The Iran war and the Global Economic Churn

On 29 March, Iran launched 15 ballistic missiles at Ukraine. All of them were intercepted and none hit their intended targets. This attack was in response to Ukrainian President Zelensky’s interview to NBC News on 28 March during which he shared a summary of his daily presidential intelligence briefing which stated that Russian satellites imaged Prince Sultan Air Base in Saudi Arabia on 20 March, 23 March, and 25 March respectively. On 27 March, Iran struck the base with six ballistic missiles and 29 drones, damaging an E-3 Sentry AWACS and multiple KC-135 tankers and wounding at least 15 US troops. Zelensky told NBC that if the Russians made an image once, then they are reconnoitring. He added that if they made images a second time, it is a simulation. The third time it means that an attack is imminent.

Zelensky is far from simply functioning as a neutral observer. He is selling a counter-weapon. Ukraine’s FPV interceptors eliminate the Russian Shahed-136 kamikaze drone at a 70% kill rate. The Shahed was designed by Iran, upgraded by Russia, fired at Ukrainian cities for four years, and is now being fired at the Gulf states Zelensky just visited. He signed defence deals with Saudi Arabia, the UAE, and Qatar in 48 hours.

Under cover of the Iran war, Ukraine has been opportunistically destroying Russian energy infrastructure and all signs point towards Russia being at the end of the line.

Between 23 and 27 March, Ukrainian long-range drones struck the critical Russian crude oil ports of Primorsk and Ust-Luga three times in five days. Satellite imagery confirmed one oil-loading pier at Ust-Luga completely destroyed. Five storage tanks and three piers damaged. Reuters calculated approximately 40% of Russia’s total crude export capacity is now offline and stands damaged.

Somewhat in the shadow are the Ukrainian strikes of recent days on two key Russian refineries, namely, KirishinefteOrgsintez (KINEF) in Kirishi and YaroslavlNefteorgsintez (YANOS) in Yaroslavl. KINEF has a processing capacity of 20 million tons per year and is the second-largest refinery in Russia by volume after the Omsk refinery. KINEF near St. Petersburg produces virtually all grades of jet fuel for Russian combat aircraft, plus naval fuel for the Baltic and Northern fleets. YANOS, beyond being a strategic refinery supplying fuel to Russia's Central Federal District, Moscow, and the needs of the Russian Ministry of Defense, is Russia's leading producer of a specialized range of oils and lubricants. YANOS is Russia's leading producer of specialized military oils — for T-90M tank engines, Buk and Tor air defense hydraulics, Ka-52 helicopter gearboxes, and turboprop engines of the Tu-95MS strategic bomber.

Russia entered the 2026 Iran war as its greatest unintended beneficiary. Ukrainian drones just turned that windfall into a target. On 28 February, US and Israeli strikes hit Iran. The Strait of Hormuz closed. Oil surged from $70.71 to $115 per barrel. Russian fossil fuel export earnings jumped twenty percent above February averages to 400 million euros per day. Urals crude, which had traded at a deep discount to Brent since 2022, began commanding a premium.

This loop is now running in reverse. Russia armed Iran to keep Hormuz closed. Higher oil prices made Russian terminals the highest-value targets on earth. Ukraine struck them with 900-kilometre-range drones built at a rate of 2,000 per day; the same derivative drones that Zelensky is now selling to the Gulf Arab states for air defence. The same Ukrainian military innovation that defends Qatari desalination plants from Iranian Shahed’s is simultaneously destroying the Russian fossil fuel export infrastructure that profits from Qatar’s misery.

One drone programme now operates in two theatres of war. Some may call this a case of perfect strategic inversion. The crude oil market has not priced this intersection. Russia’s oil revenue windfall was supposed to fund the Ukrainian war through 2026. That windfall now depends on export terminals that are on fire. The Gulf crisis that was enriching Moscow has created the strategic logic for Kyiv to ensure that while Moscow can profit, it cannot tragically collect from it. The world’s two largest energy crises are thus not parallel events but one reflexive system. The Iran war created Russia’s windfall. The windfall created Ukraine’s target. The strikes on the target threaten Russia’s ability to fund the technology transfers that sustain the Iran war. Pull one thread and the entire architecture moves.

But attacking Ukraine is not the only hostile action taken by Iran.

On 29 March, Iran also launched the heaviest barrage in weeks against the UAE and other Gulf Arab states; 16 ballistic missiles and 42 drones were launched against it. The cumulative count since February 28: 414 ballistic missiles. 15 cruise missiles. 1,914 drones launched against the UAE. All engaged. All intercepted or impacted. The targets on 29 March were aluminium smelters; Alba in Bahrain, EGA Al Taweelah in Abu Dhabi, and  Qatalum in Qatar. Together these facilities produce 8 to 9 % of the world’s primary aluminium and supply over 20% of EU, US, and Japanese aluminium imports.

For almost 30 years, Dubai was Iran’s back door to the global financial system. When sanctions locked Tehran out of SWIFT, Iranian money flowed through Dubai’s free zones, currency exchanges, and shadow companies to access the dollars denied through US sanctions. Press reports indicate that the UAE is exploring the possibility of freezing billions in Iranian-held assets in these structures. These are the arteries of a parallel financial system that kept Iran liquid for decades.

Iran’s financial centre of gravity is migrating from Dubai to its “toll booth” at Larak island in the Straits of Hormuz. The financial geography of the Middle East is being redrawn. The kinetic war destroys military targets. The financial war destroys the infrastructure that kept Iran connected to dollars. The replacement, built from necessity at Larak, runs on a different currency entirely. For now, it runs on Yuan.

Further, urea prices have increased 40% from just under US$500 to over US$700 per metric tonne as reported by Swiss based Argus Data Insights. This is 60 %  higher than a year ago. And this is before the paddy planting season in South Asia. Nearly half of global urea trade and 46 percent of global urea supply originates in the Gulf. Nearly 45% of global sulphur supply, the feedstock for phosphate fertilizer, is today trapped behind the Strait of Hormuz. China has imposed export restrictions on urea and NPK blends to protect domestic supply. The only major exporters left unconstrained are Russia and Morocco.

This war’s most dangerous deluge is not oil prices or aircraft carrier deployments or damage to AWACS and KC 135 aerial refuellers. It is the unseen cord that binds an Iranian missile to a Qatari offshore gas field to an Indian fertilizer factory to Kharif paddy sowing that feeds a billion people in South Asia. Close the Strait of Hormuz, bomb the gas fields, shut the aluminium smelters, and the forthcoming paddy sowing across all of South Asia starts operating on a countdown that no military operation can reverse.

Helium is a byproduct of LNG processing. When Qatar’s Ras Laffan refinery was struck on 18 and 19 March, Qatar lost 17% of global LNG export capacity and 33% of global helium supply. But helium was not the target. It was collateral damage from striking the Ras Laffan refinery. Helium's end uses span semiconductors, MRI machines, rocket fuel pressurisation, missile leak testing, and fibre optic manufacturing. Helium cannot be synthesised at all. World high end micro-chip leader Taiwan Semiconductor Manufacturing Company’s most advanced fabs consume 500,000 cubic feet of helium per year. There is no substitute.

South Korea imported 64.7% of its helium from Qatar in 2025. Samsung's in-house recycling system, even if scaled across all lines, cuts consumption by only 18.6%. SK Hynix claims diversified supply but has not disclosed alternative volumes. DRAM chip contract prices have already surged 90 to 95 % quarter on quarter, a record, before the helium constraint fully bites. The $4 trillion global AI buildout runs on chips. The chips run on EUV machines. The EUV machines run on helium. The helium runs through one strait that is closed, from one gas field that is struck, processed by five manufacturers with full order books stretching to 2028.

The semiconductor supply chain has lost its critical process gas because the energy infrastructure was hit.

China controls 98% of gallium processing and has been tightening export controls since 2023. Gulf smelters are among the few non-Chinese sources of gallium feedstock. Gallium is a byproduct of aluminium smelting. Gallium arsenide and gallium nitride chips power 5G base stations, military radar, satellite communications, and EV power electronics. 

Iran just struck both byproduct chains in the same war. LNG facilities that produce helium. Aluminium smelters that produce gallium feedstock. Both byproducts are critical for semiconductors. Both primary industries were targeted for reasons unrelated to the byproducts. And both byproducts have no practical substitute at scale in chipmaking.

If the global economic consequences of the Iran war have turned out to be so devastating, has the war gone out of control?

Or is there more to it? Let us view the last 4 years from a single lens.

The Ukraine conflict provided the justification for US led sanctions that collapsed the supply of  Russian pipeline gas from 150 billion cubic meters to 40 billion cubic meters per anum. Then the Nord Stream pipeline was destroyed, which permanently rewired the entire European energy system. The US went from supplying 28% of Europe's LNG in 2021 to 58% by 2025, exporting a record 111 million MTs, the first country in history to break 100 million MT. Europe was transformed from a customer with options into a captive market now purchasing its survival in US$.

The fall of the Assad regime in Syria sundered the critical node connecting China’s BRI to the Mediterranean. The proposed trilateral railway linking Iran, Iraq and Syria, designed to bypass western maritime chokepoints was completely destroyed. This isolated Iran geographically and cleared the way for what was yet to come.

In January 2026, the US action in Venezuela effectively took control of the world's largest heavy crude oil reserves. The US Gulf Coast has the most advanced refining complex on earth, specifically built for heavy sour crude. The Galveston Bay Refinery (Texas): ~631,000 bpd; Port Arthur Refinery (Texas): ~626,000 bpd; The Beaumont Refinery (Texas)~609,000 bpd; The Garyville Refinery (Louisiana) ~597,000 bpd are now positioned to process hundreds of thousands of barrels of Venezuelan crude daily. The US captured a massive strategic reserve and solidified its position as the dominant exporter of refined petroleum products, an industry worth $110 billion in 2025 alone.

Venezuela and Iran were the two major oil supply channels that existed outside the dollar system. Both produce heavy crude which was sold primarily to China and evaded US financial supervision. Both are now being neutralized within 90 days of each other.

If Iran falls and a successor government is installed that the US controls or influences (the Venezuelan Delcy Rodriguez model described weeks ago) then roughly 40 to 45 million bpd of global production out of 103 million bpd is effectively under US control. OPEC becomes irrelevant because the US coalition is now the marginal producer. Now add the gas dimension and it goes beyond oil. This war is solidifying the petrodollar system as it evolves into a hybrid petro/LNG-dollar. The old system was built on Saudi crude priced in USD. The new system is built on US crude plus US gas from the Gulf Coast, with no alternative supplier of comparable scale.

Global markets confirm this new reality. DXY went from 96 to 101. Gold is down 20% from its January 2026 all-time high. Bitcoin is down 20% on the year. Brent crude is persistently above $100. European and  Asian institutions are liquidating precious metals and crypto to buy dollars because they need dollars to buy the only remaining scaled energy supply. The world is selling its gold to buy US energy in US currency. The dollar is now being weaponized through energy dependency. The structural repricing is happening regardless of how the conflict resolves.

If you are the architect of the US empire and you view the rise of China and Chinese ASI as an existential winner takes all scenario, the collateral damage in the Iran war is an acceptable cost. Whoever controls the energy corridors controls the monetary system. Whoever controls the monetary system and the energy supply simultaneously controls the computing infrastructure that determines which civilization builds ASI first. The US is in the process of seizing all three.

Whither Iran and China?