“War is God’s way of teaching geography to Americans,” Mark Twain allegedly once quipped. The current war in Iran has a particularly painful lesson in store.

Until this spring, the average American worker was probably unaware that the Strait of Hormuz was one of the world’s busiest commercial waterways, or that this gateway to the Persian Gulf was the most vulnerable energy chokepoint on the planet.

That’s changing fast. Since the start of the war, average US gas prices have shot up over 51%. All signs indicate that this is only the start of an almighty inflationary storm. American workers can literally no longer afford to ignore what’s happening in the Persian Gulf.

A global inflation bomb

“The world has never experienced disruption to energy supply of such magnitude,” warned Fatih Birol, head of the International Energy Agency (IEA) in early April. The crisis is “more serious than the ones in 1973, 1979, and 2022 together.”

“We’re going to find out together because, honestly, there’s no playbook,” said Eric Nuttall, head of Canada’s largest energy fund. “I wish I could go to my bookshelf now and take off the ‘2026: Biggest Supply Shock in History’ playbook. We’re trying to figure it out.”

Iran’s closure of the Strait of Hormuz on day one of Trump’s war of aggression was easily predictable. Trump assumed it wouldn’t last long, betting on quick regime change. Epic mistake.

The world is now on track to lose over a billion barrels of oil. One-fifth of the world’s energy normally passes through the waterway, including 25% of the total seaborne oil supply, and 20% of liquified natural gas. It’s also the source of around a third of the international fertilizer market.

That’s not all. One-third of the world’s helium production—critical for manufacturing advanced microchips—and 30% of the world’s raw aluminum exports also come from the Persian Gulf through the strait. So do other critical minerals like sulfuric acid—the most commonly used chemical on Earth, necessary for countless industrial processes. Since half of the world’s seaborne sulfur normally passes through Hormuz, prices have spiked by as much as 80% in some regions. This will have cascading effects on the cost of everything from manufacturing food, pharmaceuticals, steel, batteries, paper, computer chips, textiles, and toothpaste, to municipal water treatment plants for processing drinking water and waste.

Energy use closely correlates with economic activity for the simple reason that all production, storage, transit, and shipment relies on fuel. The spike in products like diesel, gasoline, jet fuel, and the bunker fuel that powers all maritime shipping will drive up the cost of moving anything and anyone, anywhere in the world. In short, it’s a matter of time before every aspect of the modern economy—and virtually every physical commodity—will be impacted.

European manufacturers of metals and chemicals have already applied a 30% fuel surcharge. In the US, shipping packages through UPS is now subject to an 8% fuel surcharge, while Amazon announced a 3.5% “fuel and logistics” surcharge.

The sudden rise in jet fuel prices helped tip the already struggling Spirit airlines into bankruptcy. Others are likely to follow. Out of the world’s 20 largest airlines, 19 are canceling flights deemed “economically unviable” in light of the new fuel costs. The IEA predicts that European jet fuel stocks will be depleted by June.

Self-deception of the markets

The practical conclusion from the unprecedented supply chain dislocation outlined above is clear: A wave of inflation is on the horizon that will make the historic price hikes under Joe Biden seem quaint by comparison. After the cost-of-living issue tanked the Democrats in the 2024 election, affordability headlines have continued to plague Trump 2.0, driving down his ratings to record lows. The pain is about to get a lot worse.

You’d think this impending catastrophe would lead to panic on the markets. Yet stocks rallied to record highs in April. With the AI tech bubble in full swing, it seems Wall Street traders have no time to worry about Hormuz.

A recent cover of The Economist depicted the paradox with an oil tanker floating blissfully through the clouds in a rainbow-lit sky. The caption reads, “Still in La La land: Why oil prices are not yet high enough.”

As the S&P 500 closed in on another record peak toward the end of April, CNBC’s “Closing Bell” market analysis show invited Adam Parker, head of investment firm Trivariate, to weigh in.

“Economists keep telling us if oil prices stay higher, inflation’s going to be higher and it’s going to be harder for the Fed to cut,” says the host, “Are they wrong when it comes to that, too?”

The investor, emitting a high-pitched tone of light-hearted nonchalance: “Eh. I don’t know. I mean, I just think investors might be complacent about oil. Almost everyone I meet with—we just did a big dinner with a bunch of risk officers last week—most people are not embedding in their estimates that oil stays elevated for a really long time.”

The host, relieved to hear that there’s nothing to worry about, then cracks an ear-to-ear grin as he passes onto the “juicy question of the hour”—let’s talk about how the tech stocks are doing!

“Sleepwalking into a recession”

For now, Wall Street is oblivious. Traders may be shrugging off reality, but workers aren’t smiling as they watch the gas pump siphon off a larger share of their paychecks week after week.

By early May, average gas prices surpassed $7 a gallon in some California counties, even topping $8 for a gallon of regular unleaded at some gas stations in downtown Los Angeles. Around the same time, diesel prices hit an all-time high in at least a dozen states.

Meanwhile, the more sober analysts in the energy sector are sounding the alarm.

“It blows my mind just the level of apathy in the broader markets,” said the above-mentioned head of Canada’s largest energy firm, speaking to the Oil and Gas Global Network. “We’re down 14 million barrels per day, and global inventories are going to reach record lows in the next month to month-and-a-half. If you believe that inventories have any bearing on the market, if you think supply and demand matter at all, there’s no way to get around this massive, gargantuan hole left by Hormuz.”

But reality is about to come crashing down, he warns, as gas stations run dry, and strategic reserves are depleted. “We’re using up that safety buffer and I think reality just has to smack people in the face for them to recognize the gravity of the situation.”

The more far-sighted strategists of finance capital are also striking a much grimmer tone as they assess the record-breaking draw-down of global energy reserves. “The markets are too optimistic … oil prices are not coming back down,” said market analyst and stockbroker Peter Schiff.

Investors are showing “extremely misplaced euphoria … I think we’re sleepwalking into potentially a pretty big recession,” said Amrita Sen, head of Energy Aspects, a market data firm.

Shock-absorbers running low

Analysts sounding the alarm point out that the real impact of the disruption in Hormuz has been delayed by temporary factors that have cushioned the blow—and are quickly running out.

All the seaborne oil that had left the Gulf prior to the closure of the strait arrived at its destination by the end of April—that was the first buffer. Next is the stock of oil stored on land in commercial and government reserves, and that’s going fast.

“The world has lost its job,” wrote the top researcher at Barclays bank, yet it’s continued living comfortably off its nest egg of crude oil reserves—which will soon be spent. “The next few weeks are the runway that the world economy has left, before demand destruction really kicks in … after one of the strongest April months on record for equities, we worry that markets have decided that the energy shock simply doesn’t matter anymore. If so, we disagree—this is a crisis delayed, but not yet averted.” That was in early May.

The same week, JPMorgan warned that the “illusion of plenty” could soon shatter, and that a “non-linear spike in oil prices” could result from depleting strategic petroleum reserves (SPR) to the point of “operational stress levels.”

It’s useful to think of the total energy inventory in terms of a circulatory system that requires a minimum volume to function. An average human adult contains five liters of blood. You can lose a small amount—around half a liter—without much more than mild symptoms. But you can’t lose one-fifth of the blood in circulation without going into shock—and you certainly can’t “draw down your reserves” to even lower levels, even if you technically have more blood in the system.

It’s the same with global petroleum reserves. Only a small fraction of the total supply can be used up without running into operational constraints. As JPMorgan explained, “Pipelines lose pressure flexibility, terminals cannot load efficiently, refiners struggle to secure the right grades on time, and traders bid aggressively for nearby supply. The system does not fail because oil disappears, it fails because the circulation network no longer has enough working volume.”

How many barrels does the U.S. have left?

The strategic reserves are being drawn down at record rates, reaching their lowest level since the early 1980s. From a maximum capacity of 714 million barrels, and after hovering between 600–700 million for most of the 21st century, it’s down to around 380 million barrels as of mid-May. That’s enough to get through around two weeks at current consumption rates.

Normally, this supply shock would produce a momentous price hike, far beyond the 50% increase in crude oil prices seen so far. Systematic market manipulation—gigantic selloffs carefully timed within minutes of press releases, presidential “Truth social” posts, and official statements right before the opening or closing bell—have dampened the oil spike. On top of that, Trump has toyed with desperate measures like tapping the oil reserves on military bases or lifting federal gas taxes, to bring down the price at the pump.

The problem is that each of these moves only postpones the eventual price explosion—and guarantees that it will be all the more severe when it finally arrives. Energy market insiders are fretting that the price should be allowed to rise, because “demand destruction” is needed to slow down the bleeding.

Instead, artificially suppressed prices mean US energy consumption has remained relatively steady. The result is that the reserves are running out even faster. The market is careening toward a cliff, and the brakes aren’t working.

At root, capitalist chaos to blame

Contrary to the drunken delusions on Wall Street, an agreement with Iran will not restore normality overnight. Shipping lines are in disarray and will take months to resume their intricate global choreography. And it will take years for all the damaged energy facilities in the Gulf States to be repaired and rebuilt. This includes South Pars, the world’s largest gas field, and Ras Laffan, the world’s largest liquid natural gas facility. Each one will take up to five years to rebuild.

We can only speculate how long it will take for Trump to beat a retreat from his failed war, reach some sort of agreement with Iran, and restore the flow of traffic through Hormuz. Regardless, some catastrophic consequences are already locked in for the months and years ahead. Inevitably, this will deepen the misery and desperation suffered by the working class of every country, including in the US.

The disruption of global agriculture makes a famine all but inevitable in 2027. The World Food Programme estimates at least 45 million more people will face starvation in the poorest countries. Food prices will spike in the US, too, driven by the costs of diesel and fertilizer. The resulting crop shortages and costlier livestock feed will raise the price of produce, meat, and dairy. The full effects are expected to take around six months to make their way to grocery store shelves.

Just as the 2020 pandemic exposed the vulnerability of global supply chains and the market’s inability to cope with a sudden disruption on such a vast scale, the Iran war is repeating the lesson. Capitalist markets are inherently chaotic, short-termist, and inflexible in the face of major shocks of this size—which call for strategic decision-making and marshalling large-scale resources.

Trump has pressured American oil giants to “drill baby drill,” in order to bring prices down. He encouraged them to do the same just days after abducting Nicolás Maduro and seizing Venezuela’s oil. It didn’t work. Capitalists only invest when they’re sure they’ll recoup the money they lay out—and that requires confidence in the future. US energy monopolies have no plans to boost production or drill new wells just because of the war’s oil shock. Even Venezuela is still seen as a risky investment, considering the uncertain future of its semi-colony status.

Not that oil capitalists are missing out on a lucrative windfall from the jump in global energy costs. Given the severe supply shock in Asia and Europe, US refineries have switched over to exporting the most profitable petroleum products—especially jet fuel—at the expense of gasoline for the domestic market.

In other words, even with US gas prices about to go through the roof, an almighty inflationary explosion to follow, and the potential to trigger a broader economic collapse, oil companies are sending more product overseas than ever before.

Is this a short-sighted policy that risks hastening a severe depression? Yes. Was the entire crisis triggered by a short-sighted and ill-conceived war on Trump’s part? Yes. But capitalism doesn’t operate according to any planning or rational decision-making toward any long-term result. And declining US imperialism is likewise running low on foresight.

Like a destructive force of nature, the next stage of the crisis of capitalism is looming. Revolutionary shocks to mass consciousness will not be far behind.