Transcription
Let me ask you something that should keep you up at night. What happens when the world's most powerful country starts a war, gets stuck, and nobody, not its closest allies, not its military partners, not the global institutions it built, comes to help? What happens when a country that has spent 80 years projecting itself as a guarantor of global order suddenly looks less like a superpower and more like a bully who picked the wrong fight?
That is not a hypothetical. That is exactly what is unfolding right now, in real time, in the skies over Tehran, in the choke point of the Strait of Hormuz, and in the emergency cabinet meetings of Brussels, Berlin, and Paris. Because the real story here is not just about Iran. Iran is a battlefield. The real story is about what this war is revealing about American power and how that revelation is reshaping the positions of Europe, Russia, and China in ways that will last this conflict by decades.
So, let us begin. And let us begin honestly. To understand why this moment is so significant, you have to understand the sequence of decisions that led to it. Because each decision was a strategic bet, and at every turn, the bets were based on a fundamental miscalculation after the 12-day Israeli-American military campaign against Iran in June 2025, a campaign that targeted Iran's nuclear infrastructure.
The United States and Israel declared victory. They announced that Iran's nuclear program had been substantially degraded. They believed that a weakened Iran facing crippling inflation, a collapsing rial, and nationwide protests that had erupted in December 2025 across all 31 of Iran's provinces would have no choice but to capitulate.
Let me be precise about that economic picture, because it matters enormously. Before the war, Iran was already in serious distress. The World Bank had projected that Iran's economy would shrink in both 2025 and 2026. Annual inflation was racing towards 60%. The capture of Venezuelan President Nicolas Maduro by US forces in January 2026 had cut off one of Iran's key oil trading lifelines. And in September 2025, the UK, France, and Germany, what diplomats call the E3, had triggered the snapback mechanism under the 2015 nuclear deal, reimposing all international sanctions against Tehran.
So, from Washington's perspective, the logic was seductive. Iran was economically isolated, militarily degraded, internally unstable, and diplomatically surrounded. Indirect talks mediated by Oman in February 2026 had made some progress. Iran's Foreign Minister Abbas Araghchi described them as constructive. But the gap between what Washington demanded and what Tehran would accept was enormous. The United States under Donald Trump demanded zero uranium enrichment. Iran refused. Trump wanted Iran to dismantle its missile program. Iran's National Security Council called it non-negotiable. Trump wanted Iran to end its funding and arming of Hezbollah, Hamas, and the Houthis. Iran said its regional presence was a sovereign matter. And so, the talks collapsed.
And on February 28th, 2026, the United States and Israel launched joint air strikes on Iran. The operation was called Operation Epic Fury. It included a decapitation strike that killed Supreme Leader Ali Khamenei. It was meant to end the nuclear standoff and reshape the Middle East. What it actually did was reshape the entire global order.
The Strait of Hormuz, Iran's masterstroke. Here is what the United States got wrong. Here is a single most consequential miscalculation of this entire war. American military planners assumed that even if Iran retaliated, the retaliation would be contained. Missile strikes against US bases in the Gulf, drone attacks against Israeli cities, perhaps some destabilization through proxy forces, the standard playbook, the kind of conflict you can manage from aircraft carriers and air superiority.
What Iran did instead was something far more elegant, far more devastating, and far more difficult to counter with bombs. Iran closed the Strait of Hormuz. Just think about what that means for a moment. Before this conflict, roughly 20% of the world's entire oil supply passed through that narrow strip of water every single day. 20% not of one region's oil, all the world's oil. And Iran mined it, threatened tankers with missiles and drones, and brought commercial traffic through the strait to a near total standstill.
Commercial tanker traffic through the Strait of Hormuz dropped by more than 90% after the outbreak of conflict. Oil prices, which had been sitting around $70 a barrel before the war, surged past $103 a barrel in March alone. Iran itself saw an average boost in oil revenue of nearly $25 million per day from that price surge.
But the consequences rippled far beyond oil markets. Iran's drones struck the Qatari LNG facility at Ras Laffan on March 2nd, forcing an immediate shutdown of production. Qatar's LNG terminal, which accounts for nearly 20% of global LNG output, went offline. And that single event changed everything for Europe because Europe had spent the years after Russia's invasion of Ukraine desperately replacing Russian pipeline gas with Qatari and American liquefied natural gas.
European gas prices nearly doubled overnight. Dutch TTF gas benchmarks, the European benchmark price, raced past 60 euros per megawatt hour by mid-March. The European Central Bank was forced to postpone its planned interest rate cuts. Economists began warning of a technical recession if the maritime blockade persisted through the summer refill season. UK inflation was projected to breach 5%. Germany's industrial manufacturers imposed surcharges of up to 30% on their products to offset surging electricity costs.
And here is the truly extraordinary strategic dimension of what Iran accomplished. It wasn't just the oil and gas, the disruption also cut off 45% of global sulfur supply because the Gulf countries are major sulfur producers. Sulfur is essential for fertilizer production, for copper mining, for semiconductors. The UN World Food Program began warning about long-term global food price increases. Helium supplies, critical for semiconductor manufacturing, became constrained. became constrained.
Iran, a country that had been described as isolated, weakened, and on the verge of collapse, had just imposed costs on the entire global economy that no other single military action in recent memory had come close to matching. And in doing so, Iran didn't just embarrass the United States militarily. It revealed something far more dangerous, the limits of American power.
There is a concept in international relations that political scientists call credibility, the belief widely held by allies and adversaries alike that when the United States acts, it acts from a position of overwhelming strategic clarity, and that what it starts it can finish. That credibility has been the foundation of American power since the end of the Second World War. It is not just about military force. It is about the aura, the sense that engaging with America strategically is different from engaging with any other power because America plays a longer game, because America can absorb costs, because America's word means something.
What the 2026 Iran war did was shatter that aura visibly, publicly, and in real time. Military analysts from across the ideological spectrum described Iran as being far more resilient to US Israeli strikes than the Trump administration had anticipated. The Strait of Hormuz gambit was something American war planners had gamed out and apparently concluded Iran was too rational to fully execute. They were wrong, but it is not just the military dimension.
Consider the diplomatic picture. Trump claimed at least 38 times between late March and early June that a deal with Iran was imminent. 38 times. Each time the deal evaporated. When Iran made what Trump himself described as a significant proposal, he called it not good enough. When Iran declined a 45-day ceasefire in favor of a permanent solution, Trump responded not with a counterproposal, but with threats including the extraordinary statement that a whole civilization will die tonight never to be brought back. Administration officials were forced to clarify that this was improvisational and not part of any national security plan.
Think about what that signals to every government on Earth watching this. The world's preeminent military power is conducting a war it cannot decisively win on terms it cannot clearly articulate with threats it has to walk back against a country it has been sanctioning for 40 years. The founding chief prosecutor of the International Criminal Court, Luis Moreno Ocampo, compared the US war on Iran to Russia's war on Ukraine, saying that the world is shifting from the rules-based system to the rule of the man. Stephen Rapp, the former US Ambassador-at-Large for War Crimes Issues, said Trump's threats about Iranian civilian infrastructure could make the United States, in his words, a rogue state. That is not a fringe position. That is former senior American officials using that language about their own government.
And in the global south, in Asia, Africa, Latin America, the response was not sympathy for Washington. It was something more troubling for the long-term American project. It was a hardening of a world view that America's rhetoric about international law has always been selectively applied, and that what we are watching is not the defense of a rules-based order, but the assertion of raw power. Saeed Shah, a respected journalist who has covered South Asian and Middle Eastern affairs for decades, noted that many in the global south view the war not as having the moral purpose of the US claims, but as a failure of diplomacy and an exercise in what Gilbert Achcar called modernized gunboat diplomacy. America has not just lost a military campaign. It is losing the narrative that has underwritten its global leadership for 80 years.
Europe retreats, but in which direction? Now, let us come to Europe, because this is where things get genuinely fascinating and genuinely alarming. Europe's behavior in this crisis has exposed something that analysts at the Middle East Council on Global Affairs describe with clinical precision as structural retreat, not a tactical withdrawal, not a temporary adjustment, a structural retreat, a systemic decline in Europe's capacity to act as a coherent, principled, independent force in global affairs.
The United States went to war with Iran without consulting Europe. And Europe's response was, in essence, paralysis. The Carnegie Endowment for International Peace put it bluntly, "The US-Israel war against Iran has revealed Europe at its worst." Let me explain why. Europe had actually been involved in the Iran nuclear negotiations. The E3, the UK, France and Germany, had triggered the snapback sanctions against Iran in September 2025. The UK's National Security Advisor, Jonathan Powell, had secretly attended US-Iran nuclear negotiations in Geneva as recently as March 2026, bringing a technical team with him, reportedly believing a diplomatic breakthrough was possible. And then the war started. And Europe, which had been an active participant in the diplomatic process, found itself completely sidelined. Washington had gone to war in the middle of the negotiations, a decision that the Law Society Journal noted was a violation of the principle of good faith enshrined in Article 2 of the UN Charter.
What did Europe do? It condemned the attacks, certainly. Spain's Prime Minister Pedro Sanchez rejected the unilateral US military action. Other European leaders expressed concern, called for de-escalation, urged a return to negotiations. But here's a critical point. Words without leverage are just words.
Europe had two real problems. The first was energy. With Qatari LNG offline and the Strait of Hormuz effectively closed, Europe was heading into its second major energy crisis in less than 5 years. Gas storage levels at the start of 2026 had already been at historic lows, roughly 46 billion cubic meters at the end of February, compared to 77 billion in 2024, the EU needs storage at 90% capacity by December to survive a winter comfortably. To meet that target, Europe would need to inject nearly 60 billion cubic meters of gas during the refill season. In a market where 1/4 of global LNG export capacity had gone offline, including the Ras Laffan facility in Qatar, Europe needed energy. And the countries that had energy to sell were Russia and the United States.
This created a profound contradiction. Politically, it was untenable for the EU to go back to Russian gas. Doing so would effectively finance Vladimir Putin's war in Ukraine, undermining years of painful sanctions policy. But US LNG was the most expensive option on the market, and the United States was not exactly behaving like a reliable partner. This is the strategic trap Iran has created for Europe. By closing the Strait of Hormuz and striking Qatari LNG facilities, Iran has not just raised energy prices. It has forced Europe into a position where it must choose between its political values and its economic survival. That is an extraordinarily sophisticated piece of strategic coercion from a country that the world had written off as isolated and weakened.
The second problem was political coherence, or rather the lack of it. Belgium's Prime Minister Bart De Wever shocked fellow European leaders by calling for the EU to normalize relations with Russia to regain access to cheap energy. Germany's LNG imports surged 72% year-on-year from March to May 2026, the sharpest increase among all EU countries. France reduced its LNG imports by 23%. The UK cut its LNG imports by 20% while simultaneously increasing dependence on US suppliers. Every country was responding differently. There was no unified European energy strategy. There was no unified European political strategy on the war. There was no moment where Brussels stood up and said, "Here is where we stand. Here is what we demand. Here is what we are willing to do."
Brookings, the centrist establishment-friendly American think tank, wrote that Europe emerged at its clearest model of structural retreat. A BBC reporter covering EU leaders meetings in Brussels quoted a European MEP as saying, "Just like the crisis after Russia's full-scale invasion of Ukraine, different conflict, same European divisions, same dilemmas over energy. We can't keep going round in these circles. Something's got to give. Something's got to give." That is the voice of a Europe that knows it is failing, that knows the gap between its rhetoric about international law and its actual strategic capacity has become too wide to paper over, that knows that it built a post-World War II order as a subordinate partner to American power, and now that American power is doing things Europe cannot endorse and cannot stop.
This is not retreat in the sense of weakness alone. This is retreat in the sense of a fundamental identity crisis. Europe built its entire post-war political project on the premise that liberal international order, anchored by American power, was a guarantor of European peace and prosperity. What happens to that project when American power starts violating the norms of that order? What happens to European identity when following Washington means abandoning the principles Europe claims as its foundation? There are no easy answers, but the direction of travel matters enormously. And right now, Europe is retreating from American leadership, from strategic coherence, from any meaningful independent role in the unfolding crisis.
Russia, the quiet winner. While Washington was bombing and Brussels was panicking, Moscow was watching. And Moscow was winning. Russia's posture throughout this entire crisis has been a master class in strategic patience. Vladimir Putin condemned the US Israeli strikes as destabilizing. He expressed condolences over the death of Iran's supreme leader Khamenei. He called for a ceasefire and a return to diplomatic solutions. He maintained contact with Gulf state leaders to position Russia as a potential mediator. He reaffirmed Russian neutrality. In other words, Russia said and did all the right things from a moral optics standpoint, while simultaneously benefiting enormously from the material consequences of a war it had no part in starting.
Let us look at the numbers because they are staggering. Analysts at the KSE Institute calculate that Russia's additional budget revenues from the oil price surge caused by the Iran war could reach between 45 billion and 151 billion dollars in 2026, depending on the conflict's duration. In the central scenario, a three-month conflict, the windfall reaches 161 billion dollars in additional export revenues. That is roughly 500 million dollars per day in additional earnings, 100 billion dollars in additional budget revenues, more than Russia's entire 2025 fiscal deficit erased in one war that Russia didn't even fight. In a pessimistic scenario for the world, Russia runs a budget surplus and replenishes its sovereign wealth fund, sustaining elevated war spending in Ukraine for years.
Read that again. The US and Israel launch a war against Iran that they thought would reshape the Middle East. What it has actually done is give Russia a financial windfall that strengthens Moscow's ability to wage war in Ukraine and project power in Europe. Daniel Levy, a former senior Israeli negotiator, wrote that Israel's actions in the Lebanon theater were accelerating US global decline. The Washington Institute noted that while the war had been a setback for certain dimensions of Russian regional influence, it had done something far more valuable for Moscow. It was distracting the United States from Ukraine. Every dollar America spends in the Middle East is a dollar not spent on reinforcing NATO's eastern flank. Every political capital Trump burns trying to manage the Iran crisis is political capital not being used to maintain the international coalition supporting Kyiv. Every hour the US military is stretched over the Persian Gulf is an hour it cannot fully dedicate to deterring Russian adventurism in the Baltic states or Eastern Europe. Russia's President Putin has played this brilliantly. He made no dramatic moves. He took no risks. He simply allowed the United States to walk into a strategic quagmire and collected the receipts.
There's also the question of Russia's relationship with Iran itself and with a broader architecture of the non-Western world. Russia had promised to fund the construction of a nuclear reactor in Iran before the war. Russia, China, and Iran held a joint meeting with the International Atomic Energy Agency in April 2025 to discuss Iran's nuclear program. As Russian sanctions have hardened against Iran, Russia and China have quietly deepened their commercial and diplomatic ties with Tehran, creating an alternative that bypasses Western financial architecture. Now, with the war exposing the limits of American military power, the appeal of that alternative system, the parallel order that Russia and China are building, has only grown.
China, the patient architect. And then there is China. China's position in this crisis is the most complex and the most strategically interesting of any major power. And I want to be honest with you about this because it is easy to say simply that China is winning, but the reality is considerably more nuanced.
On one hand, China faces real economic pain from the Iran war. China's economy is structurally dependent on export demand. Europe alone absorbs roughly 15% of Chinese exports. A sustained energy shock that tips Europe and the United States into recession would collapse Chinese export orders at a moment when China's economy is already managing the aftershocks of a property crisis and suppressed domestic demand. Standard economic modeling suggests China's GDP falls roughly half a percent for every 25% rise in oil prices. Furthermore, China imports approximately 42% of its oil from the Gulf region. The closure of the Strait of Hormuz has been a major headache for Chinese energy planners. And Beijing has very little fiscal room to protect consumers. The 2026 budget deficit target leaves virtually no space for consumption-side stimulus. So, China is not sailing through this crisis without costs.
But here's the thing, geopolitical positioning is not the same as short-term economic performance. And in terms of geopolitical positioning, China is making gains that will compound over time in ways that the short-term economic hit does not capture. Consider where China stood at the start of 2025. The United States was pursuing a strategy of technological decoupling, semiconductor controls, trade tariffs, investment restrictions designed to slow China's rise. American credibility in the Indo-Pacific was still largely intact. The narrative of US power was still compelling enough that regional governments from Japan to the Philippines to South Korea, were making meaningful moves to align more closely with Washington.
Now, consider where China stands in mid-2026. The United States launched a war that analysts across the political spectrum have called a strategic debacle. American credibility, the very aura that makes US alliances valuable, has been visibly eroded. The US sanctions regime has been undermined by the simple demonstration that Washington yields the moment energy prices starting to rise at home. Trump's maximum pressure campaign against Iran, which was supposed to be the template for maximum pressure against China over Taiwan, has been shown to have severe limits.
Moreover, China has benefited from the crisis by deepening its relationships with precisely the countries that matter most for its long-term strategic position. As Western sanctions have tightened around Iran, China has stepped into the void as Iran's primary economic partner, securing energy supplies at preferential prices, and strengthening diplomatic ties that give Beijing influence in the Middle East. Al-Monitor reported that China had come to support the Iranian government through strengthened relations in the context of this war, but the broader strategic prize for China is not Iran. The broader prize is what this war means for the narrative of American hegemony in the global South.
Think about how this looks from Nairobi, from Jakarta, from Delhi, from Brasilia. The United States struck a country in the middle of negotiations. The United States killed a head of state without UN authorization. The United States closed a critical global trade route to commerce. Not because of its own military action specifically, but because it started a war whose consequences included that closure. The world's leading democracy attacked a country, generated a global economic crisis, and then spent 4 months demanding an unconditional surrender that it couldn't get. Every government watching that, every government in a country that has been told it must choose between the rules-based order and authoritarian alternatives, is drawing conclusions about what American leadership actually means in practice. And China, which has been patient, which has said the right things without taking risks, which has positioned itself as a responsible power offering development finance, trade relationships, and diplomatic engagement without demanding regime change, China's relative appeal as an alternative partner grows with every day this war continues.
The PIE, the Peterson Institute for International Economics, noted that the US Israel war on Iran has not only produced a military stalemate, but has also undermined the credibility of the US sanctions regime by demonstrating again that the US is bound to yield the moment energy prices risk rising at home. That is an extraordinary statement. The sanctions regime is the primary economic tool through which America projects power short of military force. If that tool has been exposed as having a ceiling, a point at which domestic economic pressure forces Washington to back down, then every country Washington is currently sanctioning or threatening to sanction has just learned something vital about how to resist. And China, which has been building alternative financial architectures, the BRICS payment systems, the digital yuan infrastructure, the Belt and Road trade networks, has just received the most compelling advertisement imaginable for why countries should reduce their dependence on the dollar-denominated Western financial system.
Let me step back now because I want to make sure you understand the magnitude of what is happening here beyond the immediate headlines. The Middle East Council on Global Affairs described this moment as the end of an entire historical phase. The phase of strategic certainty that prevailed in the post-Cold War era. For three decades, from the fall of the Berlin Wall in 1989 to roughly the mid-2020s, the world operated on a set of shared assumptions. The first was American dominance, that the United States was a sole superpower capable of shaping global rules and imposing new standards. The second was that the Atlantic system, America and Europe working in tandem, constituted a guarantor of global stability and a custodian of international rules. The third was that liberal democracy, backed by economic interdependence and international institutions, was a default destination of global politics.
All three of those assumptions are now under severe strain, not because of any single event, but because of an accumulation. The 2008 financial crisis that revealed the fragility of American economic management. The Iraq war that revealed the limits of American military power. The Trump era that revealed the fragility of American democratic institutions. The COVID-19 pandemic that revealed the inadequacy of international coordination. Russia's invasion of Ukraine that revealed the end of European security assumptions. And now the 2026 Iran war, which may be the defining crack.
What is replacing that old order? This is the honest answer. Nobody knows. We are in the interregnum, the period between a dying order and a new one whose shape has not yet emerged. What we can say is that the new order will be more multipolar. It will be more contested. It will have more voices, more centers of gravity, more competing visions of what legitimate international behavior looks like. Russia and China are not building a new order that I would endorse. Neither I suspect would most of you watching this. But they are providing something that a growing number of governments in the global south find appealing. An alternative. An alternative to the condition of strategic dependence on a western power structure that in the space of a few months in 2026 has revealed itself capable of starting a war in the middle of negotiations, killing a head of state, triggering a global energy crisis, and then being unable to end the conflict it started.
The founding chief prosecutor of the ICC said the world is going from the rules-based system to the rule of the man. That shift does not benefit orderly, prosperous, rule-following societies anywhere in the world. Not in Europe, not in Asia, not in the United States itself, but it is happening. And pretending otherwise is not analysis, it is wishful thinking.
So, where does this leave us? Let me offer you my assessment as clearly and honestly as I can.