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Iran’s asymmetrical approach to war threatens global systems 

Iran appears to be moving away from simple harassment of shipping and toward a more selective, coercive model of maritime control. Iranian officials have said that “non-hostile” vessels may be allowed to pass, though what that means in practice remains unclear. Even without a full closure, the uncertainty alone is proving highly disruptive. Reports of selective access, transit fees, force majeure declarations in LNG contracts, and tighter flows of refined fuels and fertilizer are already producing wider consequences, including energy emergencies, industrial shortages, rising input costs, and growing food-security risks in import-dependent countries.

That is why the conflict is increasingly taking the form of an international systems crisis. Disruption to Hormuz, LNG exports, refining, aviation, and fertilizer supply chains is becoming as strategically important as developments on the battlefield.

Negotiation messages from Washington and Tehran, meanwhile, offer little reliable guidance on de-escalation. Diplomacy is increasingly being used as an instrument of war rather than as a clear route to settlement.

On the diplomatic front, Iran’s reported negotiating position appears notably maximalist. The demands attributed to Tehran include an end to the Israeli campaign against Hezbollah, the lifting of sanctions, the removal of American bases from the region, reparations, and a framework that would allow Iran to collect fees from ships transiting Hormuz. President Donald Trump has referred publicly to Iranian proposals without fully describing them, while also speaking of a possible delay before strikes on major Iranian energy infrastructure. But recent precedent has made many regional observers wary of taking public statements on negotiations, immunity, or delays at face value. In this conflict, official messaging increasingly seems to serve as part of a coercive strategy and a form of psychological warfare.

At the military level, the conflict continues across multiple theaters. Iran-linked attacks have reportedly continued against U.S. facilities in Iraq and against Gulf infrastructure, while Israel has expanded operations in southern Lebanon and continued strikes on Hezbollah-linked assets. Israel itself remains under intermittent missile, rocket, and drone attack. The Gulf aviation network has partially recovered from earlier disruption, but major hubs remain vulnerable, as shown by the latest strike on Kuwait International Airport.

The U.S. is also increasing its force posture. The Pentagon has reportedly directed the command element of the 82nd Airborne Division, along with an infantry brigade of several thousand troops, to deploy to the Middle East. That deployment adds to the sense that Washington is preparing for a more dangerous and protracted phase of the confrontation, even as it continues to send mixed public messages about negotiations.

In the Gulf, the picture remains volatile. Qatar has reported no Iranian attacks since 19 March and has begun reopening government offices, banks, and schools, suggesting a degree of localized stabilization. Elsewhere, however, the vulnerability of infrastructure remains plain. Large explosions were reported at Kuwait International Airport after fuel-storage depots were reportedly hit by Iranian drones this morning. Businesses are also reacting to the deterioration in the security environment: Deutsche Bank has vacated its offices and is considering relocated its operations center outside the UAE while its staff, like most other multinational corporations, are working from home.

The economic fallout is broadening well beyond oil. QatarEnergy has reportedly declared force majeure on LNG contracts with Italy, Belgium, South Korea, and China. South Korea has launched a nationwide energy-saving campaign. Taiwan, heavily dependent on LNG for electricity generation, is reportedly moving closer to some form of rationing. In the Philippines, the government has declared a national energy emergency amid severe oil shortages and a sharp rise in prices. Australia is also feeling the strain, with hundreds of service stations in its two largest states reportedly running out of gasoline or diesel.

The fertilizer shock is becoming particularly serious. UN data suggest that some of the countries most exposed to disruption in fertilizer ingredients passing through Hormuz are Sudan, Sri Lanka, Australia, Tanzania, Somalia, Pakistan, Thailand, Kenya, New Zealand, and Mozambique. For poorer and import-dependent countries, this is not simply a shipping problem; it is a potential food-security problem. Higher fertilizer prices and reduced availability could raise farm costs, reduce yields, and add to broader food inflation.

That pressure has now been amplified by Russia’s decision to halt ammonium nitrate exports until 21 April. The significance of that move lies not only in the loss of AN itself, but also in the fact that AN, urea, ammonia, and other nitrogen products form an interconnected market. When one major stream disappears, demand spills into already tight alternatives. Brazil and India are particularly exposed because they are the world’s two largest urea importers and were already under pressure from Hormuz-related disruption. Brazil appears more immediately fragile because of its heavy dependence on imported fertilizer. India has stronger buffers, including larger inventories and a more active state response, but its scramble for replacement cargoes could tighten global markets further.

Lebanon and Iraq, meanwhile, are becoming more serious operational theaters in their own right.

Israel’s defense minister said the Israeli army would occupy southern Lebanon up to the Litani River, while additional Israeli strikes have targeted Hezbollah-linked assets, including fuel infrastructure. Lebanon’s government, meanwhile, has told the new Iranian ambassador that he has until Sunday to leave the country, bringing threat from Hezbollah and its main ally, Amal.

In Iraq, the government has condemned both U.S. strikes on the Popular Mobilization Forces militias and Iranian strikes on the Peshmerga, while also granting militias the right to respond in self-defense. Iranian-backed militias have struck U.S. facilities near Baghdad International Airport, and a drone also hit an area in Erbil known for foreign businesses and expatriate residences.

The broader pattern is that the conflict is widening not because of one dramatic rupture, but because several forms of pressure are accumulating at once. Shipping uncertainty, energy disruption, fertilizer shortages, aviation risk, and widening secondary fronts are no longer hypothetical possibilities. They are already shaping the operational environment.

The most likely scenario now appears to be a prolonged regional war of attrition combined with coercive diplomacy and partial maritime control, but in a harsher and more economically damaging form than before. The best case, a managed pause without a real settlement, still exists, but it has become less likely. The worst case, a wider infrastructure war spanning energy, water, aviation, food systems, and digital networks, has moved closer to realization because several of its early components are already visible.

CitiBank has made clear that its assessment of the impact of the war on the global economy is dire: 

"We posit that the ongoing loss of energy supply to global economy is so large (larger than the shocks of the 1970s as a share of oil supply) that it simply must be solved, either militarily or diplomatically, and that through various potential channels this occurs by mid-late April. Unfortunately, this is only likely after things have become substantially worse than they are today (this can occur merely with the passing of time), necessitating military action to open the Strait of Hormuz, drive leadership/regime change, and/or drive diplomatic shifts from all sides (including from China). In our baseline scenario (50% indicative probability) we see Brent rallying to at least $120/bbl over the coming month, and in our bull case scenario (30% indicative probability) we see it moving up to $150/bbl over the coming months. Our bull case scenario for energy (and stagflation case for global growth) is that neither military action nor diplomacy solves or mitigates the issues and disruptions to Strait of Hormuz flows and/or that damage to regional energy infrastructure prolongs the situation into the middle of  the year or beyond.”

The central question is no longer whether the conflict is widening. It already has. The real question is whether that widening can still be contained before cumulative disruption to shipping, energy, aviation, and food systems hardens into a broader regional and international breakdown.

Given that the U.S. and Iran are essentially fighting different wars against each other, with the U.S. fighting a conventional conflict measured in battle damage assessments, while Iran is focused on spreading economic pain globally, we are in a race to see which approach causes so much damage as to effectively either bring the two sides to genuine negotiations, or brings about capitulation in some form by one side or the other. We don’t see either happening quickly.

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