The Martlet

Bombing Iran could cause a third oil shock. While the capabilities of the U.S. military to devastate Iran’s military capacity are obvious and apparent to all, Iran’s ability to strike back has been drastically understated.

Many articles have been written recently about to what degree and for how long Iran can prevent Persian Gulf oil exports through the Straits of Hormuz. Regardless of whether Iran can or cannot close the straits, one sunken freighter could cause oil prices to rise to record highs, and make shipping through the straits uninsurable. While it’s true the U.S. Navy could likely keep the straits open, the possibility of prolonged guerrilla attacks on shipping in the form of mines, anti-shipping missiles or suicide boats would hold the price of oil at record highs for weeks.

Saudi Arabia and the Gulf States, which have been competing with Iran for regional influence, would likely be targeted as well. During Israel’s 2006 conflict with Hezbollah in Lebanon, despite a campaign of precision bombing and raids by Israeli forces, Israel was unable to prevent continued bombing by Hezbollah rockets. Iran’s conventional missile arsenal (including both the same and more advanced versions of the rockets supplied to Hezbollah) has the capacity to damage or destroy Saudi Arabia’s Ras Tanura refinery (one of the world’s largest) as well as other large refineries in other states such as Dubai and Qatar. In Iraq, Kuwait and Saudi Arabia’s oil producing regions, which have in the past prosecuted disrupted terrorist plots with alleged links to Iran, large populations of Shiite Muslims make the threat of terrorism targeting oil production particularly high.

While it may seem callous to describe this conflict in terms of Iran’s ability to disrupt the price of oil, it is Iran’s most devastating weapon and is key to America’s ability to continue a prolonged bombing campaign. The oil shocks of the 1970s wreaked havoc on the economy and led to years of low growth and high unemployment. Today the consequences would be more devastating. The U.S. is already experiencing low economic growth, and interest rates are at record lows. The national debt is skyrocketing; two rounds of quantitative easing have been undertaken to little effect, and there is zero appetite for fiscal stimulus of any kind. In other words, policymakers have few if any tools left in the toolbox to counter another recession. The Iranian leadership knows that forcing the price of oil to record highs and causing a second recession will make invasion unaffordable and have devastating consequences for the U.S. economy.

Some might argue that a short campaign is all that’s necessary. In war, the choice to end conflict is not up to a single party, no matter how disproportionate they are in military strength. If, after being bombed, Iran chooses to make the West suffer as they have, it has that power. That needs to be considered before potential presidential candidates spout off loose talk about a conflict with potentially devastating consequences for us all.