That the war in Iran qualifies as a major combat operation rather than a limited one is already clear. In the campaign’s first week, the U.S. and Israeli militaries have attacked some 2,000 targets in Iran. The Iranian military has retaliated by firing of hundreds of missiles and drones against neighboring countries and Israel. The fallout from the war has already extended across the entire Middle East region, if not the rest of the world. But the Trump administration’s precise goals for the war remain ambiguous.

Why are analysts already talking possible munition shortages faced by the United States and its allies? Who are the winners, and losers, from the increase in fossil fuel prices? And what are the broader economic effects of war in the Persian Gulf region?

That the war in Iran qualifies as a major combat operation rather than a limited one is already clear. In the campaign’s first week, the U.S. and Israeli militaries have attacked some 2,000 targets in Iran. The Iranian military has retaliated by firing of hundreds of missiles and drones against neighboring countries and Israel. The fallout from the war has already extended across the entire Middle East region, if not the rest of the world. But the Trump administration’s precise goals for the war remain ambiguous.

Why are analysts already talking possible munition shortages faced by the United States and its allies? Who are the winners, and losers, from the increase in fossil fuel prices? And what are the broader economic effects of war in the Persian Gulf region?

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: There’s already talk that the U.S. military and its allies are experiencing a scarcity of munitions, specifically the interceptors that can shoot down the sorts of missiles that Iran is firing. Despite the demand for these interceptors, producers seem to have trouble ramping up. Is there a mismanagement of the relevant supply chains? Or is this problem endemic to modern warfare?

Adam Tooze: Israel and Iran are waging war, by my estimation, at the longest distance two countries have ever fought with no land engagement. So then the crucial rate-limiting factor is the ammunition. And one particular type of ammunition that you need here are drones, and those are relatively cheap. It’s the missiles and the interceptors that are really the rate-limiting variable. And there is a kind of historic constant here in modern warfare. I think the first time a shell crisis really intrudes into the narrative of modern history is in the late summer and early autumn of 1914, when the Europeans deadlocked on the Western Front and started running up these large ammunition tallies for bombardment and counter-bombardment and ran out of shells. And it had an impact on the conduct of the war in 1914.

And it exposes a kind of inherent and perverse logic in military production. On the one hand, the rational thing to do is, before you start a war, to have all of the ammunition you need for the war. So you pile it all up. But on the other hand, if you think about that, it’s a grotesquely inefficient use of resource to pile up ammunition unless you know specifically what you’re going to use it for. And furthermore, it’s subject to obsolescence. If you buy a bunch of shells from 20 or 30 years ago, they’re not going to be of the newest type. And we’ve seen in Ukraine what was required to refurbish them. So it’s also reasonable not to buy more ammunition than you need. And if you go down that route, which of course is the money-saving route, then your supply chain for actually producing the stuff you need when it gets real is very, very tight. So then when you do ramp up to war........

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