the funds (lacking adequate revenues from oil)? Kuwait and Qatar face up to 14% contractions in GDP due to blocked oil exports and infrastructure attacks. Saudi Arabia and the UAE are also expected to see 3-5% drops in their GDP, as they can at least partially reroute some of their oil flows. Regional stock exchanges have tumbled, with Dubai's market experiencing a 15% drop and markets in Abu Dhabi and Qatar falling by 5-10%. Meanwhile, the cost of insuring against default (credit default swap spreads) has risen sharply for Bahrain and Dubai. If this crisis continues, as most expect it will do, a 10-15% drop in world GDP and asset valuation will no longer sound outlandish.
Remember: this is an oil based civilization. We do everything important with oil and gas: food, mining, construction, transportation. No economic activity is viable on the long term without petroleum. That’s the sober reality I’m writing about for years now. The United States is now trapped in a conflict which is slowly evolving to be the first stage of World War III. Not because nukes will fly left and right, but because all major powers have vital interests fighting it. China wants to grow and become the world’s largest economy. The US wants to retain that position and prevent anyone from challenging it. If we were living in an infinite world, the two could race against each other indefinitely. Problem is that planet Earth is not a bonbon filled with oil and all the minerals we wish to have. It’s resources are finite, and when the best, easiest to get part is out, the fight begins for what remains of it’s economic to recover treasures and countries begin to weaponize whatever they have against each other. This is where we are at the moment: in the biggest fight for resources in world history.
Until next time,
B
Thank you for reading The Honest Sorcerer. If you value this article or any others please share and consider a subscription, or perhaps buying a virtual coffee. At the same time allow me to express my eternal gratitude to those who already support my work — without you this site could not exist.
Without oil there is no electrification either. With Saudi sulfur (a byproduct of refining sour crude oil) off the market, a record-setting sulfur rally is now squeezing Indonesian nickel makers and African copper miners. These two metals are essential in building battery electric vehicles in a incomprehensibly foolish race to replace gasoline (used in cars and motorcycles) with diesel (used in mining and transportation equipment) digging up and delivering the necessary ores. In related news, and perhaps as a precautionary measure, China has started to severely restrict sulfuric acid export back in January already, with no exports from next month due to a lack of sulfur from the Gulf. The latest trade data shows that China exported 385,000 tons of sulfuric acid in the first two months of 2026, around half the volume exported in the same period a year earlier.
Note how France, the UK, and NATO in general are not willing to participate. By doing so they would not only risk the loss of material and personnel but also exposing the degraded state of their navies. Additionally, should they have to interfere with Chinese shipping, European countries would also risk ruining their already fragile relationship with Beijing.
European refineries produce more gasoline and naphtha than needed and much less diesel and jet fuel than consumed. This has led to a overproduction of light distillates (such as naphtha) leading to the closure of crackers and refineries all across Europe, even as east Asian buyers would kill for some extra naphtha today. This imbalance has also made Europe extremely import dependent. Previously it was Russia who provided the old continent with middle distillates, at least until Europe has banned these imports. Up until March the Middle East filled in that void, delivering 30% of Europe’s aviation and truck fuel imports, but with the strait remaining firmly shut, Europe is left without adequate diesel and kerosene supplies.
There's one additional problem here that hasn't been mentioned: drill steel. It doesn't matter whether you're getting oil out in the Bakken, South East Asia or somewhere near Magnitogorsk, the drill equipment is deeply reliant on steel additives that are produced and fed into steel mills in East Asia. Six months of Asian disruption kills the Permian.
Planted potatoes and leeks today. Will do some lettuce and brassica starts tomorrow. Then more potatoes next week. Beans and corn in May. Tomatoes and peppers of course. I have several fall-planted cereal crops that are looking good. We have been preparing for this for decades. Yes we live in a diesel economy. But you don't have to go along with the madness. Time to pull in your horns.