After one month of hostilities and no exit plan, the lethal costs of the US-Israel joint war against Iran are global. How will the crisis reverberate against the backdrop of elevated US stakes, the region and global prospects?
THE crisis has spread across the region and beyond. It has caused a severe disruption to global oil flows, threatening 20 percent of global consumption — some 20 million barrels per day — that typically passes through Hormuz. Over 94 percent of normal traffic through Hormuz collapsed already in mid-March.
In one of the largest energy shocks since the 1970s, oil has soared by more than 50 percent, up to $110–$120, with supply down by 11 mb/d (million barrels per day). The global system has suffered a highly adverse impact with airspace closures, rerouted shipping and data infrastructure hits.
In Iran alone, some 1,900–3,500 people have been killed, with up to 17,000–20,000 wounded. The US-Israel strikes have caused widespread damage, with more than 90,000 civilian installations hit, including schools, hospitals and residential buildings.
Over 3.2 million people are internally displaced in Iran, primarily fleeing major urban centers. In Lebanon, that figure is over 1–1.2 million; that’s every fifth or sixth Lebanese.
A two-month war scenario
At the end of March, the White House assessed that a mission to pry open Hormuz would push the conflict beyond its timeline of 4 to 6 weeks. As a result, President Trump reportedly told his aides that he’s willing to end the war without reopening the chokepoint. Let’s presume the report is not fake news, and the war will continue toward the end of April.
From the military perspective, the US continues its air and missile war, even if the naval campaign to reopen Hormuz may or may not intensify. Limited ground and Marine deployments may or may not occur. If Americans engage, Houthis in Yemen and Iraqi militias join in the conflict.
Despite Trump’s repeated “mission accomplished” claims, there is no decisive victory. Gradual attrition prevails as Iran’s infrastructure continues to be degraded.
War fatigue rises in Israel, where anti-government demonstrations escalate. Iranian missile barrages have depleted Israel’s stockpile of high-end interceptors, forcing a shift toward rationing and relying on less capable systems.
In the US, the Pentagon continues to downplay the costly toll of Iranian missiles, even though by late March many of the 13 military bases in the region used by US troops were ”all but uninhabitable.”
Oil prices stabilize around $120–$150, but remain volatile. The supply disruption is persistent.
Spillovers changing the region
After one month of hostilities, every country in the primary battlefield — Iran, Lebanon, Syria, Iraq and Israel — is likely to suffer an adverse GDP impact of up to minus 6 to minus 30 percent.
In most Gulf states, that impact is already at minus 3 to minus 12 percent, which threatens to defer the ambitious modernization projects in the region for years.
In the proximate Middle East, most economies, including Egypt, Turkey and Jordan, are taking hits of minus 2 to minus 6 percent. When such negative shocks come after two years of regional stabilization by Israel with US support, it leaves these countries vulnerable.
By the end of April, the regional impact is likely to amount to minus 4 percent to minus 7 percent. Add another month, and it will climb to minus 6 percent to minus 12 percent. Gulf economies alone could see a plunge of minus 5 percent to minus 15 percent in severe scenarios.
Some are indirectly affected via an inflation shock (Morocco, Tunisia). Big Gulf actors like Saudi Arabia, UAE and Qatar benefit from price gains but suffer from disruption.
Several economies — Iraq, Jordan, Gulf states — cope with high stress due to fiscal strains and security pressures.
Only low-exposure gas exporters like Algeria benefit in the short term, but no regional state is immune to rising fiscal pressures and geopolitical risks.
If hostilities prove extended, Lebanon and Yemen will teeter at the edge of state or infrastructure breakdown. The same goes for Iran, as long as the White House mistakes PM Netanyahu’s ambitions with US national security.
US strategic priorities
The Trump White House is burning almost $1 billion daily in the war. Critics argue that the first month of spending totals close to $37 billion. The administration is seeking $200 billion in supplemental funding from Congress.
What about the next four weeks?
In terms of its strategic options, the US seeks to keep Hormuz partially open. It could release some of its stockpile of crude oil to mitigate economic shocks. It can push non-MENA (Middle East and North Africa) supply (US shale, Atlantic basin). In the short term, it can tolerate high prices to avoid deeper entanglement.
Regarding their respective postures in the Middle East, the US is likely to persist in what it calls controlled escalation. US priority is — or at least should be — not to get trapped in MENA.
What if regional war lingers
If diplomacy fails, regional war emerges as an alternative scenario, as hostilities escalate from Iran and Lebanon to Gulf, Iraq, Yemen, even beyond. A sustained closure of Hormuz would amplify the supply shock undermining global prospects.
The number of deaths doubles; regional displacement exceeds 5 million. Brent oil climbs to $120–$150, even $150-$200 in the worst scenarios. If infrastructure is damaged, far greater losses loom ahead.
Some analysts declare it’s the 1970s déjà vu all over again. They are wrong. Since the global economy is today more integrated, the negative ramifications will reverberate worldwide, not just regionally. Even in the most benign scenario, the world economy will pay a hefty price, through the prolonged high-cost equilibrium.
The Iran crisis has exposed the region’s structural contradiction. On the one hand, the Gulf is an energy superpower (40 percent global gas reserves). But it is also a highly fragile, chokepoint-dependent system. In this delicate equilibrium, Hormuz holds systemic lever because it controls both oil exports (Gulf states, Iraq, Iran) and liquefied natural gas (Qatar).
The lesson is simple but harsh: With energy disruption, everyone loses, as the region morphs from an energy exporter hub to a geopolitical shock epicenter.
Dr. Dan Steinbock is an internationally recognized strategist of the multipolar world and the founder of Difference Group. He has served at the India, China and America Institute (USA), Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more, see https://www.differencegroup.net He is also the author of The Obliteration Doctrine (2025) and The Fall of Israel (2024).
This is the abbreviated version of the original “The Unwarranted War against Iran: The US-China Stakes” published by China-US Focus on April 5, 2026.
