War With Iran This Week? Will Markets Implode? Economist Answers | Steve Hanke
TL;DR
Economist Steve Hanke argues that Iran's partial Strait of Hormuz closure is merely a warning shot with limited market impact, while a full closure could spike oil to $120, though military action remains unlikely due to new Chinese radar and Iran's refusal to surrender nuclear capabilities. Despite rumors of Russia returning to dollar settlements, Hanke maintains the greenback remains unchallenged as the world's dominant reserve currency.
⛽ Iran Crisis & Oil Supply Risks 3 insights
Hormuz closure was warning shot
Iran's partial shutdown of the Strait of Hormuz was a calculated test and warning rather than a full blockade, explaining why oil markets barely reacted to the maneuver.
Full closure would spike oil to $120
A complete shutdown would send crude prices soaring to $120 per barrel and halt exports from Saudi Arabia, UAE, Kuwait, and Qatar.
Iranian economy in collapse
Iran's economy is collapsing with Hanke-measured inflation at 79.1% and a rial that has depreciated 43% year-over-year, making it the world's second-worst currency after Venezuela.
🛡️ Nuclear Talks & Military Constraints 3 insights
Israel dictates US negotiating terms
US demands are dictated by Israel, which seeks total dismantling of Iran's nuclear and ballistic missile programs—terms Tehran considers equivalent to surrender and will never accept.
Chinese radar creates military hesitation
China has installed advanced radar systems enabling Iran to potentially detect stealth bombers 600-700 kilometers away, creating significant hesitation for US military planners despite the naval armada.
Regime change would fail disastrously
Unlike the Venezuelan regime change which Hanke characterizes as an 'inside job,' a direct strike on Iran would face a well-armed, disciplined military and likely end in disaster based on historical precedents.
💵 Dollar Dominance & Russian Rumors 3 insights
Kremlin dollar memo likely fabricated
Reports of a Kremlin memo proposing a return to dollar-based energy trade are likely fabricated according to Hanke's Moscow contacts and his '95% rule' that most press coverage is wrong or irrelevant.
Moscow exchange move is meaningless
The Moscow Exchange's new dollar-ruble trading instrument is non-deliverable and settled in rubles only, representing no meaningful return to dollarization.
Dollar remains unchallenged global king
The dollar remains structurally secure as the global reserve currency with only seven international currencies existing over 2700 years, while the yuan challenges the euro but cannot replace the dollar while Chinese capital controls persist.
Bottom Line
Investors should dismiss rumors of imminent war and Russia's return to the dollar, instead recognizing that Iran will likely maintain its red lines without provoking full conflict, while the dollar's global dominance remains structurally secure.
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