Iran shows us the way – drone and missile swarms reduce expensive airplanes, ships and tanks to laughing stock. People who occupy given geography become the deciders, not George W. Bush. The oil and gas, needed long in the future, are becoming more expensive with no return. Food is becoming more expensive. Housing is becoming more expensive. Living alone is becoming a luxury, like it was all the time in human history and should always be. Families are becoming a necessity, as it always was and should always be. There is no free lunch anymore. You cannot burn things that formed through tens millions of years almost for free at will.
Based on reports regarding the escalating conflict in the Middle East as of March 2026, the strategy of employing low-cost drone and missile swarms has created a significant shift in modern warfare, creating a high-cost dilemma for conventional military powers.
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The Shift in Military Power Dynamics
Asymmetric Warfare: Iranian-backed forces are utilizing inexpensive drones (e.g., Shahed-136, estimated at 20 000 – 30 000 dollars per unit) to overwhelm advanced, expensive defense systems like the Patriot or THAAD, which can cost millions of dollars per interceptor.
Decimating Cost Advantages: This "swarm" tactic creates a "laughing stock" scenario where high-end assets are forced to exhaust expensive, finite munitions against low-cost, mass-produced threats.
Geography as Defense: The proximity of the Strait of Hormuz to Iranian territory allows them to dominate the area using land-based, mobile launchers, making it difficult for foreign powers to secure the waterway despite naval superiority.
The End of the "Cheap Ride"
Energy and Shipping Disruption: Attacks on vessels and regional infrastructure have led to a severe reduction in traffic through the Strait of Hormuz, forcing shipping companies to consider rerouting, which increases costs.
Rising Costs of Living: The disruption of oil, gas, and Liquefied Natural Gas (LNG) shipments is driving up global energy prices, which in turn spikes the cost of transportation, fertilizer, and consequently, food.
The "No Free Lunch" Reality: The economic strain caused by the conflict highlights the diminishing returns of trying to sustain low-cost, high-consumption lifestyles based on cheap, easily transported fossil fuels.
Geopolitical and Social Shifts
Deciders of Geography: The conflict suggests that local forces occupying key geographical bottlenecks can dictate terms to external superpowers.
Shift in Priorities: The rising cost of living is placing increased pressure on households, shifting focus toward local, more sustainable, and family-based resilience rather than reliance on global, fragile supply chains.
Let us dream for the last time:
“Strategists long viewed the closure of the Strait of Hormuz as a low-probability event — much like that of the United States’ launching a war against Iran. Since combat ensued, we’ve seen energy prices climb and stock markets vacillate as nations such as India deal with cooking gas shortages, Americans reacquaint themselves with $4-a-gallon gasoline and the Federal Reserve wrestles with the prospect of resilient inflation.
Iran’s ability to effectively shutter oil’s most critical waterway has exposed a huge supply chain vulnerability, one that will have to be remedied by diversification in the production of oil and gas as well as the means and methods to transport them.
Notably, this is the third major supply chain disruption induced by global events in the last six years: first Covid, then the events in Ukraine in 2022 and now the war in the Middle East. Although each was different, they all carried significant implications for energy, food and other goods, highlighting how intensely interconnected markets are.
Markets always find a way to deal with constraints — usually by settling at a much different, as in higher, price. In the near term, a full reopening of the strait is the simplest and most direct way to restore market balance. The Iranians, though, aren’t very interested in playing at the moment.
The strangling of the strait by a single government actor is forcing a huge rethink about the global energy distribution network. Right now, that means an “everything but the kitchen sink” approach.
We have seen a combination of tools being used or considered — releasing strategic oil stocks, reflagging vessels or allowing vessels to pass by agreement with Iran, government-backed insurance, naval escorts and military threats. We are also seeing expanded use of existing alternative routes that bypass the strait, such as the East-West pipeline across the Arabian Peninsula to the Red Sea.
That combination won’t be enough to break Iran’s grip on 20 percent of the world’s oil. The East-West pipeline is a starting point for how the future may unfold. It is a 750-mile system that allows oil and oil products to be moved across the Arabian Peninsula from the Eastern Province, where it can feed refineries and industrial activity, or be loaded for export at the Red Sea Port of Yanbu. Built in the early 1980s with an initial design capacity of about five million barrels per day — although it was reportedly flexed to seven million barrels in 2019 — the pipeline provides insurance against an inability to export through the strait.
The lesson here is that insurance in the form of an expanded supply chain is rapidly shaping future development. Once the Iran conflict is behind us, there has to be a careful examination of investments needed to make supply chains more diversified and resilient, including the development of export alternatives to the strait.
For the Saudis, this could include an expansion at the Port of Yanbu to support greater output and loading, as well as revisiting now-closed routes such as the Trans-Arabian Pipeline corridor. Iraq has begun exporting oil north via the Kirkuk-Ceyhan pipeline route; the United Arab Emirates has used the Habshan-Fujairah pipeline route since Baghdad and the Kurdistan Regional Government reached an agreement.
Not one of these is a perfect substitute for running tankers through the Strait of Hormuz, but Iran’s strategic advantage and the looming global oil shortages now make the expansion of these routes an urgent matter of political will, investment and commercial viability.
In practice, this means expanding production in frontier plays in Guyana and Suriname (located east of Venezuela), Argentina and Brazil. While these South American countries have historically endured cycles of nationalization and privatization, which carry their own risks for investors, they are less exposed to the type of geopolitical calamity we are witnessing in the Persian Gulf. Moreover, the nature of the production — highly complex offshore rigs or short-cycle shale — renders it less exposed to government takeover.
Other regions will also come into sharper focus, including Russia, the Arctic, Africa and North America.
Russia remains one of the world’s largest holders of oil and gas resources, but Western oil companies are unlikely to want Vladimir Putin as a partner. That’s not true of China, one of the world’s largest oil consumers, which will most likely expand its relationship with Russia to guarantee access to supply. Whoever the buyer, keeping oil flowing matters in a global market.
The Arctic remains a difficult region for oil exploration due to its remoteness and high production costs, not to mention environmental challenges. Nevertheless, the Trump administration has plans to license drilling in the Arctic National Wildlife Refuge. Do not be surprised if we hear announcements of new interests emerging.
Africa is also home to tremendous oil and gas resources, as well as minerals and metals. Here, there is interest in expanding supply chain depth beyond oil and gas. On that continent, armed conflict remains an albatross for greater investment, but the costs of the conflicts in Ukraine and Iran, as well as a Western desire to diversify minerals and metals supply chains away from China, are significant counterweights. One way or another, we are going to need Africa.
In North America, producing more oil and gas — “drill, baby, drill,” to use President Trump’s mantra — should be easier relative to other regions, thanks to our capabilities in shale and offshore production, relatively stable legal and regulatory institutions, and access to infrastructure and services that support development.
Of course, oil and gas companies will weigh their investment options against the landscape of all energy opportunities, including nuclear and renewables. Pronouncements of a shift to alternative energy will abound, and new sources could indeed play a role going forward. But make no mistake: Global economic activity relies on our current hydrocarbon-based energy infrastructure. It will go back to work when the current disruption is behind us, just as it has in the past. This is a simple cost-benefit issue.
We clearly need to deepen and diversify energy supply chains, even as the Middle East remains central to trade, just as it has for centuries. Crude oil is the deepest, most fungible commodity market on the planet, and natural gas is hot on its heels. So, a disruption anywhere is felt everywhere. We should be prepared for more of them.
Kenneth Medlock III is the director of Rice University’s Center for Energy Studies.” [1]
1. How to Straighten Out the Hormuz Bottleneck: Guest Essay. Medlock, Kenneth, III. New York Times (Online) New York Times Company. Mar 27, 2026.
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