Photo: Shady Alassar/Anadolu/Getty Images
I suspect I have written this column before. At my age, memories flood the zone and bump into each other, with some inevitably getting crowded out. I do not—yet—have fake invented memories, but I do find recent ones sometimes slipping away before I can recapture them. Plus, since this is my 550th column, some repetition is inevitable. So, if you’ve heard it all before, I apologize. You’re going to hear it again.
The Iran war, regardless of whether you think it was a good idea or not, is having an impact on the global economy and teaching us all yet another lesson about supply chains. Ironically, it is also evidence that, despite claims to the contrary, globalization is not dead. The global economy remains highly integrated; a fact we seem to rediscover every time there is a crisis. That is true for two reasons. First, the tools that enabled it in the first place—enormous reductions in the cost and time of transportation and communication, as well as digitization—have not gone away. Containerization is not going to disappear from global shipping; digital communications are here to stay. Second, those tools have allowed us to invest in and build an infrastructure that facilitates the exchange of goods and services across borders. Ports, airports, undersea cables, and other features of the twenty-first-century economy are here to stay. We can debate the merits of all that—some on the left argue it has benefited large corporations at the expense of workers, and some on the right argue it has infringed on national sovereignty and compromised our security—but we cannot deny the fact of it. A crisis like the current war is a stark reminder of our dependence on the integrated system we have created.
When the president and his advisers discussed options for dealing with Iran, they did not seem to have given much thought to the economic and moral consequences beyond concluding that the United States would be less hurt than others because we are a leading producer of oil and gas, and that, apparently, God is on our side. (The pope would beg to differ.) That has turned out to be a mistake for two reasons. First, it is wrong, as will be seen below. Second, it is an abdication of our responsibility as human beings to care about others as well as ourselves. That is not just a statement about U.S. global leadership and our efforts over the past 75 years to maintain the system; it is a reminder that we are all connected by our common humanity, and that actions that cause the death of thousands, displacement of many more, famine, disease, and the destruction of property are abhorrent and cannot be excused by the argument that all the victims are in other countries.
Roughly 20 percent of the world’s oil and gas transits through the Strait of Hormuz, most of it to Asia, and little to the United States. That made it easy to conclude we would not be hurt, but then supply chains and the global marketplace got in the way. Oil and gas are commodities priced in world markets. Events anywhere can affect world prices from hour to hour. To the surprise of nobody, prices went up when the Strait of Hormuz closed, and the price of gas at the pump here at home went up in tandem. Equally important, as the Washington Postexplained in a recent article, oil and gas are key ingredients in petrochemicals like ethylene, propylene, and naphtha, which, in ways we don’t often think about, are a backbone of the global economy because they are the basis for plastic products including bottles, bags, food packaging, auto parts, personal protective equipment like surgical gloves, and medical equipment like syringes and catheters, and toys, among many others. Supply interdictions lead to both price increases as the raw materials become scarcer, and shortages, which force factories to reduce production or to shut down. The former arrive early, as we are seeing; the latter arrive later as existing inventories are used up. These effects are in addition to increases in the price of transportation, jet fuel in particular, and energy generally. They also relate only to products that involve petrochemicals. Shipping delays caused by the Strait closure and impending fuel shortages will slow down factories’ access to raw materials and cause supply interruptions for numerous products. Already well-publicized is the case of helium, an essential element in the production of semiconductors, a substantial portion of which comes from Qatar.
There are two lessons here, both of them old. One is that everything is connected, sort of like the “butterfly effect” that was in vogue in the 1960s. An event in one place has a profound ripple effect that causes changes all over the world. The other lesson is that we should have seen this coming. (In fact, a lot of people did see it coming, but they were ignored. Unexpected consequences occur frequently, particularly in war, as we have witnessed in Ukraine over the past four years. Competent governments anticipate this and have backup plans to deal with every contingency. It is apparent that the United States had none, which says a lot about the current administration’s competence.
Author’s Note: I retired from CSIS on March 29, 2026. I plan to continue writing this column and participating in the Trade Guys podcast, so please continue to read and listen. However, my CSIS email address will no longer be working, so if readers or podcast listeners want to contact me directly, they should do so at [email protected].
William A. Reinsch is a senior adviser (non-resident) and Scholl Chair emeritus with the Economics Program and Scholl Chair at the Center for Strategic and International Studies in Washington, D.C.
