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How the Iran War Could Lead to a Crash Worse Than 2008
It’s too late to prevent the inflation of an AI bubble or to advise against a US attack on Tehran. At this point, the most we can do is to hope for a quick end to the war and for some improvisational brilliance among the world’s leaders of government and finance.
Mar 21, 2026
Several commentators have remarked that the United States’ war on Iran carries echoes of 2008. I’ll argue here that a potential financial crash this year could actually be much worse.
The Global Financial Crisis (GFC) of 2008 was the biggest economic crunch since the Great Depression. Unemployment surged, topping 10% in the US. Global stocks lost trillions of dollars in value. Major brokerage houses collapsed. The US auto industry only survived thanks to enormous government bailouts. How could another crash top that?
Consider the causes. The 2008 Great Recession resulted from a confluence of three factors:
- Failed US wars in the Middle East, in that instance against Iraq and Afghanistan. Many economists argue the Iraq and Afghanistan Wars contributed to the GFC by fueling massive American budget deficits and worsening trade imbalances, and by creating a “capital flow bonanza” that triggered the US credit boom. While not the sole cause, the war compounded the vulnerability of the US economy.
- Soaring oil prices, following the plateauing of world conventional oil production in 2005. Oil demand continued to rise but the global supply of oil did not follow suit. On July 11, 2008, crude prices hit $147 per barrel, their all-time high. Since the economy runs on energy and oil is the world’s most important energy source, oil prices have a way of impacting all industries. Financial markets crashed three months after the oil-price peak.
- A bursting financial bubble inflated by subprime mortgages in the US and financial derivatives traded worldwide. The mortgage bubble involved $1.3 trillion to $1.5 trillion in high-risk loans issued during the 2000-2006 housing boom. It was a house of cards waiting to tumble.
The resulting unwinding of debt and derivatives came within a hair’s breadth of turning into a massive bank run and general economic collapse. Governments (led by the US) bailed out industries and banks, lowered interest rates to zero, purchased large tranches of financial securities, and instituted enormous fiscal stimulus programs and tax cuts. Even with these rapid and maximum-scale efforts totaling hundreds of billions of dollars, the GFC led to widespread housing foreclosures, a near-40% downturn in the S&P 500, and a substantial increase in the poverty rate.
Now consider the following:
- Today’s AI financial bubble is four times bigger than the subprime mortgage bubble of 2008 and 17 times bigger than the dot-com bubble of 2000.
- The Iran war, though so far not involving US ground troops, could possibly end up being more problematic than the Iraq invasion of 2003, if only from the standpoint of flows of energy and international trade. The war is likely to result in real oil shortages and prices potentially even higher than those seen in 2008. Additionally, more of the Middle East is now involved in hostilities, and oil and gas production and shipment infrastructure is being damaged or destroyed, thereby undermining the long-term economic prospects of the region, as well as destabilizing its politics. No one knows how this will end.
- For the US economy, warning signs were already flashing before the war: Stubbornly high inflation, a bad jobs picture, and worsening consumer sentiment were indicators of a looming recession.
- The final factor can be stated as a question: Would today’s US Treasury head be as successful at averting financial doom as was Henry Paulson in 2008? Then, the US was able to enlist government and business leaders from the world’s key countries in cooperating to fashion a collective survival strategy. Would current US Treasury Secretary Scott Bessent have similar success, given the recent global collapse of trust in US leadership?
In view of the possibly catastrophic consequences of the attack on Iran, many people wonder what motives could have justified it. Logan McMillen argues in Foreign Policy in Focus that the so-called “Donroe Doctrine” intends to freeze China out of the Western Hemisphere and to deprive it of cheap energy:
The strategy is entirely zero-sum. By turning the Middle East and the Caribbean into militarized chokepoints, the United States is suffocating China’s independent oil supply lines, starving its industrial capacity while guaranteeing temporary windfall profits for Western supermajors. Concurrently, from the lithium flats of Bolivia to the ports of Peru, Washington is deploying right-wing proxies and military coercion to systematically dispossess Chinese capital in Latin America, re-colonizing the Andes to secure the supply chains of the 21st century.
Other commentators see the war as being spearheaded by members of the Christian Zionist movement, which desires a fulfillment of biblical prophecies of the battle of Armageddon and the return of Jesus.
Even if McMillen’s analysis is sound and there is an arguably rational motive behind the war, that doesn’t mean the campaign will go according to plan or that it will achieve its aims. Many analysts see it already careening off the rails.
It’s too late to prevent the inflation of an AI bubble or to advise against a US attack on Tehran. At this point, the most we can do is to hope for a quick end to the war and for some improvisational brilliance among the world’s leaders of government and finance.
Meanwhile, it would be smart to make whatever preparations you can. For folks in the Northern Hemisphere, it’s time to start planning this spring’s food garden. You might want to plant a few more rows of beans than you do most years, so you have enough to share with neighbors.
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Trump and Israel’s War on Iran Once Again Exposes the Folly of Fossil Fuel Dependence
The world’s leaders should not only condemn US and Israeli aggression that has thrown the global economy into a tailspin but also take action to insulate their economies from this relentless cycle of fossil-fueled violence, volatility, and instability
Mar 19, 2026
As the US and Israeli war on Iran continues into its third week, the human, economic, and ecological impacts are devastating. Some 3,000 Iranians have been killed, including 165 children in one school strike, 10,000 injured, and 3.2 million displaced.
The war has caused a crisis. The World Health Organization has warned that with many oil storage tanks hit, resulting in “black rain” falling on Tehran, there is "danger for the population." The debris contains toxins that can cause respiratory and neurological damage, as well as certain kinds of cancer. For US consumers, who were promised that President Donald Trump would stop foreign conflict, the war is costing more than $890 million a day in direct costs, before we factor in the rising costs of energy. This is money that could be spent on education and healthcare.
The war has also brought chaos to global oil markets. Middle East producers have cut oil production by at least 10 million barrels per day, sending oil prices soaring. With no end to the conflict in sight, oil markets remain jittery and volatile.
Spikes in the price of oil affect billions of working people worldwide. They are forced to pay more to fill up their tanks, heat their homes, and even purchase food, since fertilizer is often made from fossil fuels. Rising energy prices can also cause knock-on inflation in the price of other consumer goods.
It is nonsensical that the global economy is so dependent on a 21-mile strait of water staying open to tanker traffic.
On Tuesday, the price of a barrel of Brent crude, the global benchmark for oil, was close to $104, up almost 50% from before the conflict started. By Thursday, after strikes on Gulf oil and gas infrastructure, oil was $119 a barrel and gas jumped 30%, with industry insiders calling it an “Armageddon scenario.” “The world does not need $120 oil,” said Steven Pruett, chief executive of one Texas-based oil producer, Elevation Resources. “It’s going to cause economic destruction.”
Last week, the global energy watchdog, the International Energy Agency, said that oil markets are suffering “the largest supply disruption in history.” The boss of Saudi Aramco, Amin Nasser, has warned of “catastrophic consequences” for the world economy if the US-Iran war drags on.
The problem lies with the Strait of Hormuz, the narrow waterway between Iran, the United Arab Emirates, and Oman. A quarter of the world’s oil—some 20 million barrels a day—passes through the Strait, which is only 21 miles wide at one point. And now, in retaliation for the US and Israeli aggression, Iran has effectively stopped traffic through the Strait by bombing tankers.
For decades, academics and the oil industry have warned that war in Iran could cut off the Strait in times of conflict. The industry has long feared what would happen if the Strait were to close. Chevron boss Mike Wirth recently said: “We do crisis management exercises… the big one has always been something in the Middle East that shuts the Strait of Hormuz… Markets are very uncomfortable, uncertain, volatile, and unpredictable.”
It has become increasingly apparent that Trump had no plan for dealing with the Strait’s closure after pleading earlier this week with European allies to help keep it open. In a scathing editorial, the New York Times wrote: “President Trump went to war against Iran without explaining his strategy to the American people or the world. It now appears that he may not have had much of a strategy at all.”
It added that he also “failed to plan for a predictable side effect of a war in the Middle East: a disruption of oil supplies that causes a price spike and impairs the global economy.”
The evidence bears this out. The threat of closing the Strait remained unseen by the Trump administration, bloodthirsty for regime change and blinkered by the ease of removing President Nicolás Maduro from power in Venezuela.
Before the strikes on Iran, Trump’s Energy Secretary Chris Wright had told an interviewer he was not concerned that the looming war might disrupt oil supplies in the Middle East and wreak havoc in the markets. Since the crisis began, Wright and Interior Secretary Doug Burgum have appeared “flummoxed” by the surge in prices, according to Politico. One industry official has called Burgum the “Where’s Waldo” of the crisis. Both men have been scrambling, but failing, “to head off a bout of energy-driven inflation.”
After a closed-door briefing to lawmakers last week, one Democratic Senator, Chris Murphy, said on social media that the administration had no plan for the Strait of Hormuz and did “not know how to get it safely back open.”
It's not all bad news for the oil industry, though.
Oil companies are set to make obscene profits. Oil Change researchers recently calculated that if oil prices rise just $20 a barrel, US producers will rake in $280 million in extra revenue every day. That’s over $100 billion a year. Shares in the six oil majors, BP, Chevron, Eni, ExxonMobil, Shell, and TotalEnergies, have soared by more than $130 billion in the first two weeks of the war.
This isn’t the first time global oil markets have been thrown into upheaval by war, and by looking to the past, we can see the dangers and possibilities created by oil shocks. In 2022, oil companies were able to use the invasion of Ukraine to increase their already massive profits.
For long-term economic security and stability, as well as a future safe from climate disasters, there needs to be a radical shift to renewables.
The five Big Oil companies—BP, Chevron, ExxonMobil, Shell, and TotalEnergies—reported combined profits of $196.3 billion the following year, more than the economic output of most countries. Working people around the world, as well as our climate, paid the price for Big Oil’s greed. For example, the war cost Canadians $200 billion over the next three years due to inflation spikes.
After the Ukraine war, Pakistan prioritized renewables. Energy analysts in the country believe that solar expansion has helped insulate the power sector from the spiraling energy costs.
“While we’re certainly seeing some impacts, the expansion of distributed solar in the country has provided a cushioning effect against the impacts [of the energy crisis]” Nabiya Imran, an associate at Renewables First, a Pakistani think tank, told The Guardian.
The world’s reaction to the 1973 oil crisis shows that a different path is possible. After oil prices quadrupled, there was significant investment in renewables and energy efficiency. Back then, the US government worked on a program to promote wind turbines and energy efficiency, which would be antithetical to the Trump administration.
Indeed, the madness of Trump’s current war on renewables is such that the administration is reportedly planning to pay nearly $1 billion to French energy company TotalEnergies to stop further offshore wind development.
Despite this, the chaos in the energy markets has led to renewed calls to get off oil and decarbonize. In the UK, The Guardian editorial board argued: “After Russia’s invasion of Ukraine, Europe swapped Russian pipeline gas for American LNG [liquefied natural gas]. Dependency didn’t disappear. Britain just changed suppliers. That is one reason among many why this crisis must see the government focus like a laser on faster decarbonisation, not more drilling.”
US tech corporation Microsoft, which donated $1 million to Trump’s inauguration fund, has also said the war strengthens the case for investment in clean energy sources and battery storage. “Wind and solar as, as part of that mix, is a huge benefit from the standpoint of price stability, because once you install it, you have more certainty around what that actual cost profile looks like,” the company told the Financial Times.
It is nonsensical that the global economy is so dependent on a 21-mile strait of water staying open to tanker traffic. It is nonsensical that oil prices are so volatile that they whipsaw on a tweet from Trump or even a misleading one from US Energy Secretary Chris Wright claiming the US military had successfully shepherded a tanker through the Strait. And it is deeply unjust that this volatility affects the household bills for billions of people.
As some pundits have pointed out, even if Trump declares victory, it is now up to Iran when they will allow the Strait to reopen. It can close it at any time in the future. Iran has the means to hold much of the global economy to ransom.
So, for long-term economic security and stability, as well as a future safe from climate disasters, there needs to be a radical shift to renewables. Leading pundits agree:
There is evidence that the war in Iran is beginning to cause the same shift in thinking that the 1973 oil crisis did. South Korean President Lee Jae Myung said this week that it was time to prepare major measures to conserve energy as the situation deteriorates. These include promoting energy conservation and “rapidly transitioning away from fossil fuels to renewable energy.”
It's also worth remembering that the US military is the largest emitter of greenhouse gases of any institution on Earth and the US is the largest producer of oil and gas globally. The military uses much of that might to defend US interests in fossil fuels.
The world’s leaders should not only condemn US and Israeli aggression that has once again thrown the global economy into a tailspin but also take action to insulate their economies from this relentless cycle of fossil-fueled violence, volatility, and instability. Moving away from fossil fuels does not guarantee world peace. We are already seeing conflicts over the rare earth minerals needed for solar and other green technologies in places like the Congo.
But it can insulate working people from the shocks triggered by the reckless aggression of powerful nations that consider themselves adequately protected from the consequences of their actions.
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The Iran War Reveals a Global Chokepoint
The current fixation of world attention on the Strait of Hormuz should remind us of the inherent brittleness of an economy in which our food and energy security, and our livelihoods, are intertwined with depleting and polluting resources and expectations of perpetual growth.
Mar 13, 2026
It’s unclear how long the United States’ war against Iran will last. Some reports suggest President Donald Trump might declare victory and cease attacks within days; others foresee a long campaign with American boots on the ground. The lack of clear US objectives invites speculation. Even if hostilities end soon, the war highlights a perennial vulnerability of industrial societies: their systemic dependency on fossil fuels.
The 24-mile-wide Strait of Hormuz in the Persian Gulf, through which roughly 20% of world oil shipments pass, is an obvious pinch point for a vital industrial resource. But it also serves as an apt metaphor for the brittle global supply chains upon which the entire economy depends.
The US-Israel-Iran conflict has led to dramatic oil price volatility, with a swing of nearly 40% recorded on a single day. Most economics commentators understand that higher oil prices can be a drag on the economy, but prices are only part of the story. The war is likely to lead to long-term damage to oil production, storage, and shipment infrastructure in the Middle East. In the best-case scenario, if hostilities end immediately, the world’s crude deliveries could be stabilized in six months. But stability would likely resume at a lower level of output, since the ongoing oil production capacity of Iraq and other Middle Eastern producing countries is likely being compromised.
Iraq is the second-largest producer in the region after Saudi Arabia. If oil can’t be shipped or stored, production must be cut—not a light decision, as shutting in oil production can damage wells. But that is what’s happening: Oil production from Iraq’s main southern oilfields has dropped by 70% thanks to the effective closure of the Strait of Hormuz. Saudi Arabia, the UAE, Kuwait, and Qatar have also reduced production due to the war. Iran even hit oil facilities in their closest ally in the region, Oman.
This is a system destined to fail.
While spot prices for crude oil have spiked and fallen in recent days, futures prices are stubbornly high. Savvy oil investors and industry analysts don’t expect this oil crisis to be resolved quickly. A week and a half after the start of the war, US gasoline prices were up nearly 60 cents per gallon on average; historically, higher gasoline prices driven by oil shortages have persisted for weeks or months after oil prices normalized.
Then there are secondary impacts, largely overlooked by the economics commentariat. So far, the Iran war has effectively closed off one-third of the world’s helium supply. Helium is a depleting nonrenewable resource, like fossil fuels. Qatar’s Ras Laffan facilities, which produce 17 metric tons of helium daily, are now offline. Experts warn that if the Strait is closed to shipping for longer than two weeks, months-long global helium shortages could ensue. Helium is indispensable in advanced semiconductor production processes.
While semiconductors are staples of high tech, food is a more basic necessity for humans. Roughly one-third of the world’s fertilizer supply passes through the Strait of Hormuz, and fertilizer prices are spiking. Unless the war ends within days and shipments resume quickly, global food prices will inevitably rise throughout the year.
These developments underscore a message that we at Post Carbon Institute have been repeating for over two decades. Oil and other fossil fuels are the basis of the modern industrial economy. They’re polluting, but they’re also depleting. And in the case of oil (and, increasingly, natural gas) they’re internationally traded at massive scales, raising geopolitical risks. This is a system destined to fail.
But when? During and shortly after the US invasion of Iraq in 2003, the all-time peak in world conventional oil production seemed to be at hand. Indeed, in the last two decades, conventional global oil output has exceeded its 2005 rate in only a couple of years.
However, total oil production has continued rising largely due to the soaring contributions of tight oil from the US, oil sands from Canada, and deepwater oil from Brazil. These unconventional sources of crude entail higher production (and environmental) costs than conventional oil. Indeed, oil prices have generally remained higher, in inflation-adjusted figures, than was the case pre-2005, though low enough to enable global economic expansion to continue at a slower pace.
Even if Trump TACOs and ends the attacks early, the war represents a significant shift in the trajectory of the modern industrial economy.
During the same time, efforts to battle climate change took the form of an energy transition from fossil fuels to renewable energy sources—mainly solar and wind power. While a shift toward renewables makes sense on many levels, the messaging from renewables promoters was sometimes overoptimistic: They promised that the world could replace fossil fuels with solar and wind quickly and completely, while still growing the economy. Our analysis suggests instead that the shift will take decades, during which energy consumption for non-transition purposes will have to decline significantly, and that total energy usage over the long haul, especially in highly industrialized countries, will be a fraction of current levels if civilization is to be sustainable. Further, supplies of minerals essential to the renewable energy transition are again globally traded and pose still more geopolitical chokepoints.
And here we are, 20 years past the effective conventional oil production peak, with the energy transition still in an early phase (fossil fuels now provide 82% of world energy, down from 85% five years ago). Installation of solar panels in the US fell in 2025, due to Trump administration anti-renewables incentives and penalties. Fracking is nearing its limits, with US tight oil production set to possibly begin its inevitable decline this year. The electrification of the economy (electricity currently accounts for about 21% of all energy usage) is essential to the energy transition, but the sudden growth of electricity demand for new data centers threatens to delay if not defeat the goal of shifting all energy usage—for transportation, manufacturing, agriculture, and more—to wires.
So, what a fine time for a war in the Middle East! If the war drags on for weeks or months, the economy and politics, local and global, will likely come unglued. If you want a longish analysis of what’s at stake, Craig Tindale has the best I’ve seen. Short version: An extended energy crisis will lead to global stagflation, food shortages, and increasing political instability. This could all get very ugly on many levels at once.
Even if Trump TACOs and ends the attacks early, the war represents a significant shift in the trajectory of the modern industrial economy. Financial bubbles are likely to get punctured by increased overall economic uncertainty. The US Federal Reserve’s plans to reduce interest rates will likely be derailed by higher energy and food prices. Robust oil prices will surely incentivize more investment in high-cost petroleum drilling, slowing the decline of tight oil production, thus putting off the energy transition even longer.
And remember, from the US perspective this is a war of choice, not necessity.
The current fixation of world attention on the Strait of Hormuz should remind us of the inherent brittleness of an economy in which our food and energy security, and our livelihoods, are intertwined with depleting and polluting resources and expectations of perpetual growth. More chokepoints loom.
As always, we advise community resilience as the best strategy for coping with what’s coming. Localize production and consumption, reduce your dependency on global supply chains, and get to know your neighbors.
This is going to be an interesting year.
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