The Iran Conflict | Letters to Fred

This article is an attempt to step back from the constant stream of breaking news and look at the larger strategic forces shaping major global conflicts. Much of the reporting on wars and geopolitical crises focuses on individual events as they unfold. The goal here is different: to synthesize the most important reporting, connect it with economic and strategic dynamics, and explore the broader implications that may not be obvious in daily headlines. Future editions of this blog will follow the same approach, using reliable reporting from outlets such as Reuters and the Wall Street Journal as a foundation while focusing primarily on analysis and long term consequences. Thank you very much for reading.

Over the past few weeks Iranian missile launches have dropped dramatically. According to the commander of U.S. Central Command, Adm. Brad Cooper, ballistic missile attacks have fallen roughly 90 percent and drone attacks about 83 percent since the campaign began. At first glance that statistic suggests the conflict may already be winding down. If Iran’s ability to launch missiles has been degraded so severely, it would seem logical that the conflict might begin cooling.

But the global reaction tells a very different story.

Instead of calming markets, oil prices surged. Brent crude, which had been trading around $60 per barrel earlier this year, quickly climbed toward $100 per barrel, one of the sharpest moves in years. Even after governments stepped in to calm markets, energy prices remain viciously volatile.

That raises a more interesting question: if Iranian missile attacks are falling so quickly, why did global energy markets react so violently?

The answer likely lies not in the number of missiles fired, but in geography.

The Strait That Powers the Global Economy

Roughly one fifth of the world’s oil supply normally moves through the Strait of Hormuz which is a narrow waterway separating Iran from the Arabian Peninsula. That translates to roughly 20 million barrels of oil per day and makes the strait one of the most important chokepoints in the global economy.

Since the conflict began, tanker traffic through the corridor has largely collapsed. According to Reuters and vessel tracking data cited by energy analysts, shipping companies have largely halted transit through the strait after Iranian threats against vessels attempting passage. Tankers have instead been waiting outside the corridor or rerouting where possible.

The market reaction was immediate. Brent crude, which had been trading in the mid-$60s before the conflict escalated, surged rapidly as traders began pricing the potential loss of supply. At one point futures briefly reached nearly $120 per barrel, their highest level in years.

Energy markets often move like this during geopolitical crises because they price future risk rather than current supply. Traders are not simply reacting to the barrels moving today. They are reacting to the possibility that those barrels may not be available tomorrow if the conflict expands.

Prices later pulled back slightly after governments intervened to stabilize supply.

That intervention was unusually large. According to Reuters and other reporting, G7 countries and members of the International Energy Agency coordinated the release of hundreds of millions of barrels from strategic petroleum reserves in an effort to calm markets and offset potential shortages.

Strategic petroleum reserves exist precisely for moments like this. They are designed to stabilize markets when geopolitical shocks threaten the normal flow of global energy supplies.

Why Fewer Missiles May Not Mean Less Risk

The decline in Iranian missile launches is real. U.S. strikes have targeted missile factories, launch sites, and storage infrastructure in an effort to reduce Iran’s ability to carry out large-scale attacks. The campaign has focused not only on destroying existing weapons but also on damaging Iran’s ability to rebuild the military equipment.

But missile barrages have never been Iran’s only strategy.

For decades Iran has relied on what military analysts describe as asymmetric warfare. Rather than confronting stronger militaries directly, Tehran built influence through a network of allied groups across the Middle East.

As those proxy forces have come under strain, Iran’s strategy may increasingly shift toward tools that do not rely on large allied armies.

Drones, maritime disruption, and attacks on energy infrastructure are powerful examples of asymmetric warfare because they are dispersed, relatively inexpensive, and difficult for even advanced militaries to defend against consistently.

And in a region where energy exports power the global economy, even limited disruption can have enormous consequences

How the Conflict May Have Begun

Understanding how the conflict started may be just as important as understanding how it unfolds.

Public reporting has focused largely on the military exchange itself, but the strategic logic behind the opening phase of the war may have been shaped by several overlapping pressures.

Israel has long viewed Iran’s leadership and nuclear program as an existential threat. For years Israeli officials have signaled that they would be willing to strike Iranian targets if they believed the threat was growing.

According to Axios, President Trump had considered striking Iranian targets during escalating tensions in January but ultimately held back after advisers warned that the United States did not yet have sufficient forces positioned in the region to manage the consequences of a broader confrontation.

That earlier hesitation highlights how quickly the strategic situation evolved. In the weeks that followed, the United States began deploying additional naval and air assets into the Middle East, creating the military posture that would later make the current campaign possible. At the time, however, it remained unclear whether the buildup was meant as a warning to Iran or as preparation for a real military intervention.

At the same time, the United States maintains extensive military infrastructure across the Middle East, including bases in countries far closer to Iran than Israel itself. Any large Israeli strike on Iranian leadership or military facilities would almost certainly trigger retaliation against those American installations.

Geography matters in this context. Many of the weapons Iran could deploy quickly after a preemptive strike, including short range missiles, drones, and other asymmetric systems, are primarily capable of targeting nearby regional assets. U.S. bases across the Gulf therefore represent some of the most accessible targets for an immediate response.

That dynamic may have created a situation in which Washington faced a difficult choice. If Israeli leaders were prepared to move forward with major strikes regardless, American officials may have concluded that becoming involved early was the safest course in order to shape the conflict and reduce the risk to U.S. personnel stationed across the region.

Another factor is the challenge of defense alone. Even the most advanced missile defense systems can be overwhelmed if large numbers of drones or missiles are launched simultaneously, forcing defenders to prioritize which targets to protect. From that perspective, relying only on defensive measures while waiting for an attack could have been far more dangerous than acting preemptively.

Sometimes described by analysts as a “decapitation strategy,” the opening phase of the conflict included targeted strikes on senior Iranian military leadership and command structures. Such strikes are intended to disrupt an adversary’s ability to coordinate retaliation in the early stages of a war.

At the same time, intelligence and policy makers may have believed that internal pressure could destabilize the Iranian regime. Iran has experienced repeated waves of domestic unrest over the past decade, including protests in 2019 and demonstrations following the death of Mahsa Amini in 2022. More recently, demonstrations earlier this year again drew international attention and were cited by some officials as evidence of growing internal pressure on the regime. Many of these movements have been driven by younger generations frustrated with economic hardship and political restrictions.

Whether those assumptions shaped the early decisions of the conflict remains uncertain.

What is clearer in hindsight is that wars often begin with expectations about how adversaries, allies, and even domestic populations will react. Those expectations do not always unfold the way planners imagine.

Energy Economics

Energy shocks rarely stay confined to energy markets.

Oil prices feed directly into inflation, because energy costs affect transportation, manufacturing, agriculture, and nearly every other sector of the economy. When fuel prices rise, the cost of producing and moving goods rises as well.

For central banks that have spent years trying to bring inflation under control, a sudden energy shock complicates economic policy.

Higher energy prices can force central banks to keep interest rates higher for longer , slowing economic growth by making borrowing more expensive for businesses and consumers.

That creates a chain reaction.

Higher oil prices can push inflation upward. Higher inflation can lead to higher interest rates. Higher interest rates can slow economic growth.

Historically, energy shocks have often played a role in triggering economic downturns. Some analysts cited by Reuters have warned that prolonged disruption in Persian Gulf shipping could create a broader global energy crisis if the flow of oil through the Strait of Hormuz becomes unstable for an extended period.

Ironically, recessions themselves often push oil prices back down by reducing demand.

American Credability

The importance of the Strait of Hormuz goes beyond energy markets. It also represents one of the most visible tests of American military credibility.

For decades the United States has acted as the primary guarantor of maritime security in the Persian Gulf. The U.S. Navy’s presence in the region, supported by an extensive network of bases across the Gulf, has long been designed to ensure that oil tankers can move safely through the narrow shipping corridor that connects the Gulf to the global economy. Maintaining that security has been a central strategic priority for Washington, and the United States has invested heavily in military infrastructure across the region in order to project power into the Strait when necessary.

If commercial shipping cannot move freely through the Strait for an extended period of time, the implications would reach far beyond energy prices. Such a disruption would raise difficult questions about whether the United States can still guarantee the security of one of the most important trade routes in the world.

That pressure helps explain why additional U.S. military assets are reportedly being moved into the region. Recent reporting has described naval reinforcements, including an amphibious assault ship (miniature aircraft carrier), being positioned in the Gulf in an effort to restore confidence in the safety of commercial shipping.

Yet the challenge is not purely conventional. Iran has real asymmetric capabilities designed specifically to threaten maritime traffic in the Strait. Naval mines, drones, small attack craft, and anti-ship missiles can all disrupt shipping even without large-scale naval battles. These tools are relatively inexpensive but can create significant uncertainty for global energy markets.

The stakes are therefore unusually high. Roughly one fifth of the world’s oil supply passes through the Strait of Hormuz. If that flow cannot be secured, the consequences would ripple through global energy markets, international shipping, and the strategic calculations of governments across the world.

In that sense the conflict is not only about Iran and Israel. It has also become a test of whether the international system that has protected global trade for decades can continue to function under pressure.

The Russia Connection

The conflict also intersects with another war taking place thousands of miles away.

Iranian-made Shahed drones have become one of the most widely used weapons in Russia’s war in Ukraine. According to reporting from the WSJ and Reuters, these relatively inexpensive drones have allowed Russia to strike Ukrainian infrastructure repeatedly while conserving more advanced missile systems.

Because of that connection, strikes on Iranian drone manufacturing facilities could have implications beyond the Middle East. Damage to those production sites may affect Russia’s ability to replenish one of the weapons it has relied on most heavily during the war.

At the same time, the economic effects of the conflict point in the opposite direction. Russia remains one of the world’s largest oil exporters, producing more than ten million barrels per day. Higher global oil prices caused by instability in the Persian Gulf tend to increase the revenue Russia earns from those exports. Russia’s economy remains heavily dependent on energy exports.

The result is an unusual dynamic. The Iran conflict may strengthen Russia economically through higher energy prices, while at the same time weakening one of its military supply chains if Iranian drone production is disrupted.

In that sense, the conflict could simultaneously help Russia financially while complicating its military position in Ukraine.

The Global Stakeholders

Another reason the conflict carries global reverberations is the number of major economies that rely on Persian Gulf energy.

Countries including China, India, Japan, and much of Europe depend heavily on oil shipments that pass through the Strait of Hormuz. For these economies, the stability of shipping lanes in the Gulf is not simply a geopolitical concern but a basic requirement for economic stability.

Recent reporting has indicated that some governments have begun exploring direct diplomatic channels with Iran to ensure the safe passage of commercial vessels through the region. Leaders in countries heavily dependent on Gulf energy have reportedly discussed maritime security and oil shipments with Iranian officials as the conflict continues.

Those developments highlight a deeper strategic issue. For decades the United States has positioned itself as the primary guarantor of security in the Persian Gulf. If major economies begin negotiating directly with Iran in order to secure energy supplies, it raises difficult questions about Washington’s ability to project power and shape events in the region during a conflict.

The optics are particularly sensitive given that American leaders have repeatedly stated that they do not want the current Iranian regime to remain in power. Yet if that same government continues to control the Strait and engage diplomatically with some of the world’s largest economies, it suggests that Tehran still retains meaningful leverage despite the military pressure it is facing.

In that sense, Iran’s leadership may view survival itself as a form of victory. In many conflicts, simply remaining in control of the state and maintaining influence over critical economic chokepoints can be enough to claim strategic success.

In the end, the outcome of the conflict may not be determined solely by battlefield victories. It may instead depend on whether the United States can secure global energy flows, whether Iran’s leadership can remain in power, and whether the international system built around free trade and maritime security continues to function under pressure.