Viewed in terms of economics, this is a very odd war. While Iran has done some damage to American allies and bases in the gulf the total, measured in dollars or lives, is trivial compared to the damage the US has done to Iran. Yet Iran seems to be winning, judged by their escalating demands and the US pattern of threats not carried out. The chief weapon of the Iranians against the US is their ability to close the strait of Hormuz. Viewed in economic terms it is a very odd weapon. Closing the strait raises the world price of oil and natural gas, which injures nations that are net consumers of them, including much of Europe ' also China, by a large margin the world's largest net importer. It has an ambiguous effect on net producers some of whose output normally goes through the strait such as our gulf allies and Iran itself; they sell less but at a higher price. It benefits net producers whose output does not go through the straits, including Russia, Canada and the US.1 The net effect...
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