Iran War Oil Crisis 4/3
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Jon Freise
Apr 3, 2026, 5:34:12 PMApr 3
to Transition Twin Cities
Hi Everyone,
There is quite a bit of good commentary about the Iran war so I will not try to cover that ground again. Here are a few resources that I am finding helpful. And then a few thoughts about resilience.
Prof. Paul Krugman's substack is covering the economic impacts of this war. He has deep knowledge of macro economics and a very wide network and experience base to pull from.
In this article he talks about how the world has been protected from this crisis because of already filled oil tankers that have been travelling by sea. But those are going to arrive and get emptied soon and then there are none behind them. At that point we will see real shortages appear in the world.
Prof. Robert Pape has deep expertise in how the politics of war pull leaders into fighting even when they cannot win. Basically he lays out the logic for how the US is likely to be pulled into another Forever War in Iran. How a 3 day war turned into a 3 week war, and now another 3 weeks, etc.
Resilience has a lot of good articles. Kurt Kobb did a nice job of explaining why Trump is stuck: he dare not walk away politically, yet he dare not destroy Iran (and thus the world economy).
We cannot predict how this will unfold. This is a system that has entered a chaotic phase and cause and effect begin to disconnect as too many variables interact. And many factors are hidden from us as citizens.
However, there are many plausible scenarios for what happens next. In this sense, it is like the weather: we cannot really predict the weather, too much chaos, but we have a pretty good idea about the monthly climate.
One plausible scenario is that Israel and Trump and the Gulf Arab states all give up attacking Iran and oil begins to flow again with Iran taking a cut of every barrel for war reparations. Politically unlikely because everyone who has called for more war has to actually agree to stop, but physically possible. In that case oil tankers start to refill soon, and it takes another 1 or 2 months for them to reach places short of oil. We get a very nasty 2 month oil shock, but the world economy recovers. We will likely get a nasty food shortage this coming fall.
Another plausible scenario is that Israel or Trump or the Gulf Arab states try to destroy all the military capability in Iran or force open the Strait of Hormuz. And once Iran feels it will lose the ability to strike back or control of the flow of oil, it launches its remaining ballistic missiles and drones and wipes out all the Gulf Region oil production and loading terminals. Those can eventually be rebuilt, but say we lose 20% of the world's oil and LNG production and refining capacity for 1 to 3 years.
In the second case we are likely looking at a world wide recession, followed by a nasty food shortage this fall.
It is that second scenario that is more likely (and you can read Pape on why). So what this feels to me is a bit like 1929. The economy was doing really well in the stock market, but then there was a bubble, a banking panic, and a big recession turning into a depression. And then some governments tried Austerity as a coping mechanism (which the US is trying right now) and the result was political destabilization. It would take another 2 or 3 years, but many governments were replaced by opposition parties, or the whole government fell outright. It would take a full decade before WWII started, but that war was baked in by the stock market crash and government responses to it.
If it was 1929 and you knew you had 10 years until WWII what would you do with your time? How would you prepare for that situation? How would you cope with a the Great Depression? How would you plan to support your kids? Grandkids? Yourself?
What kinds of mental and physical training might you consider? Might you recommend to those around you?
May you be well,
-Jon
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