Good morning. Yesterday, President Trump said the war in Iran was “very complete” — before walking that back a few hours later and warning of even more aggressive action if Iranian leaders tried to cut off the world’s energy supply. “We’ve already won in many ways, but we haven’t won enough,” he told a group of Republican lawmakers in Florida. More than a week into the conflict, its reverberations are beginning to crash onto the shores of the world economy. That’s where I’m going to start today.
The energy crisisThe war on Iran may directly involve only a few combatant nations, but it is becoming a severe economic headache for the world. Oil. The war has effectively closed the Strait of Hormuz, a narrow waterway next to Iran that serves as a superhighway for a fifth of the world’s oil. Tanker traffic there has come to a virtual standstill. The price of oil rose briefly yesterday to almost $120 per barrel. Several refineries in the area have shut down or slowed production — meaning they’re processing less oil into gasoline, diesel and jet fuel. Gasoline. Trump says the war will be a short one — he called it “a little excursion” yesterday — and has discounted the disruptions to global shipping. Rising gas prices at home, he said, are “a very small price to pay” for national security. “Only fools would think differently,” he wrote on social media. That may include Americans fueling up at the Marathon station down the street. The average price of a gallon of gas in the U.S. reached nearly $3.54 yesterday, a 19 percent increase since the war began. Markets. Still, oil prices fell and stocks rebounded in the U.S. on Monday afternoon, and in Asia and Europe overnight, after Trump told CBS News that the U.S.-Israeli war against Iran “is very complete, pretty much.” Inflation. A protracted war could cause global prices to rise about two percentage points faster than it would have otherwise, one economist told The Times. That would mean U.S. inflation could pass 4 percent this year and, potentially, lead to a recession. Kevin Hassett, the director of the National Economic Council, did not appear worried. “There’s some disruption right now,” he said on CNBC last week, “but at the White House we’ve got our eyes on the horizon.” Asia’s quandary“We’re doing this for other parts of the world, like China,” Trump said yesterday. The country has a lot to lose in the conflict, my colleagues Alexandra Stevenson and Murphy Zhao write: In Iran, China found a cheap source of oil in recent years. Across the region, it found governments keen for its know-how in renewable energy and technology. China grew reliant, like much of the rest of the world, on the Middle East’s supply of both oil and gas. The region’s importance to China became even more pronounced this past year, as the country’s trade rivalry with the United States escalated and it was unable to sell many goods to the U.S. market, once China’s biggest market. The United Arab Emirates became the fastest-growing market for Chinese cars. Demand from Saudi Arabia and its neighbors for Chinese steel doubled. China’s exports to the Middle East grew nearly twice as fast as its exports to the rest of the world in 2025. China has invested billions of dollars in the Middle East. Now munitions are falling on ports and ships there, on pipelines and desalination plants. The Strait of Hormuz — where around 90 percent of the exported crude was sailing to Asian markets — isn’t just closed to tanker traffic. Container ships laden with Chinese goods are at anchor, too. Beyond China, leaders around the world are deciding whether to tap into the reserves of oil they set aside for hard times. Leaders of the G7 countries said yesterday that they were prepared to release oil from their strategic reserves — but not just yet. Taiwan is stockpiling new oil to weather the storm. “There will absolutely not be any gas shortages or power shortages,” its minister of economic affairs said yesterday. And South Korean officials have imposed a cap on gas prices for the first time since the Asian financial crisis in 1997, though they did not say how they would compensate suppliers for their losses. Bangladesh has called for fuel rationing and closed universities to conserve electricity. And some local governments in the Philippines have shifted to four-day workweeks, responding to President Ferdinand R. Marcos Jr.’s order to reduce the use of electricity. Nearly 90 percent of the Philippines’ oil comes from the Middle East. “We are victims of a war that is not of our choosing,” Marcos said. Here’s what else is happening in that war: Iran’s new leader
A crowd gathered in Tehran yesterday to celebrate the announcement of Mojtaba Khamenei, the son of the recently killed supreme leader, Ayatollah Ali Khamenei, as his father’s successor. It was both a message of continuity and a show of open defiance toward Iran’s attackers. The younger Khamenei is known as a hard-liner, though he seldom appears in public. He is not only Iran’s new religious and political authority but also the commander in chief of its armed forces. After his appointment, Iran’s state television quickly switched from somber coverage of war and religious mourning to upbeat revolutionary anthems. Trump said yesterday that he was not happy with the choice of Khamenei, “because we think it’s going to lead to more of the same problem for the country.” But he declined to say whether the U.S. and Israel were planning to target him. More on the fighting
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