The United States, which entered this war in expectation of a short, sharp win along the Venezuela model, is now preparing for deeper involvement in a conflict it does not fully control, without the allies it typically relies on, against an adversary that is not behaving as expected, in a global environment that is already absorbing economic shock.
Prem Panicker continues his must read daily blog on the Gulf War.
Going through my posts from earlier this week, I realised that in a fast-moving conflict like this one, the trap is to treat every new development as a turning point.
In fact, most aren't -- they are either noise, repetition, or escalation along lines that are already clearly drawn.
Over the past 48 hours, though, something seems to have structurally shifted.
Until very recently, the global economic story of this war was about disruption.
Ships not moving, insurance costs spiking, the Strait of Hormuz intermittently closing and reopening. That phase seems to be over.
Key Points
- Gulf refining damage has caused a structural oil supply shock, reducing global capacity by an estimated 11 million barrels daily.
- Markets are reacting sharply, with rising oil prices, falling equities, and increasing bond yields signalling renewed inflation fears.
- The US and Israel are operating largely without allied support, straining military logistics and long-term sustainability of operations.
- Iran is shifting strategy from disruption to controlled access in Hormuz, creating leverage through selective flow of energy supplies.
- India faces rising risks from energy shortages and fertiliser disruptions, which could impact inflation, agriculture, and economic stability.
Hormuz Control Changes the War
European officials now say (external link) that 30-40 percent of Gulf refining capacity has been damaged or destroyed, creating a shortfall of roughly 11 million barrels a day.
That is a serious structural hit to the system that processes and moves energy, and it implies that even if the Strait were to reopen tomorrow, there may not be enough product to move through it.
Markets are reflecting this reality. Oil prices are rising sharply even as equity markets are sliding and bond yields climbing on renewed fears of inflation (external link).
In other words, the market is pricing in actual, quantifiable, physical loss. (As I write this, the Sensex is down (external link) by over 1000 points, reflecting global uncertainty).
Oil Shock Hits Global Markets
At the same time, the political and military track is telling a different story.
Publicly, the United States continues to oscillate.
Trump's unilateral five-day ceasefire (or at least, pause in strikes against civilian infrastructure) comes to an end Friday evening US time -- but the US president has already extended it by another ten days. [Trump's extension (external link)]
The spin is that 'talks are progressing', though I'm damned if I can figure out just who is talking to who.
All of Iran's major leaders have publicly denied there are any negotiations; the usual US interlocutors (Steve Witkoff, Jared Kushner, Marco Rubio, J D Vance) are all in the US.
Ignore the spin, and the probability is that this latest extension was triggered by the market sell-off (external link).
And Pakistan's foreign minister says his country, which earlier this week was positioned as the potential host and facilitator of talks, is for now merely ferrying messages back and forth.
Even the diplomatic track reflects this. Mediators report that Washington does not expect Iran to accept its terms.
Iran, for its part, has already rejected them.
Beneath this roiled surface, there are significant military moves.
Additional troops are moving into the region.
Units trained for seizure and holding operations are being positioned within range of Iranian territory.
Plans around Kharg Island, long discussed as a possibility, now appear to be moving into the realm of operational readiness.
The conclusion is unavoidable: Diplomacy is no longer shaping decisions, or even influencing them.
The second structural shift is quieter, but just as consequential.
This is a war the United States and Israel are fighting alone. Not a day has passed without Trump railing (external link) at NATO allies.
Yesterday, Marco Rubio joined in (external link): NATO says this is not our war, he said, (external link) well, Ukraine is not the US's war either.
US Fighting Without Allies
For all Trump's snark about NATO's lack of capabilities, those countries are important as they can contribute critical capabilities: mine-clearing, escort operations, intelligence, logistics.
And this matters because the American military was not designed to fight wars like this in isolation.
Its operating model assumes allied depth: Shared logistics, distributed risk, replenishment from multiple industrial bases. None of that exists here. [Gandalv on X (external link)]
Every interceptor fired, every munition expended, every deployment extended is being drawn from a largely American pool. There is no feeder service in operation. [The Erosion of American Military Capacity, Substack (external link)]
Israel, meanwhile, is showing signs of strain of its own.
The IDF chief of staff Eyal Zamir has warned (external link) of severe manpower shortages after over 900 days of conflict (if you go back to its invasion of Gaza), even raising the prospect of internal collapse if the burden on reservists continues without relief.
Taken together, this is a war being fought without the system that was meant to sustain it.
And then there is the strategic mismatch.
The United States appears to be operating on a familiar assumption: That sufficient military pressure, potentially including a limited ground operation, can force Iran to concede.
But there is little evidence that Iran shares that logic.
Iran Strategy Defies US Pressure
If anything, the opposite is emerging.
Iranian officials and mediators alike suggest that Tehran is unlikely to accept terms that it had refused before the war began.
Iran's military degradation has not translated into political flexibility.
Instead, Iran appears to be shifting the battlefield away from where the United States expects resolution to occur.
The most visible example of this is in the Strait of Hormuz.
What began as a threat to close the strait has evolved into something more complex: a form of controlled access. It is no longer about shipping being blocked -- Iran is now filtering, managing, selectively permitting what will be allowed and what will not.
And for all the talk in the media about ships belonging to friendly countries being allowed through, that is a mere trickle, as the Strait of Hormuz tracker shows (external link).
This represents a clear shift from disruption to administration, and that is a very different kind of leverage that employs both carrot and stick, where earlier it was all stick.
There is no shortage of noise around this war: Talk of internal frictions (external link) within the White House; public complaints about NATO's reluctance to share the burden; competing narratives about negotiations that may or may not be happening.
All of these are interesting rabbitholes for the media, but most of it is peripheral to the actual war.
There is a point in every conflict when the original theory of victory begins to separate from the reality on the ground. This war appears to be approaching that point.
The United States, which entered this war in expectation of a short, sharp win along the Venezuela model, is now preparing for deeper involvement in a conflict it does not fully control, without the allies it typically relies on, against an adversary that is not behaving as expected, in a global environment that is already absorbing economic shock.
Taken together, these suggest that the war is no longer unfolding along the lines that any of its participants initially imagined.
And when that happens, outcomes tend to be determined less by intention, more by unanticipated constraints. And that is the shift that is now clearly underway.
Developments
The military-industrial pivot: Israel has formally shifted its air campaign away from regime destabilisation and toward systematic destruction of Iran's military-industrial base: weapons production sites, naval cruise-missile facilities, submarine research centres et al.
The Wall Street Journal reports that Israeli officials, convinced Trump may end the war soon, are racing to inflict lasting damage before the window closes.
The Financial Times adds that IDF intelligence had privately doubted the regime-change objective from the start, even as Netanyahu continued to assert it publicly.
Both pieces together tell the same story: The gap between stated war aim and operational reality has now become official. [Wall Street Journal, via Livemint (external link); Financial Times (external link)]
Troops fighting from hotels: Iran has so severely damaged US military bases across the region that thousands of American personnel have been dispersed to hotels and makeshift sites, or what one official called alternative' locations.
The New York Times reports that much of the land-based military is effectively fighting the war remotely, with the exception of flight crews.
Iranian Revolutionary Guards are actively hunting dispersed troops, and urging civilians via Telegram to report American locations.
Six service members were killed in a strike on a Kuwait tactical operations centre.
A collision between two KC-135 refuelling tankers this month killed six more.
The picture that emerges is of a military operating well outside the conditions it was designed for. [New York Times (external link)]
The Geneva moment: A striking detail has emerged about the days before the war began.
Former national security adviser Jake Sullivan says that in late February, Iranian negotiators put a proposal on the table in Geneva that went a significant way toward resolving the nuclear question, and the US side, led by Steve Witkoff and Jared Kushner, did not understand what was being offered and moved past it.
A senior Trump official repeatedly misidentified the IAEA and concluded of the Iranian document: 'It all smelled fishy.'
That view was relayed to Trump. The next night, he launched the strikes. The Trump administration disputes Sullivan's account. [New York Times (external link)]
The Qatar shock: Iran's strike on the Ras Laffan LNG facility in Qatar has removed 17 percent of the country's export capacity and triggered force majeure declarations with customers in Italy, Belgium, South Korea and China.
Repairs are estimated to take three to five years.
The IEA head described the combined energy disruption as equivalent to two oil crises and one gas crisis simultaneously.
Qatar, which had long maintained cautious relations with Iran, has expelled two senior Iranian diplomats.
The strike has also disrupted global helium supply -- critical for semiconductor manufacturing and medical imaging -- and raised the prospect of a food crisis, as fertiliser shipments from the Gulf have effectively ceased with spring planting season approaching in the northern hemisphere. [The Atlantic (external link)]
India Faces Energy, Fertiliser Risk
The Ripple
The economic consequences of this war are beginning to arrive in India in ways that go beyond oil prices.
India imports roughly 85 percent of its crude, a significant share of which transits or originates in the Gulf.
With refining capacity damaged and Hormuz functioning as a selective filter rather than an open channel, the price and availability of that crude is now a logistics question.
Indian refiners are already scrambling for alternative sources; the premium on non-Gulf crude is rising.
The fertiliser disruption is the less-noticed threat.
India is one of the world's largest importers of urea and other fertilizer inputs. Qatar is a key supplier.
With Gulf shipments halted and spring planting underway, the agricultural sector faces input shortages at precisely the wrong moment.
This will not show up in headline inflation immediately, but it will eventually, in kharif sowing decisions, in input costs, in the food price index later in the year.
The broader strategic question for India is one it has been quietly managing since the war began: How to maintain its historically balanced relationship with Iran -- a relationship built on Chabahar, energy imports and regional connectivity -- while not alienating Washington or the Gulf states on whom it depends for remittances, energy and investment.
That balance is becoming harder to hold. The war is forcing choices that New Delhi would prefer not to have to make, or at the least to defer. [See M Rajshekhar's blog for running round-up (external link)]
Reading List:
Today's essential long read is from Foreign Affairs.
Narges Bajoghli, an anthropologist at Johns Hopkins SAIS, argues that Iran has been preparing for exactly this war for four decades, ever since the Iran-Iraq conflict (external link) (1980-1988) forced it to develop an asymmetric doctrine.
Bajoghli's central frame: Iran's strategy is 'survive and exhaust' and, on that metric, it is winning.
The piece is particularly sharp on the decapitation paradox: The commanders replacing those killed are younger, more aggressive, and believe they have already beaten the Americans once, in Iraq.
A postwar Iran led by this generation will be more revisionist, not more moderate. [Foreign Affairs (external link)]
The Economist's cover piece reaches a similar conclusion through a different route.
The hardliners are more firmly in control than before the bombing began. Domestic opposition is 'deathly quiet'.
Iran's highly enriched uranium stockpile remains untouched.
The closing binary lands perfectly: Trump's options are either escalate or talk, and neither is clean. [The Economist (external link)]
The most forensically useful piece on the ground operation scenarios comes from Thomas Wright.
In the Atlantic, Wright details why each of the three most likely options -- the Isfahan uranium raid, the seizure of Kharg Island, and coastal deployments to suppress Hormuz attacks -- carries risk the administration appears to be underestimating.
The Isfahan detail alone is worth the read: The uranium cannot be reliably destroyed by explosives, emits hazardous gas if cylinders are pierced, and may be dispersed across multiple sites.
The operation, if attempted, would be among the most complex raids in US military history. [The Atlantic (external link)]
Read all together, the Wall Street Journal piece reports Israel's pivot from regime-change to military-industrial attrition, and the Financial Times reveals that IDF military intelligence had privately considered regime change improbable from the outset.
Between them they document the distance between what was said publicly and what was believed internally.
In an interview by David French, General Stanley McChrystal identifies three recurring seductions in American military thinking: covert action, surgical Special Operations raids, and air power.
Each promises a clean outcome, but none delivers on its promise.
The money quote is this: 'If you like this war, enjoy this first part. Everything after this will be harder.' (The interview dates to March 20, but reads more relevant today as the US plans Special Ops raids. [New York Times (external link)]
The longest piece in today's reading list, and worth every minute of your time, is by Bret Devereaux.
He is a military historian, not a policy analyst, and it shows in the best way.
Where most commentary has been tracking developments, Devereaux steps back to work through the whole problem from first principles: why the gamble was always unlikely to pay off, why the Strait of Hormuz was always the trap, and why the United States now finds itself in a situation where every exit is costly.
Devereaux is particularly sharp on two things: Why the escort-the-tankers solution is far harder than it sounds (Iran needs to damage just one ship a week to keep insurance costs prohibitive), and why the uranium at Isfahan cannot simply be bombed into irrelevance.
His conclusion: It is entirely possible for both sides to lose a war simultaneously, and that mutual ruin is precisely where this is heading.
The piece runs to 7,500 words, so you might want to adjust your schedule. [A Collection of Unmitigated Pedantry, Substack (external link)]
Susan Glasser frames the NATO rupture not as a consequence of the Iran war but as something Trump has been working toward for a decade, with the war now providing the occasion.
The detail that lifts the piece: the Trump administration has temporarily lifted sanctions on Russian oil to ease the supply crisis created by its own attack on Iran.
Trump's war is now, in effect, funding Putin's war. [The New Yorker (external link)]
The Economist carefully assembles numbers underlining the human cost of the war, in a series of charts and maps.
More than 22 million people across the Middle East live within one km of a reported strike. Nearly 15 million of them are Iranian.
The conflict now spans 15 countries. Up to 3.2 million Iranians may have been internally displaced.
All told, it is a sobering document on a day when the analytical pieces risk making this war feel abstract. [The Economist (external link)]
In passing...
We have, all of us, been reading this war in terms of troop movements, oil prices, and the statements of those who are prosecuting this war.
But maybe there is another, even more important lens.
In Khasab, a small Omani town overlooking the Strait of Hormuz, boys are still skipping stones into the water at sunset.
And just beyond the horizon, a war that dominates global headlines unfolds within sight, but not within reach. [New York Times (external link)]
It is easy, from a distance, to reduce a conflict like this to deployments, deadlines, and strategic objectives.
But wars are also lived environments, places where uncertainty seeps into daily life long before it resolves at the level of states.
That gap between how wars are analysed and how they are experienced is where much of their real cost lies.
And it is a cost that will outlast the war itself, that will ramify through generations to come, and one that cannot be settled in any ledger.
- EARLIER BLOGS: The New Fog of War
- Has US Repeated Its Iraq Mistake?
- Hormuz Crisis Threatens Global Economy
- Iran War Exposes Washington's Strategic Chaos
- Iran Plays Hardball With India's Hormuz Requests
- Trump Is Caught Between Two Bad Options
- Iran Rewrites Rules of War
- Why Did Israel Kill Ali Larijani?
- Trump's War Has Crossed Energy Rubicon. And There's No Turning Back
- War Exposes Cracks in US-Israel Alliance
- Gulf War: Hormuz Is Becoming The Central Battlefield
- Will Trump's 5 Day Pause End The War On Friday?
- Trump's Pause Gives Iran NOTHING!
- Will Trump Send Troops To Iran By The Weekend?
Photographs curated by Manisha Kotian/Rediff
Feature Presentation: Ashish Narsale/Rediff
