Tariq Saeedi
The world has grown wearily accustomed to the rhythm of American diplomacy under Donald Trump — a lurching, unpredictable cadence that alternates between the theatrics of engagement and the blunt instrument of maximum pressure. Nowhere has this rhythm been more damaging, or more globally consequential, than in the protracted drama surrounding Iran.
As Part Twenty-Six of this series, we turn our lens not to the battlefield or the nuclear file alone, but to the economic wound that is quietly deepening across continents — a wound inflicted not by war itself, but by the corrosive, grinding uncertainty of a conflict that refuses to resolve.
International financial agencies, from the IMF to the World Bank, from the Asian Development Bank to the European Central Bank’s own advisory bodies, have begun issuing warnings that are unusually stark in their language. The message is consistent: the stop-start diplomacy between Washington and Tehran, punctuated by threats of military action, the spectre of Strait of Hormuz disruptions, and the erratic imposition and partial suspension of sanctions, has created a climate of uncertainty so profound that it is now registering as a structural drag on global economic performance — not merely a regional risk premium.
“The damage is not waiting for a war to begin. The damage is the waiting itself.”
Standard economic theory holds that uncertainty is itself a cost. When businesses cannot forecast input prices, when shipping firms cannot price risk on routes through the Persian Gulf, when central banks in Asia and Europe cannot calculate the inflationary pass-through of an oil spike that may or may not materialise — investment contracts, consumption hesitates, and growth narrows. The Iran crisis, in its current indeterminate form, has become a masterclass in the economics of ambiguity.
Oil markets have been whipsawed repeatedly over the past eighteen months. Each round of talks — in Muscat, in Rome, via Omani intermediaries — sends Brent crude dipping as traders price in the possibility of Iranian barrels returning to the market. Each breakdown, each threatening statement from Washington, each Iranian counter-threat regarding Hormuz, sends prices lurching upward again. The result is an oil market that cannot find equilibrium, and an energy-dependent global economy that cannot plan.
For Europe, already bruised by years of energy volatility following the Ukraine conflict, this is not merely an abstraction. Germany’s industrial base — still struggling to restore competitiveness after the shock of Russian gas decoupling — faces renewed pressure every time the Gulf deteriorates. German manufacturers have quietly told the Bundestag’s economics committee that energy price unpredictability has become, in their own words, “the single greatest obstacle to forward investment planning.” Similar testimony has emerged from chambers of commerce in France, Italy, and the Netherlands.
The Asian Exposure
If Europe’s exposure is serious, Asia’s is acute. Japan, South Korea, India, and China collectively import the substantial share of their crude oil through the Strait of Hormuz. The prospect of any disruption — whether through Iranian mining operations, US naval blockade, or the fog of miscalculation — sends tremors through the finance ministries of Tokyo, Seoul, New Delhi, and Beijing. None of these capitals can absorb a sustained oil price spike without either painful fiscal intervention or economic slowdown.
II. The Hormuz Gambit — Neither Tenable Nor Popular
Among the more alarming threads running through Washington’s current Iran policy is the periodic resurfacing of proposals — sometimes explicit, sometimes implied — to establish a form of naval dominance over the Strait of Hormuz that would effectively constitute a blockade of Iranian maritime access. The strategic logic, such as it is, holds that depriving Iran of the ability to export oil would break the economic back of the regime and force a comprehensive capitulation on nuclear, missile, and regional proxy issues simultaneously.
The strategic logic is, to put it plainly, fantasy. And it is fantasy that a growing chorus of voices — including within the American foreign policy establishment, NATO capitals, and the Gulf states themselves — are refusing to entertain.
“A Hormuz blockade would not starve Iran into submission. It would starve the world into recession.”
The arithmetic is unsparing. Roughly twenty percent of globally traded oil, and approximately thirty percent of global LNG, transits the Strait of Hormuz. A sustained blockade — even a partial or contested one — would trigger an immediate oil price shock of a magnitude that most economists model somewhere between seventy and one hundred and fifty dollars above current levels per barrel, depending on duration and the degree of market panic. At the lower end of that range, the global economy enters severe recession. At the upper end, the consequences become genuinely civilisational in scope for energy-dependent developing economies.
Saudi Arabia and the UAE have been unambiguous in private channels and increasingly direct in public statements: they cannot afford a Hormuz crisis. Their own export revenues, their Vision 2030 diversification projects, their sovereign wealth fund strategies — all of it depends on the Strait remaining open. The suggestion that the Gulf Arab states would support, or even passively acquiesce in a US-imposed blockade misreads the geopolitical reality of 2026 almost entirely.
The Legal Dimension
Beyond economics, a Hormuz blockade faces an insurmountable legal problem: the Strait is an international waterway subject to the UN Convention on the Law of the Sea, and the right of transit passage is among the most firmly established norms of international maritime law. An American attempt to enforce a blockade — whether directly or through naval presence designed to deter Iranian shipping — would place the United States in direct violation of international law, inviting legal challenges, counter-measures from major powers, and a legitimacy crisis of the first order.
Russia and China, both of whom have been carefully constructing a narrative of American unilateralism and rules-based-order hypocrisy, would find in a Hormuz blockade the single most powerful evidence for their case. And for the Global South — already restive about the weaponisation of the dollar and secondary sanctions — it would function as a recruiting poster for de-dollarisation and alternative economic architecture.
III. The Isolation of America — Slow, Structural, and Accelerating
There is a tendency in Washington — and in the commentary that surrounds Washington — to treat American foreign policy as a series of discrete decisions, each of which can be reversed, corrected, or explained away. This transactional view of geopolitics has always been simplistic. Under the current administration, it has arguably become dangerously delusional.
The world is watching. And it is not merely watching the Iran crisis in isolation. It is watching the Iran crisis as one chapter in a longer story about the reliability, the consistency, and ultimately the trustworthiness of the United States as a partner, a guarantor, and a participant in the rules-based international order. The conclusions being drawn — in the foreign ministries of Europe, in the chancelleries of Asia, in the finance ministries of the Global South — are not flattering, and they are not temporary.
Consider the perspective from Brussels. European capitals have now lived through two distinct experiences of American Iran policy: the JCPOA era, in which a multilaterally negotiated agreement was unilaterally shredded by Washington; and the current era, in which diplomatic signals oscillate between negotiation and confrontation with a frequency that defies strategic logic. European governments have drawn the obvious conclusion: agreements made with the United States have no binding force beyond the tenure of a single administration. This conclusion is not confined to Iran policy. It is shaping European thinking on defence procurement, on industrial policy, on technology standards, and on the architecture of future multilateral agreements.
“The world is not merely losing confidence in American policy. It is actively constructing an architecture designed to reduce dependence on American decisions.”
The Dollar’s Quiet Retreat
Perhaps the most consequential long-term consequence of the Trump administration’s Iran policy — and of its broader sanctions maximalism — is the acceleration of de-dollarisation. This is not a sudden revolution. It is a slow, structural shift, the kind that central bankers and finance ministers notice before markets do, and that markets notice before politicians admit.
The use of dollar-denominated sanctions as a primary instrument of foreign policy has created, over the past decade, a powerful incentive for states to develop alternative payment and settlement mechanisms. China’s Cross-Border Interbank Payment System, the development of digital yuan infrastructure for bilateral trade, the expansion of local currency swap agreements between emerging economies, the growing use of the euro and the renminbi in commodity contracts that were once exclusively dollar-priced — these are not isolated curiosities. They are the early manifestations of a structural response to what the world now correctly perceives as the weaponisation of dollar dominance.
Iran, ironically, has been the laboratory in which the world has learned that dollar sanctions can be survived, circumvented, and ultimately delegitimised. As other states observe Iran’s adaptation — the shadow tanker fleet, the barter arrangements, the cryptocurrency experiments, the bilateral trade denominated in local currencies — they are not merely sympathising. They are taking notes. The lesson being absorbed across the Global South is that dollar dependency is a strategic vulnerability, and that reducing it is a matter of national security.
NATO and the Fraying Alliance
Within NATO, the strains are becoming structurally significant. The prospect of American military action against Iran — whether as part of a negotiating strategy gone wrong or as a deliberate policy choice — fills European capitals not with solidarity but with alarm. None of the major European NATO members have any interest in a military confrontation with Iran. All of them have significant economic, diplomatic, and humanitarian stakes in the region that would be destroyed by such a confrontation. And all of them remember, with bitter clarity, being told by Washington that the Iraq war of 2003 was also a matter of existential necessity.
The current posture in Washington — threatening military action while simultaneously claiming to seek negotiations, applying maximum economic pressure while expressing openness to a deal — does not read, from European capitals, as sophisticated compellence strategy. It reads as incoherence. And incoherence in the management of a potential major-power crisis is, from an alliance perspective, the most dangerous quality an ally can display.
IV. The Warnings That Are Not Being Heard
In recent months, a striking convergence of institutional warnings has emerged from organisations not typically given to alarmism. The International Monetary Fund’s most recent World Economic Outlook flagged Middle East instability and energy price volatility as among the top-three downside risks to global growth. The World Bank’s commodity markets outlook specifically identified Strait of Hormuz disruption scenarios as capable of producing oil price shocks comparable to the 1973 Arab embargo — an event that contributed materially to a decade of stagflation in Western economies.
The Bank for International Settlements — the central bankers’ central bank — has issued unusually direct commentary about the exposure of global financial systems to geopolitical shock, noting that current market pricing consistently underestimates tail risks in the Persian Gulf. Credit agencies have revised sovereign outlooks for several Gulf states, and shipping insurance premiums in the region have reached levels not seen since the tanker wars of the 1980s.
These are not the warnings of ideological actors or partisan commentators. They are the institutional judgements of the bodies entrusted with monitoring global economic stability. And they are, by any reasonable assessment, not being heard in the one capital that has the greatest capacity to reduce the risk they describe.
The Developing World Bears the Disproportionate Cost
There is a profound moral dimension to this story that is too rarely acknowledged. The countries most severely affected by oil price volatility, food price inflation driven by energy costs, and the disruption of global supply chains are not the United States, or Europe, or even China. They are the sub-Saharan African nations whose governments spend thirty to forty percent of foreign exchange reserves on fuel imports. They are the South Asian economies where cooking gas prices determine whether families eat. They are the small island developing states in the Indo-Pacific that import virtually everything they consume.
When the on-again, off-again talks between Washington and Tehran send oil prices lurching by fifteen dollars in a week, the consequences ripple outward to populations that had no voice in the decisions that created the crisis, no agency in its management, and no buffer against its impacts. The human cost of American strategic incoherence is being paid, as it so often is, by those least responsible for it.
V. A World Learning New Realities
The most significant long-term consequence of the current crisis may not be economic at all, in the narrow sense. It may be epistemic: the world is learning new realities about the nature of American power, the reliability of American commitments, and the sustainability of the American-led international order that has structured global affairs since 1945.
These are not comfortable realities for those who believe that American leadership, for all its flaws, has been a net positive for international stability. But they are realities nonetheless, and the refusal to acknowledge them is itself a form of strategic blindness that makes effective policy impossible.
The reality is that the United States, under its current administration, has demonstrated a consistent willingness to subordinate long-term strategic interests and institutional relationships to short-term domestic political imperatives. The Iran file is the clearest example of this tendency. The JCPOA was not a perfect agreement, but it was a functional one — it constrained Iranian nuclear activity, it provided verification mechanisms, and it was the product of sustained multilateral diplomacy. Its destruction was a gift to Iranian hardliners, a body blow to European trust in American commitments, and a strategic own goal of the first magnitude. The current attempt to construct a replacement through a combination of maximum pressure and episodic negotiation has produced neither a deal nor effective deterrence.
What it has produced is the situation we now inhabit: a world in which Iranian nuclear capability has advanced significantly beyond where it stood when the JCPOA was abandoned; in which global energy markets operate under a permanent risk premium; in which American alliances are strained to the point of functional rupture on this issue; and in which alternative global architectures — from BRICS financial mechanisms to regional security arrangements that deliberately exclude Washington — are advancing faster than at any point since the end of the Cold War.
“Isolation is not imposed upon America from without. It is chosen, policy decision by policy decision, from within.”
The Question of Return
Can the United States reverse course? The honest answer is: probably, but not without cost, and not without acknowledging what the cost of the current course has already been. The architecture of trust — between Washington and its European allies, between the dollar system and its reluctant dependents, between American security guarantees and the states that have historically relied upon them — can be rebuilt, but rebuilding takes years of consistent, credible behaviour. It cannot be accomplished by a single deal with Tehran, however comprehensive.
The deeper problem is that the current administration shows no signs of recognising that isolation is a process already underway. The internal discourse in Washington continues to treat American power as essentially unchallengeable — as a default condition of the international system rather than an achievement that requires active maintenance. This complacency, more than any particular policy error, is the source of the deepest vulnerability.
The world does not need America to be infallible. It needs America to be reliable. And on the Iran file, across every dimension — diplomatic consistency, economic restraint, legal respect, alliance management — reliability has been conspicuously absent.
Conclusion: The Cost Compounds
Part Twenty-Six of this series finds us at a point that earlier instalments have been tracking with growing concern: the convergence of economic damage, strategic drift, and institutional erosion into something that begins to resemble not merely a policy failure but a civilisational inflection point.
The on-again, off-again talks with Iran are not merely a diplomatic inconvenience. They are a source of structured global economic instability, costing billions in risk premiums, misallocated investment, and foregone growth across dozens of economies. The Hormuz blockade proposal is not merely strategically misconceived. It is a potential trigger for the most severe global economic shock since the Second World War. The broader pattern of American foreign policy incoherence is not merely frustrating to allies. It is actively reshaping the international system in ways that will constrain American power for decades.
None of this is inevitable. But changing course requires, first, the honesty to diagnose the problem accurately. And that honesty — that willingness to look steadily at the consequences of one’s own decisions — remains, as of this writing, the scarcest commodity in Washington.
The world is watching. And the world is learning. The question is whether Washington is doing either. /// nCa, 24 April 2026