Photo: maps4media via Getty Images
The first rule of holes is that when you are in one, stop digging. This is something that Trump has apparently forgotten or never known. It is obvious that the Iran war is not going exactly as the administration expected. I suspect Trump and his advisers thought it would play out the same way as in Venezuela—a quick hit, in and out, and a new regime more pliable than the old one. Unfortunately, history shows that wars in the Middle East do not work that way. Nobody ever finally wins. If there is a victory, the losers simply go underground, gather strength, and reappear later. Peace negotiations are endless, and when agreements or ceasefires are reached, they do not last. The United States has dug itself into a hole, and it will take longer than expected to get out, as demonstrated by the on-and-off closure of the Strait of Hormuz last week.
That means the negative economic impact will linger. Prices will stay high, particularly for energy; global supply chains will be disrupted; shortages will appear; growth will slow down. It was easy for the administration to think that the United States would be less hurt than others because it is a fossil fuel exporter. Still, that conclusion ignored the realities of a globally integrated trading system and the experience of shippers. Two and a half years later, transit volume in the Bab al-Mandab Strait is only half what it was before the Houthis began their attacks. As people begin to come face-to-face with the new economic reality and realize it will be with us longer than we thought, there are several longer-term impacts we should keep in mind.
First, as discussed in last week’s column, everything is connected, often in unexpected ways. Disruptions in oil and gas shipments thousands of miles from U.S. borders will still hurt us with higher costs and delayed shipping. Much of this was foreseen—and ignored.
Second, in a supreme irony, Donald Trump, the apostle of fossil fuels, is effectively pushing the world away from them and accelerating the shift to renewables. The war has allowed Iran to weaponize oil with a surprising degree of effectiveness. I have given countless speeches over the past five years on supply chain resilience and identifying and dealing with chokepoints. Now, the Strait of Hormuz is a chokepoint, oil and gas have been weaponized, and countries and companies dependent on them are being forced to rethink their supply chains. In the short term, that means finding alternative sources of supply and cutting back energy consumption. In the longer term, it means avoiding the dilemma entirely by switching to renewable sources. One example is in Egypt, where 75 percent of its electricity comes from gas, and the government is moving rapidly to increase renewables’ share of electricity production from 10 percent to 45 percent in two years. Among the renewable projects, no doubt to Trump’s consternation, is the construction of a 200-megawatt wind farm in the Egyptian desert.
We will also see changes at the consumer level, as the shift to electric vehicles accelerates, as more money is put into research on battery technology, and as the installation of solar panels continues to grow.
The other irony here is that the chief beneficiary of those developments will be China, which already leads the world with 80 percent of the global supply of solar panels, wind turbines, and batteries, and leads the world in electric vehicle manufacturing. So, Trump is not only undermining his own energy policy goals, but he is also likely facilitating China’s leadership in these sectors, which means the money from all those sales will be going to China and not the United States. There is a telling scene in the movie Looper, where the gang leader tells Joseph Gordon-Levitt, who wants to learn French and go to Paris, “I’m from the future. Go to China.” Ten years from now, we will realize the enormous mistake the United States made in not competing in renewable energy.
Third, the war has exposed the fragility of the smaller countries in the Persian Gulf: Bahrain, Qatar, and the United Arab Emirates. They have spent decades trying to convince the world they are safe and reliable destinations for foreign investment, manufacturing, tourism, and transit. Located halfway from just about everywhere, Dubai and Abu Dhabi have become global transit hubs. The war has shattered that illusion. While infrastructure can, and will, be repaired, investor and visitor comfort levels will be much harder to restore. People and money will start to look elsewhere.
Finally, while economic coercion is hardly a new concept, the war has validated its use as a tactic and demonstrated that smaller countries often have more leverage than the big ones believe. Trump’s strategy has always been based on bullying—the big get to push around the small. The war shows us that the small are not without resources. Vladimir Putin, whose philosophy is similar to Trump’s, is finding that out in Ukraine as well. The lesson is that people who dig holes should plan how to get out of them before getting in too deep.
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.
