As the war in Iran enters its fourth week, attacks on the region’s energy infrastructure are disrupting the economy around the world. The price of oil reached nearly $120 a barrel, up from around $80 just a little more than a week ago. International shipping through the Strait of Hormuz is effectively closed. And the local economies of Persian Gulf countries, including the United Arab Emirates and Saudi Arabia, continue to come under direct attack.

Why does the U.S. government seem so unprepared for the closure of the Strait of Hormuz? How do insurance markets work for ships that now want to pass through the Persian Gulf? And what role is Iran’s geography playing in the war?

As the war in Iran enters its fourth week, attacks on the region’s energy infrastructure are disrupting the economy around the world. The price of oil reached nearly $120 a barrel, up from around $80 just a little more than a week ago. International shipping through the Strait of Hormuz is effectively closed. And the local economies of Persian Gulf countries, including the United Arab Emirates and Saudi Arabia, continue to come under direct attack.

Why does the U.S. government seem so unprepared for the closure of the Strait of Hormuz? How do insurance markets work for ships that now want to pass through the Persian Gulf? And what role is Iran’s geography playing in the war?

Those are just a few of the questions that came up in my recent conversation with FP economics columnist Adam Tooze on the podcast we co-host, Ones and Tooze. What follows is an excerpt, edited for length and clarity. For the full conversation, look for Ones and Tooze wherever you get your podcasts. And check out Adam’s Substack newsletter.

Cameron Abadi: The closure of the Strait of Hormuz is a scenario that has long been predicted as part of a war with Iran. So why does the U.S. government seem so taken by surprise by the economic fallout? Have the effects been even more severe than the predictions entailed? Or is this just a basic failure to reckon with what the predictions envisioned?

Adam Tooze: This war has been exposing the extraordinary web of interconnections that keep the modern economy going. And we are now going beyond the closure of the strait to........

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