The Energy War Iran Can’t Win
Iran’s leaders know they cannot win this war outright. Their strategy, as analysts have noted, is to drive up the costs for President Donald Trump — in casualties, energy prices, and inflation — and hope he declares victory and goes home. That will not work when it comes to energy.
Tehran has disrupted critical oil and gas facilities in Qatar, Israel, and Saudi Arabia, but stopped well short of a sustained campaign to eliminate Gulf export capacity. That restraint reflects a simple reality — Iran cannot escalate against critical Gulf energy infrastructure without inviting devastating retaliation against its own. With its economy already crumbling and exports now stalled, Iran cannot survive such an outcome. Energy is not a lever Iran can pull. It is a strategic weakness that the U.S. can exploit.
No One Is More Vulnerable Than Iran
Oil exports are Iran’s lifeline. Roughly half of government revenue comes from oil and gas, much of it funding the security services and military. Even before the current conflict, inflation hovered around 50 percent annually, and the currency had sharply depreciated, bringing Iranians to the streets. Iranian exports are stalled, and a sustained loss of revenue could mean the end of the regime.
Iran has struck regional energy facilities but stopped short of destroying primary export hubs. That is intentional. Tehran understands that once energy becomes the central battlefield, its own network becomes the primary target. Its approach seems calibrated — inflict pain, raise risk premiums for insurance, signal capability, but avoid crossing the threshold that would invite attacks against its critical oil infrastructure.
China Is Susceptible to Any Gulf Conflict
China imports roughly half its crude from the Persian Gulf. Before the conflict, Iran exported an estimated 1.5-million barrels per day, almost all of it to Chinese buyers — roughly 13 percent of China’s seaborne imports. While China has been stockpiling crude, a prolonged shutdown of Iranian exports would raise costs for Chinese “teapot” refineries and tighten supply. Beijing’s muted criticism of the United States and Israel and its foreign minister’s pleas to Iran to spare regional energy export infrastructure reflect hard economics — its energy security depends in part on Iran’s ability to recover exports after the conflict.
The U.S. Is Better Prepared Than Europe — But Still Exposed
The United States is more insulated than in past Middle East conflicts. As a net energy exporter, higher oil prices can benefit U.S. producers, even as consumers feel it at the pump. U.S. liquefied natural gas (LNG) exports — over time — could become more strategically valuable if Gulf LNG flows remain constrained.
Europe faces greater exposure. Since pivoting away from Russian energy, European nations rely heavily on oil and LNG shipped from the Gulf region. Europe’s benchmark gas price jumped nearly 50 percent after Iranian drone attacks shut down the world’s largest LNG plant in Qatar. For Europe, these increases threaten to reignite inflation and stall fragile economic growth.
In Case of an Energy War, the U.S. Has Options
Washington has tools available to fight an “energy war.” Opening the Strategic Petroleum Reserve, maximizing U.S. LNG export capacity, escorting and insuring tankers through the Strait of Hormuz, and providing increased missile and drone defense for alternative energy routes that might be struck by Iran — such as Saudi Arabia’s East-West Pipeline, which bypasses Hormuz — can cushion the blow for U.S. consumers and allies. The most important lever is Iran’s own oil infrastructure. The United States can use the threat of attacks on critical Iranian energy infrastructure as a deterrent against Iranian attacks on allied infrastructure, or as a bargaining chip in any eventual negotiation or transition to a post-Islamic regime Iran.
Iran has no oil revenue coming in. Time is not on its side. Iran can disrupt and threaten, but it cannot escalate an energy conflict without accelerating its own collapse.