The Third Gulf War is raising plumes of smoke but could this appalling war have a silver lining?

“Terrain determines the pace and method of fighting… the flat deserts of Kuwait and Iraq in the Gulf War of 1991 magnified the effect of air power, even as holding vast and heavily populated stretches of Iraq in the Second Gulf War showed the limits of air power and thus made American (ground) forces victims of geography,” Kaplan wrote, “Aircraft can bombard, but they cannot transport goods in bulk, nor exercise control on the ground.”

As they embarked on the Third Gulf War, the US and Israel appear to have assumed their vastly superior air power and military intelligence would end the war in days. Iran, in response, launched drone attacks on US allies around the region in a bid to globalize the war and force the US and Israel to relent.

Assuming some sort of strategic plan precedes war in today’s world of majoritarian populists, the US-Israeli assumption appears to have been that with the senior Iran leadership killed, an acquiescent new leader in Tehran would capitulate, as in Venezuela. The recent ‘election’ of Ayatollah Khamenei’s son as supreme leader suggests the hardline faction is still in charge.

Now a war of attrition begins as the US and Israel seek to destroy Iranian infrastructure and Tehran responds by using drones and the proximity of geography to continue attacks on other oil and gas producers to make the global economy suffer collateral damage.

US and Israeli casualties have been a fraction of those incurred by Iran. The bombing of an Iranian school and torpedoing of a naval ship off the coast of Sri Lanka each left vastly more people dead than the total casualties on the other side.

Are there any bright spots amid the horrors of war? The first is that if and when financial markets start to really tumble, the guiding principle of today’s rule-by-chaos US administration may come into play: Trump (almost) Always Chickens Out.

On the other side, Iran’s leadership, unlike Ukraine’s much more popular leadership when Russia attacked it four years ago, may come under domestic pressure to end the war. Iran’s strategy of attacking its Gulf neighbours also looks set to backfire as they might cooperate more closely with the US and push for regime change in Tehran.

Two unintended consequences appear likely. One is that India and other Asian countries will build larger buffers of oil reserves. Japan and Korea have strategic oil reserves that should allow them to manage for half a year or so. Nevertheless, the Seoul stock index plunged as the war began before the Korean government stepped in to bolster it. It is in the interest of governments everywhere to put on a business-as-usual face. Markets are volatile but following suit; Brent crude oil futures descended after a brief scare earlier this week.

So far, so relatively sanguine. Yet, even as the Saudis and others find ways to transport oil through pipelines and other routes, the longer Iran’s Hormuz stranglehold continues, oil price pressure will grow.

As Windward, a research consultancy, observed in an update this week: “The mechanisms suppressing traffic are no longer purely kinetic. The combination of vessel attacks, elevated strike risk, GPS and AIS (Automatic Identification System) interference, and the withdrawal of insurable war-risk coverage is now producing a de facto closure effect for much of the commercial market, despite the absence of a formally declared and universally enforced blockade.”

After four weeks of this, we could be in a different psychological zone altogether. Many oil tanker crews will have returned and many oil producers would have long exhausted their storage capacity. The Wall Street Journal points out, “As Yemen’s Houthis have shown with their attacks in the Red Sea, it doesn’t take much sophistication to close major international shipping lanes. With a few drones and anti-ship missiles, the Iranians could do that too for a long time.”

Since 2022, Iran’s increased capacity to make Shahed kamikaze drones, and transfer the tech to Russia, has been a critical factor in that conflict and may prolong this one, too.

A happier prospect is that this oil shock might arrest today’s complacency on climate change and push the world to decarbonize faster. As the global energy consultancy Wood Mackenzie forecast last year, demand for liquid hydrocarbons is expected to rise for another half dozen years. Natural gas demand will remain ‘resilient’ through the 2040s, the report predicts.

Two alternative paths have been laid out by our neighbours, one predictable, the other less so. In China, oil demand looks set to fall by a third in three decades thanks to rapid electric vehicle adoption, said the report: “However, India, Southeast Asia and Africa remain key drivers of oil demand growth.”

The other salutary example is Sri Lanka. In response to its economic crisis a few years ago that required an IMF bailout, the country is now reliant on renewables for 70% of its electricity, compared with less than 50% in 2021. By contrast, while renewables account for over half of India’s power generation capacity, their share of our energy consumption is a mere 15-20%.

There are many reasons to decry this appalling war, but perhaps some good will come of it. As an expert quipped, it is hard to weaponize solar and wind energy.

The author is a former Financial Times foreign correspondent.