The Persian Polycrisis

What can we do now, that the damage has been done?

Drought. Image via Unsplash

The war on Iran has officially passed the 2 months mark. Now, with negotiations at an impasse and a dual-blockade imposed, the crisis started by the US and Israel has been turned into a chronic condition. At this point we have to seriously ask ourselves the question: what if the Hormuz crisis isn’t going to be resolved anytime soon—if at all? Regardless how long the blockade will last, the damage to supply chains of energy, fertilizer, food, and many industrial inputs has been already done—it’s just not registered by the Western ruling classes. Yet. The polycrisis, I wrote about last year and attended a superb conference on last week, has been greatly accelerated by this conflict. With a super El Nino in the pipeline this oil shock can very well produce the first major, permanent step towards the collapse of modern societies all around the globe—not the end of the world, but major step towards the great (involuntary) simplification of global civilization. Last but not least what can we and our elected officials do to at least mitigate the damage?

I had a Wild Live with the wonderful Sarah Wilson earlier this week, chatting about these topics on camera. Be sure to check it out!

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.

The pike caught by the fox, the fox caught by the pike

Before we get to the solutions part, we have to understand why this crisis is unlikely to end till one of the parties, if not the entire world economy, falls into ruins. There won’t be, or rather: there simply cannot be a negotiated (let alone military) solution to this war, nor there is a way back to the old status quo. By the end of April, 2026, the conflict has reached a sort of quasi-equilibrium. This means that the present state, although disadvantageous for both sides, could be maintained at a “reasonable” cost for an awful long time, at least compared to the cost of exiting or trying to change the situation. See, should any of the parties decide to end this unpleasant status quo, they would risk a devastating response from the other side, just like in a true Mexican standoff. In such a confrontation no participant can win or escape without significant losses and ultimately find themselves in a deadly, high-tension deadlock.

If Iran decided to end the blockade, by sinking or seriously damaging a US ship for example, American elites would feel that they have no other choice than to launch a massive retaliatory strike damaging the electric and other infrastructure of Iran. Should the US, on the other hand, initiate such a move (either by retaliation or by its own volition), Iran would launch a devastating missile strike on Gulf Monarchies, destroying their oil and electric infrastructure. A true lose-lose situation, where both parties end up being hurt without the crisis being resolved. (This doesn’t mean that lobbing missiles at each other won’t return. It very well might be that the US tries out its new hypersonic missile on Iranian targets deep inside the country, but such a move would still not be able to end the stalemate.) There is a saying in my country to describe such a state of affairs: “Róka fogta csuka, csuka fogta róka.” (Rough translation: “The pike caught by the fox, the fox caught by the pike.”) I let you decide who is the fox and who is the pike in this game.

From a broader military perspective—beyond kinetic strikes on each other’s infrastructure and military targets—we see a very similar situation: neither Iran nor the US can defeat each other militarily. Iranian drones and missiles, no matter how devastating their effect was on US military bases and allies in the region, cannot reach the American continent and force the US to capitulate. American missiles and bombs, on the other hand, no matter how many hospitals, schools and houses they hit, cannot break the will of the Iranian people, nor reach Iranian underground missile cities to prevent future strikes.¹ Both parties lack the means to destroy each other—or to end the blockade—short of using nuclear weapons (which would ultimately put us in an even worse situation).

Leaving the conflict is also not an option. Iran obviously cannot do so, unless they manage to move their country to another Galaxy. The US cannot depart either, as it would leave Iran in a very strong position, and the US hegemony and Israel in a very weak one—opening the door for the cascading collapse of the empire (not to mention the immense resistance by Israel to any such move). So, as much as people like to say ‘TACO Tuesday’ it actually takes two to TACO... Which in our case is actually a game of three…

Then how about a diplomatic solution? Well, as it was made clear by a number of American and Israeli leaders (implicitly or explicitly) they simply cannot accept the existence of a sovereign Iran, which has become not just a strong regional power, but also a gate keeper and toll booth operator controlling 20% of global oil flows. Iran, on the other hand, is no longer willing to live under constant threat of military attacks and crippling sanctions and want to exert its power. As Aurelien brilliantly explained in his piece last week:

“The US (present) and Israel (present by proxy) want to damage and if possible destroy Iran as a functioning state. For the US this is revenge for nearly fifty years of humiliation, dating from the storming of the US Embassy in Tehran and the disastrous failure of the subsequent rescue mission, as well as Iranian attempts to frustrate US policies in the Levant. For Israel the objective is to destroy the only country standing between them and their domination of the region. (The US also represents this objective vicariously.) The Iranians obviously want to prevent all this, but they also want an end to sanctions and isolation, and they want to establish themselves as the unquestioned dominant local power, through the eviction of the US from the region.”

These two positions can simply never be reconciled, even by the most brilliant negotiators in history. And since there is zero overlap between the desired outcome of the parties involved, there is nothing to be negotiated. (If you think that willpower or speech acts are enough to break such a deadlock, then just take a look at what happened in the past 1.5 years with the “negotiations” between the US and Russia on ending the war in Ukraine—a similar situation in so many respects.) The topic of nuclear enrichment is thus nothing but theater, an excuse why not to admit that there is nothing to talk about. The following set of statements sums it up:

“Trump says the war won’t end without a nuclear deal. Iran says nuclear won’t be discussed until the war, the blockade and sanctions end.”

No end in sight

This analysis leaves us with a highly unpleasant conclusion: the blockade of the Strait of Hormuz (maintained by Iran) and the obstruction of Iranian ports (maintained by the US) will likely remain in place for a very, very long time. I’m sorry to be the bearer of bad news but this situation has the power to linger on for months, if not years—or at least till the world economy falls apart. And even if tensions somehow (magically?) dissipate over time, or the US does decide it’s time to leave, there will be no return to the old status quo, let alone pre-war oil flows, either. Just take a look at what happened to shipping in the Red Sea after peace “broke out.”

The “houthies” (Ansar Allah) blockaded the Bab el-Mandeb strait, a 16-mile-wide waterway between the west coast of Yemen and the East Coast of Africa, in response to the US-Israeli bombing of Gaza in late 2023. After a failed attempt by the US and its allies (called “Operation Prosperity Guardian” launched in December 2023), the strait remained effectively closed for western shippers till a cease fire was finally agreed upon in Gaza in January, 2025. Despite no ships were attacked at least since last autumn, though, traffic never returned to previous levels.

If history is any guide, it’s unlikely that shipping will return to previous levels. Source

Truth to be told, the Bab el-Mandeb strait and the Red Sea has an alternative to it: a trip around the Cape of Good Hope in Africa. And while the diversion adds approximately 7–12 days and increases fuel use, these costs are outweighed by the benefits of avoiding disruption, potential cargo losses, crew endangerment and higher insurance costs. In case of the Strait of Hormuz, however, there is no such alternative. If the present crisis lasts long enough, though, there won’t be a need for one either.

The damage done

The Hormuz blockade has turned into a ‘permacrisis’. A fight of economic endurance, where the only question is, whose economy will collapse first? This means that there is not only no solution in sight, but also that there will be no real replacement for the lost barrels either. The result? Permanent demand destruction. The consequence: a long lasting, massive drop in GDP, employment, food supply, manufactured goods output, everything. So while we could argue how successful the US blockade is (it’s estimated to be 10-70% effective in turning back or interdicting shipments of oil from Iran), this discussion is completely beside the point.² In order for the US blockade to take effect, it has to be in place for at least 3-4 months: 1 month to choke off Iranian oil production, and another 2-3 till the last shipments (and their payments) arrive.³ And even then the economic effect remains highly questionable, as Iran maintains several independent land and inland sea routes (via the Caspian) with its Asian partners from Pakistan to Azerbaijan and ultimately with Russia and China.

The world economy, starved of oil, doesn’t have that much time. In fact, the damage has already been done, and the only question remaining is how deep and severe the coming economic depression will become, and how long it will take to climb out of this massive hole… In which, by the way, we still keep digging ourselves deeper and deeper into. As the secretary general of the International Energy Agency, Fatih Birol, told CNBC earlier this month: “As of today, we’ve lost 13 million barrels per day of oil ... and there are major disruptions in vital commodities.” According to Goldman Sachs, Gulf crude oil production has fallen by an estimated 14.5 million barrels per day, or 57%, from pre-war levels.

According to the latest assessment of the situation, at least seven Asian governments have imposed work-from-home mandates, five have rationed transport fuel already. Diesel-intensive businesses are operating part-time, petrochemical plants and plastic makers are shutting down. European inventories and late deliveries have thus far sheltered consumers from shortages, but even Europe’s refinery output and stocks will plummet if Hormuz stays closed beyond May—which it most likely will. And if that weren’t enough shipping (bunker) fuel shortages are a very real possibility in the coming weeks and months. Since 80% of all cargo on planet Earth moves via ships (including oil), this is going to be a major hurdle to the world economy. No oil, no shipping either.

Recovery? What recovery?

Altogether, since the start of the war, at least 600 million barrels of oil production was lost. Even if the crisis magically ended today, an average of forecasts from the EIA and IEA points to a recovery of just 70% of lost production after three months of reopening and 88% after six months. And this is just production. Available empty tanker capacity in the Gulf has already fallen by around 50%, and it will take till August till ships could physically return, as they’re currently booked elsewhere.

Considering the delays described above, and calculating with a best case scenario, we might easily end up with 1.6 billion barrels of oil supply lost by the end of the year. (See also: Peak Prosperity / Craig Tindell.) According to my calculations, the situation is actually even worse than that. Just recently, Trump told his aides to prepare for a long blockade, which, in my reading means end of May at best, and many more months at worst. Starting from there, we can draw up three distinct scenarios—all backed by data presented in this analysis.

From bad to worse. Chart shows cumulative monthly losses in million barrels, the table below shows daily lost volumes, also in million barrels a day.

Even in the best case scenario we see 2 billion barrels being lost throughout 2026, or 6.3% of world crude oil supply. (I calculated with a recovery starting at the end of May, with 70% of lost production restored by August and 88% by December.) In the worst case, where the strait remains effectively closed till the end of 2026, the world economy would lose twice as much, or 4 billion barrels (12.5%) of global crude supply. Finally, in a middle of the road scenario, the Strait of Hormuz reopens in June, but only half of the pre-war shipping volume gets restored (Bab el-Mandeb style).⁴ In this case we would lose “only” 2.6 billion barrels (or 8.3% of world supply) in total for the year.⁵

Be it as it may, this supply shortfall is simply unprecedented, and frankly, devastating… And to repeat: much of it is already in the pipeline—there is no way we can dodge this bullet. Some analysts believe we would need $175 oil prices to close this yawning gap between supply and demand. Others, such as the chief market strategist of Longview Economics, Chris Watling, say they wouldn’t be surprised if oil went to $200, or even $250, as “commodity prices go parabolic when there’s a shortage of supply.” In other words: this cannot possibly end well from an economic perspective either.

Conclusion: the world economy is heading for a crash, no matter what.

The Polycrisis Perspective

None of this happens in a vacuum. The world was already grappling with many serious crises from severe heat waves and droughts to peaking mineral supplies (crude oil, copper, silver); or from trade wars to a wave of increasingly unhinged US foreign and domestic policy decisions. Now, factor in an emerging, potentially very strong El Nino on top of this super-massive hydrocarbon shortfall—combined with losing half of the world’s sulfur and a third of fertilizer supply—and you have the biggest food crisis in our post WWII history. Craig Tindell wrote an excellent post on the topic, I highly recommend reading it for getting the full picture. Let me highlight the most salient points without being exhaustive:

• 45% of global sulfuric acid consumption is dedicated to the wet-process production of phosphoric acid for phosphate fertilizers. Plants need phosphorus to grow deep root systems, giving them a better chance at surviving droughts. There is no worse time to run out of fertilizer than in a heat wave that is lining up to be epic.

• India, China, Russia (and many other countries) have already halted fertilizer exports to protect their domestic agriculture, with China also stopping the export of sulfuric acid.

• At present, given a 50% loss of sulfur supply from the Gulf, “we” have to decide whether “we” mine phosphorus to increase the resilience of our food crops, or dig up industrial metals (nickel, gold, rare earth elements, copper, uranium etc.) to continue with the “transition.”⁶

• Naphtha, 60-70% of which used to arrive from the Persian Gulf to East Asia, is an essential input in making herbicides and pesticides, without which crops don’t have a chance against weeds and pests. Factor in plant weakness from a lack of nutrients (fertilizer), making them even more vulnerable, and you have a disaster waiting to happen.

• Modern crops, tuned towards maximum yield vs resilience simply cannot be grown without these chemicals. Alternatives (coal to chemicals, pipeline supply etc.) are costly and time consuming to build and operate.

• Faced with massive price hikes, from diesel fuel to ammonia and phosphorus fertilizers, farmers are forced to drastically reduce application rates per hectare. This creates a fatal agronomic divergence: crops are receiving the lowest nutrient inputs precisely when climatic stress demands the highest biological resilience.

• The weather pattern over the Pacific will transition into an El Niño phase over the summer, gradually gaining strength towards the end of 2026. Next year a global sulfuric acid and naphtha shortage will collide with extreme El Niño droughts and floods.

• Shipping through the Panama-canal is under heavy strain from drought and increased traffic from shipping US oil, hampering food deliveries between the Atlantic and Pacific basins already. El Niño will make this situation even worse by lowering water levels in the canal’s Gatun lake, putting a hard upper limit on the number of transits.

• WMO notes that El Niño typically brings severe drought to Australia, Indonesia and parts of southern Asia—exactly to those regions effected by the unfolding fertilizer and pesticide shortage the worst.

• FAO and WFP further note that El Niño-linked drought and high temperatures can trigger outbreaks of transboundary pests and diseases, and in the recent Southern African drought farmers in the hardest-hit countries lost, on average, at least half their crops.

• An extreme under-application of fertilizers, forced by the 2026–2027 crisis guarantees a persistent “yield hangover”, a structural suppression of global agricultural productivity that will extend through 2028 to 2030. Plants, lacking adequate nutrient supply from fertilizers will simply deplete the soil’s nutrient storage, resulting in lower yields for years to come (even if fertilizer production and application returns to normal).

• El Niño-driven droughts routinely cripple hydroelectric power generation, the primary baseload energy for many smelters and mines globally. This double-bind throttles the production of copper, nickel, and uranium exactly as global decarbonization mandates accelerate.

• Precision application of fertilizer and pesticides via drones (assisted by AI) and genetically modified heat, drought and pest tolerant crops will proliferate. These solutions will take time to spread, though.

• In 2026/27 the world still faces a 10-15% crop yield reduction. In emerging markets, local food inflation could spike by 15–25% year-on-year, driven by the compounding effects of currency depreciation against a strong US dollar, exorbitant freight costs, and local yield failures.

• Sovereign capital reserves will be rapidly depleted as governments attempt to subsidize basic nutrient inputs for local farmers while simultaneously paying premiums to import replacement food calories. This dynamic will invariably lead to severe balance-of-payments crises, potential sovereign defaults, and forced debt restructurings through multilateral institutions by late 2027.

Finance and the economy

Ultimately this all boils down to economics. While the quasi-equilibrium seems to be holding for now, as the cost of changing the status quo is almost prohibitively expensive for both parties, it cannot last forever. The damage has already been done to the world economy, and the only question is how deep and how long the coming crisis will be. As things look today, especially when considering the global food and materials supply chain situation, this is going to be one hell of a crash… And not even the world’s largest economy has the power to stop it from happening. Quite to the contrary: the US is being sold out and liquidated as we speak. Barrels from the strategic petroleum reserve and fuel stockpiles are being sold to the highest bidder. Gold reserves, too, have become an export commodity—in fact, the precious metal has become the no.1 export of the United States. The last time anything remotely similar happened (during the Nixon shock in 1971) the dollar’s gold pegging was removed. That’s no longer an option.

Meanwhile more than 70% of Americans report difficulty affording food, housing, healthcare (according to a CBS poll). US consumer sentiment (understandably) reached an all time low, and job market expectations hit recession levels: 64% of US citizens expect unemployment to be higher over the next 12 months—a result near the highest reading on record. And what does the stock market do? It breaks its own records… Well, as John Maynard Keynes famously put it: “Markets can remain irrational longer than you can remain solvent.” No wonder the Bank of England warns of an impending financial crisis.

The question is no longer whether the western financial system will break down this year, but where and how.

At the same time, and as sign of things to come, the United Arab Emirates (UAE) asked the US for a currency swap line (essentially a loan in dollars collateralized by the UAE’s own currency), then decided to exit OPEC in order to be able to pump more oil. (That, of course, presumes that there is a solution to the crisis and that the UAE will still exist in its current form by then.) If this is not a sign of extreme financial distress, nothing is. Extraordinary times indeed…

What can be done?

And yet, even as all seems to be lost, there are number of things which could be done to at least mitigate the damage. If only our betters and elders would understand what’s coming their way… (Or maybe they do, and this is why we are in a global conflict precipitating the very crisis they sought to avoid.) Sarcasm aside, this is what governments could be doing right now if they cared about their voters, at least a little.

• Stop producing bio-fuels—immediately. Store that corn and soy beans for later use. Not getting enough gas in the car is a far lesser problem than not being able to feed people. (Biofuels have a very poor energy return on investment anyway, so the loss of net energy from them would be far less than expected.)

• Tax profits made on commodity trading, heavily (independent from what happens with that money, whether it’s reinvested or not). Use this revenue to subsidize fuel for farming, food delivery and to help the most vulnerable.

• Prepare and implement detailed rationing plans for both food and fuel. Make it public and have an open debate where energy use should be prioritized. Don’t allow corporation to lobby for more fuel.

• Increase hours worked from home.

• Shorten the work week. There will be less energy, fuel, raw materials, parts etc. to go around anyway.

• Implement tradable energy quotas originally proposed by the late David Fleming. Everyone gets an x liters or gallons of fuel, air miles etc. on a card / digital wallet every month—both of which could be made anonymous and everyone gets the same amount. This card or app must be then swiped during every transaction made at the pump, acting as a limit to individual purchases. Excess quotas (not used up that month) could be traded and sold on an online platform to the highest bidder. The poor who already travel less can get an extra income stream from selling their quotas, the rich could still travel more if they bought the credits needed. On a national level governments can manage fuel rationing by increasing / decreasing the issuance of quotas.

Okay, that’s all nice till you realize that nothing on that magnitude actually happens (at least in Western countries). So, what can an average citizen do then to mitigate the risk of being seriously harmed by this crisis? (Disclaimer: the information provided in this article is for educational and informational purposes only and does not constitute financial, investment, tax, or legal advice.)

• Don’t panic or fall into despair. This is going to be rough, but not the end of the world. It’s important to be, first and foremost, mentally prepared. What’s coming is not an evil curse, but what many generations before you have lived through over the centuries and millennia. In fact, our peaceful, full comfort lives in the past 80 years was the exception, not the norm. Frame it as a challenge, or even as an opportunity to live a more thoughtful and sometimes frugal life. And if things turn out to be better than you feared they will, then all the better.

• Stock up on non-perishable food and medicine. Have at least a week’s supply of food, and months of essential medical supplies. If you have prescription drugs, stock up on those first. The goal is not to build a post-apocalyptic bunker, but to be able to ride through occasional shortages, or becoming able to reduce trips to the supermarket (just like during COVID).

• Repair, replace every essential product you use, while spare parts last. Think, for example, glasses (which are actually made of high-tech plastic). Having a spare pair is a real blessing when you can’t replace a broken pair so easily. Check your heating system, car, A/C, fridge etc. for parts to be replaced. If something makes weird noises have it repaired as soon as you can.

• Insulate your home to save on energy (both heating and cooling), or at least repair what you can.

• Approach you neighbors and ask if they need help in anything. Mutual aid was always a key in surviving hard times.

• Save some money for increased food and energy costs. Set aside a certain percentage of your monthly salary as soon as you’re paid. The more the better. Now is not the time to buy that shiny gadget, bag or pair of fancy shoes.

• Pay down debt if you can. Consult a certified financial advisor.

• Sell unused, not needed items such as old records, books, collectibles. Raise cash.

• Consult with a professional on your savings (especially if you own, or have been invested into stocks and bonds). Aim for a low risk portfolio.

• Grow some vegetables if you want, but don’t think it will save you. Growing enough food to feed a family requires a huge land area (whatever you have in mind, multiply it with two or four) and is a full time job.

If you have more ideas feel free to share in the comments below.

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.

1. To make matters worse, the US is also running low on many critical ammunition and missile types. Any further operation—lasting more than a week or two, which, let’s admit, still won’t be anywhere near enough to defeat Iran—is off the table. And even as US weapons stocks run low, China continues to tighten rare earth exports, effectively making missile replenishment impossible. Why would they supply parts to weapons ultimately aimed at them and their allies?

2. Iran has 12-22 days of usable oil storage remaining (per Kpler) as their crude exports collapsed ~70% from 1.85M bpd to ~567k bpd. (Goldman estimates Iran already curtailed 2.5M bpd.) Should the US blockade turn out to be successful, Iranian oil production would then face a three to five hundred thousand barrel per day permanent loss. According to Shanaka Anslem Perera: “Remove continuous pressure support for a prolonged shut-in and four damage mechanisms activate simultaneously: water coning upward through the fracture network, fines migration into pore throats, formation compaction under increased effective stress, and clay swelling under altered salinity and pH. The damage is not theoretical. It is documented. And it is measured in months to years of recoverable production capacity, not days.” While that would certainly add to the barrels lost due to the closure of Hormuz, but would neither break Iran nor the world economy in and of itself. The loss of Gulf barrels will.

3. At present it is highly questionable whether the US blockade can last that long. The navy struggles to feed soldiers already, and now adds an another carrier group with 5000 soldiers living on pitiful portions.

4. There are many reasons to believe that oil flows will not recover to their pre-war levels, even in case of a full agreement. For one, the US will most likely keep sanctioning entities willing to pay the Hormuz crossing fee to Iran, effectively excluding western shippers. Two: demand destruction will take an awful long time to recover from: once a plant is shut down and the workforce is laid off, it will be very hard to ramp production back up. Third, there is always a risk the US-Israeli coalition will return to a second or third round of fighting, triggering another shut down.

5. For comparison, during the 2020 lock-downs, 2.36 billion barrels of crude and condensate production was lost worldwide (compared to the January-April 2020 baseline), but entirely due to government mandated restrictions on travel and work, and not because feedstock was physically unavailable. So while the 2020 lock down induced production shut ins, it did not hurt the chemical / fertilizer / food / plastic / metals supply nearly as much as the present crisis already did.

6. The transition narrative is deeply flawed in many ways. First, increased electricity production does not replace lost diesel, jet and heavy fuel oil supply—and it really doesn’t matter if these new electrons come from a coal fired power plant or “renewables.” Electric vehicles replace gasoline, but physically cannot replace diesel in long distance transport, construction, mining and agriculture — the backbone of every modern economy. Second, you cannot meaningfully increase the production of solar panels and wind turbines on the back of a failing six continent supply chain fed by minerals mined and delivered using fuels which used to come from the Persian Gulf. Action plans, such as the one from the EU commission thus structurally fails to address the crisis at hand.