Tehran, not COVID, will determine your gas price

Beneath a cloud of obfuscation that dominates public discourse, the probability of war between Israel and Iran is high and growing daily. In fact, a conflict would appear nearly inevitable without new American policy measures.  

While simultaneously advancing its ballistic missile program, Iran has begun enriching uranium to the 60 percent level, just a short of weapons grade. Its hardline president Ebrahim Raisi has appointed an opponent of the first nuclear deal to negotiate the second and is clearly not interested in any agreement without extracting extraordinary concessions. Israel, on the other hand, threatened by a regime that openly and routinely calls for its destruction will not suddenly decide to live quietly with a nuclear-armed Iran. Jerusalem is willing to use military force to prevent that outcome and has dramatically increased its 2022 defense budget to fund such an eventuality.  

The prospects for stability in the Persian Gulf this year are not promising. 

Armed conflict between Israel and Iran would have immediate and dramatic economic consequences for the United States. Despite our anticipated shift away from fossil fuels, the global economy still runs on oil, much of which is traded in a global market. Twenty percent of the world’s oil supply passes through the Straits of Hormuz where even the threat of war would quickly increase insurance rates. Should war actually break out, a disruption of Gulf oil production and a sharp rise in American gasoline prices are very likely. 

Our key Asian trading partners remain heavily dependent on Persian Gulf oil, hence any supply disruption there would quickly affect their ability to produce the goods we need and to purchase the goods we manufacture. Any shortfall in Middle East oil production would likewise increase Russia’s influence in energy markets and world affairs. Last year, Iranian drones and cruise missiles disabled half of Saudi Arabia’s oil export capacity in a single attack. This week, a similar attack struck Abu Dhabi. Many may have forgotten that in 1973 and 1979 it was geopolitical disruptions, not routine market fluctuations, that caused gasoline lines and a decade of stagflation. It could well happen again. 

Despite our assumption that the United States, EU, Russia and China all want a peaceful resolution to the Iran nuclear issues, only one of the 12 scenarios run through a predictive analytics software reduced the likelihood of an Iranian-Israeli conflict below 70 percent. The time elapsed before a conflict begins varies by scenario, but not the final outcome. Only if Iran’s revolutionary leadership abandons its decades-long effort to develop nuclear weapons does conflict become unlikely, yet these same leaders consider obtaining nuclear weapons essential to their regime’s survival. 

The threat is real, and the stakes are high. The current regime in Tehran is no more likely to abandon its nuclear ambitions under the pressure of economic sanctions than the Pakistanis and North Koreans were. Overt, American-initiated regime change in the Middle East has a poor track record to stay the least. Even if it were offered, Israel would not welcome American security guarantees that limited its freedom of action, nor would Jerusalem ever leave its fate entirely in Washington’s hands as many smaller NATO partners have done.  

If the now-spluttering negotiations in Geneva fail, American drivers should prepare for a shock at the gas pump. 

Ambassador Michael Gfoeller is a former political advisor to the U.S. Central Command.  

David H. Rundell is the author of “Vision or Mirage, Saudi Arabia at the Crossroads” and a former Chief of Mission at the American Embassy in Riyadh. Both are partners at Arabia Analytica.