The United States is being seen as unstable and unpredictable on the world stage, and it will have vast long-term consequences for everyday citizens.
If you study enough print or television media in America, then you inevitably become familiar with stock assumptions or phrases that are often deployed. One tried-and-true notion professed by the elite pundit class is that very few Americans pay attention to, let alone vote on, foreign policy matters. While that may be accurate in the most general sense, it tends to be an overly simplistic conclusion. It is true that most Americans don’t pay close attention to the day-in, day-out machinations of U.S. foreign policy, but many people have an innate sense of when reckless and costly foreign policy decisions are siphoning away energy and resources needed to address pressing domestic issues, even if it can’t be fully articulated and is perhaps vaguely felt. However, there are times when foreign and domestic policy merge in a way that is so glaringly obvious that it becomes impossible to ignore, and we are currently in the midst of one of those periods.
On February 28, 2026, President Donald Trump ordered a series of military strikes on Iran, labeled Operation Epic Fury. Since the decision, which was made without Constitutionally-mandated Congressional approval, there have been cascading economic effects globally and, in a tangible way, direct hits to Americans’ wallets. Aside from the obvious unconstitutionality and illegality of the decision to go to war, even if one were to look at it from a cold, hard realpolitik perspective, the choice is still reckless and short-sighted. The war with Iran has been poorly received from the outset and has reverberated stateside almost immediately, two factors that are very different from past major conflicts. One reason that Americans can be so disconnected from their own government’s foreign policy is that, often, blowback from reckless decisions can take years to take hold, leaving the public unclear on the root cause. But this conflict has been markedly different so far.
From February 20 to March 20 of this year, the price of Brent crude oil futures rose from $71 per barrel to about $110 per barrel, a 54% increase. Brent, a type of oil mostly from the North Sea, is considered the international benchmark for oil prices, with traders regularly buying and selling futures in financial markets. Oil prices are set to continue to rise with no realistic off-ramp to end the war in sight. Meanwhile, President Trump continues to bring into question market manipulation, as he has falsely declared on multiple occasions that his administration is engaged in diplomatic talks with Iran, leading to the price of oil futures to fall dramatically. The most immediate effect domestically has been a marked increase in gas prices, as gas prices usually rise with Brent prices because Brent is relatively easy to turn into gasoline.
According to the American Automobile Association, since February 20, the average price of a gallon of regular gas in the U.S. has risen by more than a dollar, from $2.93 to $3.98. That is a 36% increase, the single largest one-month rise in 30 years. The biggest reason for the increase is Iran’s current ability to control and halt shipping in the Strait of Hormuz, a narrow waterway along the country’s southern coast that connects the Persian Gulf with larger waterways. The strait is considered the most important shipping lane in the world, as one-fifth of global oil passes through it. Iran’s blockade of the strait was triggered by the initial attack by the U.S., as Iran proceeded to bomb numerous American military bases in the region in addition to attacking Gulf state countries like Dubai, Bahrain, the United Arab Emirates and Qatar, all allies of the U.S. As a result, the infrastructure that prevented Iran from blockading the strait was largely destroyed, Iran seized control of the waterway, and now holds an enormous point of leverage over the global and American domestic economy. Iran has been booby-trapping the strait with mines, tightly restricting the flow of traffic through the waterway.
According to a March 13 Wall Street Journal report, top military officials warned President Trump of the strong possibility of the closure of the strait in the event of an attack on Iran, but those warnings were summarily ignored and contingency plans were not developed. Since the 1979 Iranian Revolution, every American president has been presented with the option of engaging Iran militarily, and all refused due to the possibility of cascading negative consequences from the closure of the Strait of Hormuz, in addition to the massive human toll. The Trump administration clearly received a lot more than they bargained for in Iran’s response, as U.S. officials have already indicated that simply reopening the strait could be a condition for ending the conflict. It’s not a good sign for the long-term viability of the conflict from the American side if government officials are already conceding merely to establish conditions that existed before the conflict began. It is an indirect confession from the U.S. government that the decision to start the conflict was an enormous mistake. They’re now stuck in a mode of trying to fix problems that they created by attacking in the first place.
The vessels that pass through the Strait of Hormuz not only carry oil, but fertilizer for food, aluminum for key infrastructure, helium for semiconductors and various petrochemicals key for pharmaceuticals and manufacturing. The closure is creating a chain reaction, as the Kiel Institute for the World Economy, a leading European research center specializing in global trade and macroeconomic modeling, detailed in a recent report. “The initial disruption reduces the supply of oil and gas, driving up energy prices. These higher costs feed directly into chemical production, particularly in gas-intensive sectors such as fertilizers. As fertilizer prices rise, agricultural production becomes more expensive, pushing up food prices. Each stage amplifies the previous one. What begins as a shock in one sector propagates through the entire economic system, producing effects that are larger and more persistent than standard models would predict,” the report states. “In many countries, the crisis operates through multiple channels simultaneously. Farmers face higher input costs due to rising fertilizer prices. At the same time, consumers confront higher food prices in local markets. Governments, already under fiscal pressure, struggle to subsidize essentials or stabilize supply. The result is a convergence of pressures that can quickly translate into social and political strain. The study’s modeling captures the economic dimension of this process, but the implications extend far beyond economics.”
The report further details, “From a policy perspective, the implications are significant. The crisis challenges the traditional separation between energy security and food security. In a system where energy inputs are embedded in agricultural production, disruptions in one domain inevitably affect the other. Strategic reserves, long focused on oil, may need to be reconsidered to include fertilizers and other critical inputs. International coordination mechanisms, particularly those aimed at supporting vulnerable economies, become essential in managing such crises. The closure of the Strait of Hormuz offers a clear window into the evolving nature of global risk. What appears at first as a localized geopolitical event quickly unfolds into a systemic disruption, affecting energy, industry and food simultaneously. The key insight is not simply that the world depends on Hormuz, but that this dependence is embedded across multiple layers of economic activity.”
In addition to the short-term economic damage that is being incurred by entering this conflict, there is also the long-term damage being done to America’s global economic standing. As a recent report by Deutsche Bank details, the longest-lasting legacy of the Iran War could be its destruction of the dollar as the dominant global-reserve currency. The report outlines, “The dollar’s dominance in cross-border trade is arguably built on the petrodollar: globally traded oil is priced and invoiced in USD. This arrangement can be traced to a deal struck in 1974, where Saudi Arabia agreed to price oil in USD and invest surpluses in USD assets in exchange for U.S. security guarantees. Because oil is a core input to global manufacturing and transport, there is a natural incentive for global value chains to dollarize, and global surpluses to accumulate in USD. From 1945-1971, the dollar was “backed” by gold — namely, global central banks were able to exchange $35 for 1 oz at the Fed. This was the foundation of the international monetary system known as Bretton Woods. In 1971, the U.S. broke the dollar’s link to gold. Since then, the dollar has been in a purely fiat regime — one that is backed by the sovereign creditworthiness of the U.S. and willingness of the world to save in its debt.”
The Deutsche Bank findings continue, “Enduring support for the fiat dollar arguably comes from the dominance of the dollar in the pricing of cross-border trade. Globally traded goods and services are largely priced in USD, with payments exchanged over U.S.-controlled payment rails. Global surpluses are thus built in USD and mostly invested back into U.S. assets. Corporations are incentivized to save and borrow in the currency of their payables and receivables, banking systems are dollarized, and central banks save in dollars to act as effective lenders of last resort. A crucial anchor to this system is the petrodollar: the fact that most globally traded oil is priced and invoiced in dollars. Because oil is so central to global manufacturing processes — from petrochemicals, fertilizers and transport, to running factories and offices — companies are incentivized to price end products in dollars as a natural currency hedge to a key cost.”
The report concludes, “The current conflict has arguably shaken some core foundations of the petrodollar regime: the security-for-oil-pricing arrangement. U.S. military assets and bases in the Gulf have come under attack in the war. Oil infrastructure in the Gulf has also been hit. And the U.S.’s ability to provide maritime security to ensure the global flow of oil has been challenged with the closure of Hormuz. The U.S. security umbrella has been fundamentally tested. The legacy of this conflict for the dollar could be the ways in which it tests the foundations of the petrodollar regime. In the long-run, if the world uses less oil, the Gulf draws more deeply on existing dollar savings, if the Gulf moves closer to Asia in its trade and investment relationships, and eventually prices less oil in dollars — there could be significant downstream effects to the dollar’s usage in global trade and savings.”
The decision to start a wide-ranging war with Iran was long off-limits for a reason. It throws into question the very foundation that America has built its economic power on in the first place. This country built a great deal of economic might on guaranteeing a combination of security, predictability and diplomacy, all of which have been completely thrown out the window in recent years. The United States is being seen as unstable and unpredictable on the world stage, and it will have vast long-term consequences for everyday citizens. As a country, we’re entering a brand-new world, one with a lot less safety and security than the last.
