Iran, Conflict, and Economic Aftershocks

Steven A. Cook, the Eni Enrico Mattei senior fellow for Middle East and Africa studies at CFR, provides an update on the Iran war, including the latest developments on the ground, regional dynamics shaping the trajectory of the war, and implications for U.S. foreign policy. Amy Myers Jaffe, director of the energy, climate justice, and sustainability lab at New York University’s School of Professional Studies, discusses the energy market implications of the Iran war, both globally and in the United States.

TRANSCRIPT

FASKIANOS: (Off mic)—State and Local Officials Webinar Program. I am Irina Faskianos, vice president for the National Program and Outreach here at CFR. 

CFR is an independent, nonpartisan, national membership organization, think tank, educator, and publisher focused on U.S. foreign policy. CFR generates policy-relevant ideas and analysis, convenes experts and policymakers, and is the publisher of Foreign Affairs magazine. As always, CFR takes no institutional positions on matters of policy. 

Through our State and Local Officials Initiative, CFR serves as a resource on international issues affecting the priorities and agendas of state and local official governments by providing background and analysis on a wide range of topics. So thank you all for being with us today. We’re delighted to have more than 400 participants from forty-nine U.S. states and territories registered for today’s conversation. The webinar is on the record and the video and transcript will be posted on our website after the fact at CFR.org. 

So with that let me join—please join me in welcoming Steven Cook and Amy Myers Jaffe to talk about conflict in the Middle East and its effect on global energy markets. We shared their bios with you, so I’ll just give you a few highlights. 

Steven Cook is the Eni Enrico Mattei senior fellow for Middle East and Africa studies at CFR, specializing in Arab and Turkish politics as well as U.S.-Middle East policy. He is the author of several books, including The End of Ambition: America’s Past, Present, and Future in the Middle East, False Dawn: Protest, Democracy, and Violence in the New Middle East, and The Struggle for Egypt, from Nasser to Tahrir Square, which won the 2012 Gold Medal from the Washington Institute for Near East Policy. And he’s a columnist at Foreign Policy magazine and a frequent commentator on radio and television.  

Amy Myers Jaffe is a research professor and director of the Energy, Climate Justice, and Sustainability Lab at the New York University’s School of Professional Studies, where she is the leading expert on global energy policy, sustainability, and geopolitical risk. She is the author of several books, including her most recent, Energy’s Digital Future. And she too is a frequent media commentator on television and in print, including New York Times, Financial Times, CNN, the Wall Street Journal. And she’s a regular contributor to the podcast The Energy Gang. So thank you both for being with us. We appreciate it.  

Steven, let’s start with you. If you can give us an overview of where the war in Iran stands today, and the regional dynamics that we’re seeing, and how they will shape potential outcomes. 

COOK: Well, thanks very much, Irina. It’s a great pleasure to be with you. And, Amy, it’s great pleasure to be with you as well. As well as, from what I understand, about 400 people from forty-nine states. I haven’t been to forty-nine states. I’m ticking them off, but hopefully I’ll get to all fifty sometime in the near future.  

Anyway, you know, a discussion of where we stand on in the war with Iran. We stand essentially where we’ve been since April 7, when the ceasefire was announced. There is a stalemate in the Gulf. Ten days after the ceasefire I had the opportunity to be on a television program, Financial News Network television program, in which I was asked when would the Strait of Hormuz be open? And I said, oh, this is going to be a matter of months, at least two months, and likely more. In which the host sort of blanched. And there was this just lack of expect—there was an expectation that somehow the strait would be open, and a lack of appreciation for the real political dynamics that are happening between the United States and Iran.  

First, the Iranians. They believe that they have time on their hands. That’s because they understand the American political clock. They understand that there are economic consequences of keeping the Strait of Hormuz bottled up. And they are—and their effort to maintain some semblance of control over the strait that works to their advantage. They also hold America’s Gulf partners hostage. The president had threatened once again this week to hit Iran if they didn’t demonstrate more flexibility at the negotiating table, only to call off those threats. Now, we don’t know whether those threats were real, given the pattern of the president over the course of this war. But if the story is to be believed, America’s three most prominent Gulf partners—Qatar, Saudi Arabia, and the United Arab Emirates—all asked the president not to resume military operations against Iran because they feared the consequences of Iran’s retaliation, which would likely come on their energy infrastructure and infrastructure more generally.  

At the same time that the Iranians believe that they have time on their side, the president clearly believes that he has time on his side. He believes that the Iranian economy is near collapse and that the economic pain that we are feeling in the United States—and elsewhere in the world, which it is greater in other parts of the world. In Egypt, for example, people have been asked to work from home. Major government projects that are energy-intensive have been canceled or delayed as a result of this. I mean, you can go on and on and on with stories of countries in terrible shape because the Strait of Hormuz is closed. We have about $5.50 of gasoline, where I live in the D.C. suburbs. Painful, but not devastating. And the president’s position is that whatever pain is being inflicted will be short-lived and worth the ultimate collapse of the Iranian regime. It seems clear that he prefers the blockade of the Iranian blockade to undertaking military strikes. Although I should point out that he threatened to use force once again—once again yesterday.  

Meanwhile, throughout all of this ceasefire, the parties still continue to fire at each other. The Emirates is taking daily drone strikes, mostly from Iraqi militias that are aligned with the Iranians. The Saudis are routinely firing—routinely shooting down drones. So this is, despite a ceasefire, a relatively active war zone. And when the president has sought to undertake Operation Project Freedom, which was a sort of escort of vessels through a preferred route through the Strait of Hormuz, the Iranians responded with fire. They attacked an energy facility in Fujairah, which is part of the United Arab Emirates, and shot at American warships, who fired back. But this is—this is a kind of a ceasefire, but not a ceasefire all at the same time. Meanwhile, it seems as if diplomacy is at a standstill. Although, I should point out, that today the president has said that negotiations are coming—between Iran and the United States are coming to some sort of successful conclusion. It feels like Groundhog Day, that famous movie, because we’ve heard this before and things tend to change as the hours go—as the hours go by.  

At the same time, there’s another front to this war. And that is in Lebanon. Despite negotiations between the Lebanese government and the Israeli government, Hezbollah, which fired on Israel shortly after the Iran war began, maintains that it will not take part in any kind of negotiation and will continue to fire on Israel. There is a structural problem to getting to a better place in Lebanon, where a million people have been displaced, where the Israelis once again occupy about seven miles of territory in southern Lebanon. They have pulled back from bombing Beirut, but have continued to bomb southern Lebanon, and have continued to say that Beirut and its environs are well within part of its target set, but in deference to the president, have not done it, and in deference to the negotiations with the Lebanese government. But there is a structural problem for those negotiations to move forward, separate from the fact that Hezbollah is not a party to those negotiations. 

It’s that the Israelis can’t or won’t withdraw from Lebanese territory until Hezbollah stops firing on Israel and is disarmed. The Lebanese government, for its own political survival, can’t disarm or take any action against Hezbollah, assuming that they have the power to do so, until Israel withdraws from Lebanese territory. (Laughs.) It is a classic chicken and egg problem, in which neither side is willing to move. In the Israeli case they’re not willing to move because their northern communities are under constant fire. And in Lebanon, I think the Lebanese government would like to disarm Hezbollah but is unable to do so, even with all of the American taxpayer money that has gone to support the Lebanese armed forces. 

So there is overall a sense of foreboding that the possibility of, you know, high-tempo combat can return to both the Lebanese front as well as the Iran front. Like I said, I think the president would prefer not to, but he essentially has put the United States in a situation where either there is capitulation—either of the United States or Iran—or escalation. The continuing effort to kick the can down the road will diminish in time, and the president is going to have to take some action. So it’ll either have to be at the negotiating table or there will have to be a resumption of conflict. The problem is that the Iranians are unwilling to be more flexible after taking a beating from both American and Israeli forces; and they’ve been unwilling to compromise at the negotiating table, maintaining their maximal demands. Therefore, we are at a stalemate with Iran and on the Israel-Lebanon front. 

I’ll stop there and leave it to Amy to pick up on the energy issues. Thanks. 

FASKIANOS: Yes. So, thank you, Steven. 

Amy, over to you to talk about the closing or the restricted access of the Strait of Hormuz, what this has done to the energy markets, and what ripple effects it will have—a protracted conflict with Iran will have on the energy sector and, frankly, other consumer goods that we’re seeing. 

JAFFE: So I think the first step—because, I mean, everybody’s heard these big numbers of how much oil and gas passes through the strait—to kind of break that down a little bit, because the numbers sound really frightening and it is the most historic large disruption of energy, you know, since World War II. But I think we have to bracket that a little bit in the following way. 

Oil, when it leaves the Strait of Hormuz back in the day, you know, you’re talking about a thirty-day journey for it to go to Asia, and maybe a fifty-day journey for oil to come to the United States, or forty-five days to Europe. So, if you think about that timeline, the oil that exited the market—the strait before the war is—was arriving now, basically. And so we’re kind of like, we hadn’t—you know, up until a couple weeks ago we hadn’t really felt the actual full brunt of the disruption. And then, on top of that, you have some ameliorating factors. Saudi Arabia years ago built a pipeline across the country, and so you have a certain amount of oil that they are able to move out through the Red Sea. And then Steven mentioned that UAE has a big port at Fujairah that is outside the Strait of Hormuz, and so they also have a pipeline that brings a large amount of their oil out to be exported in Fujairah. So it’s not zero, and the market was really super-oversupplied before the war began, right? 

What we’re going to see now is the rubber’s going to meet the road if we don’t actually see the strait open up, because now we’re getting to the point where we’re starting to—we’re going to start to miss that oil. We’re getting to be Memorial Day, which is sort of a high-demand period here in the United States. But even globally, you know, May/June is a higher-demand period than March and April, which tends to be sort of a slow time of year for oil, and refineries sort of are in maintenance, and so forth. So we’re kind of, like, moving through the backlog. We had a big strategic release of strategic stocks here in the United States and from other countries. And so it sounds crazy to say, but we haven’t really seen the full brunt of the disruption yet. 

And you know, the market—as Steven mentioned, the market’s been sort of sanguine because they believe that what I’m saying is correct, and so therefore by the time we’d get to that moment when we would feel the brunt of the disruption there was sort of this belief that the strait would be open again, and therefore, you know, we would have released strategic stocks and everything would be not great but markets would come back down. So the problem is the longer it lasts the bigger the disruption will start to feel. 

And then we have to ask these sort of basic questions, which is a little bit hard to answer because it’s not just—if it was just crude oil, I would tell you maybe the market could absorb that over time. But the problem is several oil refineries in the Middle East were bombed, and so we’ve lost a certain amount of refined product. We can’t—Qatar was a major supplier of helium to Asia. Many of you don’t think that that means anything, but actually helium is absolutely necessary for the production of semiconductor chips and for many medical applications. And so, again, you know, everybody’s thinking it would open back up and people had inventories, but—and many of you have probably read, and I know we have some members from the farm communities, and you know, CF Industries is a major producer of urea in the United States. And our imports of urea are not as high as maybe some other countries that are very dependent on Middle East urea, but in 2025 about 10 percent of the U.S. urea market came from Qatar. And so there has been some impacts on fertilizer prices in the United States. And you know, again, the longer we go on with this problem, the bigger a problem it becomes over time. 

So we’re at a hundred-dollar oil today, even though we haven’t felt the full brunt of the supply disruption. And I think the question’s going to be—we’re kind of like in a race. 

Let me make a couple of points here on things that everybody cares about. 

Actually, only 2 percent of world gasoline supply came from inside the Strait of Hormuz, so there isn’t actually a disruption in gasoline. It’s just that the price of the crude oil that you would use to make gasoline has gone up, and those two commodities tend to move in lockstep. That is why gasoline prices are up. 

Same thing with jet fuel. You know, it was a higher percentage of jet fuel and diesel fuel came from these Middle East refineries, but again there’s a lot of capacity to make that jet fuel in other places by increasing refinery runs. You know, for example, there’s a giant new refinery in Nigeria that’s been supplying a market. 

So I don’t think that the question is so much on the product side at this moment. And one of the questions—big questions that comes forward is, are people going to change their habit? You know, in the United States I used to tell people rule of thumb, you know, when gasoline prices go above $4 to $4.50 people don’t drive as much. But Steven mentioned in Egypt that people went to remote work, so that’s happened in many different countries. And when you take away—in the United States, for example, commuting used to be something like 15 or 16 percent of all the oil we used. So if you start to see people adjust their patterns—and today we’re not in as bad a situation as we used to be in the ’70s because in some cities in the United States you can take a ridesharing electric vehicle that doesn’t even have a driver, right? You can use e-commerce instead of driving to the store. You can use e-commerce to get food. So I’m not saying everyone’s in that position. There are a lot of Americans that are in a very—you know, very, very insecure place because they have to drive for their work or they’re not close to the activities they do in a day-to-day way the way urban city citizens have that luxury. But it’s easier today, no matter where you live, to reduce the amount of use for everyday life using oil products. So that helps us a little bit. 

But you know, I guess my basic message is it could get worse depending on either how long the strait is down to a trickle or if—as Steven mentions, if there’s an escalation and Iran continues—or even the militias in Iraq, a worst-case scenario, because how do you deal with that?—continue to attack in the Strait of Hormuz. And a lot of the attacks in Hormuz recently have been from Iraqi militias and not from the Iranian territory itself. Solving that problem over time is a really big problem because it’s not a military activity in the sense that there aren’t warships. In closing the Strait of Hormuz, we’re really talking about drone-related activity—some missiles, but mainly drones. And that could be underwater drones, that can be, you know, aerial drones. 

And that’s a pretty hard problem to solve in a ceasefire that’s going to come from an Iranian government which, I tell people, you know, picture the show Survivor, right? You’ve got a bunch of people, all of whom are looking over their shoulders, all of whom are under some pressure to be tough on the United States. And it’s unclear how well any particular set of people in Iran could make a peace agreement and then have it stick.  

FASKIANOS: Thank you for your insights. 

We are going to go now to all of you for your questions. So, as a reminder, we are on the record.  

(Gives queuing instructions.) 

So I will take the first question from Alder Julia Matthews from Madison, Wisconsin: Wouldn’t e-commerce also rely largely on oil for the transportation greater supply chain? 

JAFFE: So one of the great things about relying on e-commerce, especially in the AI age, is that—and you’ve probably noticed this if—you’re living someplace where people are using e-commerce, you’ll notice that the little trucks stop first at your house or apartment building, and then at the next building, and then the next building over. So there’s a lot of—these algorithms are set up now to reduce the amount of fuel use. And so for eighteen wheelers, you know, moving product across the country from ports, you know, that’s still a lot of pressure because we have a lot of oil use in that sector. That sector is mainly diesel fuel.  

But once it gets to the sort of consumer delivery distribution center—and people have moved those distribution centers around to minimize the amount of eighteen wheelers we need to do things. Remember, these algorithms have already predicted that you’re going to buy boots in a certain time of year, or this is the time of year that, you know, you have your family and so therefore you’re going to need five times as many paper towels as you usually order. Those kind of things can actually really minimize the amount of oil we use, even though—and just so you know, I mean, the last-mile transportation, all those delivery trucks, are not actually oil based. You have a lot of natural gas trucks, you’ve got electric trucks. And so a lot of the system has actually moved off of oil when it comes to the e-commerce system. 

But— 

COOK: I have made it my business to never go to CVS ever again in my life. 

JAFFE: Right. But—and let me make this point to all of you, because if you were to see the numbers they’re really startling. I think the numbers are something, like, we exported something, like, eleven or fourteen million barrels a day of combined crude oil and refined products in the last month from the United States. So part of the thing that transmits the international price, the higher prices in Asia, for example, to the United States is that consumers in other countries are bidding away this refined products that we have in the United States. So we have a giant surplus of gasoline manufacturing capability and diesel manufacturing capability compared to how much we actually use here in the United States. 

FASKIANOS: Thank you. 

I’m going to go next to a raised hand from Council Member John Jaszewski from Mason City, Iowa. If you could unmute yourself. Working on it? John, all right, can you unmute yourself? Looks like we are having some technical issues here. OK, I will—we’ll try to come—oh, wait.  

OK, going next to Bill Cole, who’s a commissioner from Birmingham, Michigan: Is fertilizer also a big part of what travels through the strait? As parts of the world are entering planting season, when does the food supply get hit? 

JAFFE: So 100 percent. Something like a third of all urea exports in the globe come through the Strait of Hormuz. And it’s—you know, that happened right before planting season. So we are going to see a lot of impact on food. In some places, farmers are moving to other solutions. But I do think that it’s going to be hit in the food system. And, again, you know, these kind of things. And then, you know, you have the double hit, because not only do I not have fertilizer, and the price of fertilizer has gone up significantly even in the United States, but then on top of that the price of diesel fuel, which I need for doing the planting and harvesting, has gone up. And so I do think that’s where we’re going to see a big impact of the inflation, is through the food system, more than we might see it in other parts of the economy.  

You know, I’ll just make a point, for the United States. We used almost—I mean, we use no oil to generate electricity in the United States, for example. We do not use oil to manufacture petrochemicals in the United States. It’s all done by natural gas, which is still in very, very widespread supply in the United States. So the impacts, I think, in the food system are going to be where we feel that pressure of inflation the strongest. And I think for the U.S. economy, you know, gasoline prices have gone up and down in recent years, and the economy has kind of, like, navigated that.  

But when you start to have this pile-on effect of inflation, it’s not just the inflation that hurts American families. It’s the anticipation that in past we’ve had these disruptions in the Middle East, or through Russia’s invasion of Ukraine. And people—if consumer confidence collapses, then the impact on the U.S. economy becomes much larger, just because people are anticipating that it’s going to hurt the economy and, therefore, they feel insecure about making purchases. Which hasn’t completely happened yet, but could happen as the conflict prolongs. 

FASKIANOS: Great. 

I’m going to go back to John Jaszewski. Let’s see if you can unmute now. 

Q: OK. I hit the unmute. 

COOK: We can hear you.  

FASKIANOS: We can hear you. OK. 

Q: OK, Great. 

A very simple question. Coming up is the elections for Congress. If the Republicans lose control of the House, will that affect this equation at all in terms of settling the war and resolving the problems we’re having? 

COOK: Well I prefer to do policy than politics, but I think, despite the fact that the Democrats have tried over and over again to invoke the war powers resolution, and would, in theory, use their power of the purse if they control both houses of Congress, to defund the military operation, I think it’s very, very hard for, when you have American troops in harm’s way, to cut them off. So I think that, you know, right now we’re hearing a lot of heated political rhetoric about, we—you know, we’re going to defund this, we’re going to invoke the war powers resolution.  

But should Democrats come to office, they’re going to then be confronted with whether they really want to cut off American forces. I mean, obviously it wouldn’t be as—it wouldn’t be as clean and easy as simple as that, but that’s essentially what it would—that’s essentially what it would mean. So I would expect that the Democrats, if they were to control the House and Senate, would try to hold the president accountable for a war that they believe has been—that is reckless. But I think it’s another thing then, though, to leave the military hanging. 

JAFFE: And remember, as we’ve been discussing, there are all these commodities that our economy and the economy of our allies and trading partners rely on. So the U.S. economy is not just affected by—as I said, we have our own oil, we have our own refined products, we’re exporting, you know, four or five million barrels a day of crude oil too. Like, we do not have the same supply situation as a country like Japan or some of the other Southeast Asian countries. But then, if the economy of India, and the economy of Japan, and the economy of South Korea slows down, we’re a nation that trades with all those countries.  

And so therefore, you know, people’s jobs and economy is affected by the outlook in the global economy. And whether you’re a Democrat or a Republican, you have to concern yourself with that because how Americans are managing and weathering inflation and the economy is the biggest, I think, political issue in this country. And that will have to be weighed in thinking about what would the Iranian response be if there was a forced withdrawal. You know, what would they do? 

FASKIANOS: Mmm hmm. 

I’m going to take the next question from Rae Lynn Hicks, the mayor pro tem of Swartz Creek, Michigan: Who is in control—in parentheses—negotiators in Iran—at the current time? Steven, do we know? 

COOK: Yeah. We absolutely know who is in control. I think that the—I think the president and other principals in the administration have sort of accentuated the idea that there are splits within the regime. What I think is really happening is it’s difficult for those principals to communicate with each other. As Amy mentioned, they all have targets on their back. The second they open a—turn on a smartphone or communicate electronically, the Israelis and/or the United States will target them. So there has been a problem of coordination. But I think it’s pretty clear that Ahmad Vahidi, who is the head of the Islamic Revolutionary Guard Corps, is mostly the one who is calling the shots there. Mojtaba Khamenei, who is alleged to have been grievously wounded on the first day of the war that killed his father, still there is no signs of life there.  

So, what you have is essentially Vahidi at the top of the National Security Council, which is made up of hardline generals from the Islamic Revolutionary Guard Corps. And you can see that they are the hardest of the hardline and that they are relatively on the same page, because every time they table a proposal for ending this conflict it is the same hardline demands of the United States. There’s no real difference. Now, do I believe that there is— 

JAFFE: So let me just point out— 

COOK: Hold on one second, Amy. Let me finish, and then I’ll give you an opportunity, because the question was to me.  

JAFFE: Go ahead. OK. 

COOK: It’s clear that there is back channeling that goes on between, you know, Saudis and Iranians and Saudis and Pakistanis, and so on and so forth. And so that there is a whole realm of diplomacy that happens in between the presentation of formal proposals. But the Iranians have demonstrated zero flexibility, just as the president has demonstrated zero flexibility. So I think that in that case it’s hard to say that they are disorganized, or that they—that they’re so totally at odds with each other that they cannot produce a proposal. They produced four, by my count, proposals that all say the same thing. And that are all pretty coherent. Amy, go ahead. 

JAFFE: I would just slightly disagree, in the following way. I agree with what Steven’s saying about the coherence of the negotiations. But I think they’re looking over their shoulders probably less at this point about the United States and Israel, and a little bit more about each other. And I do think that there’s some—I don’t think it’s a unified playing field. 

COOK: We haven’t seen a lot of fratricide going on in the regime. We’ve seen a lot of regime figures being killed from the outside— 

JAFFE: Just remember— 

COOK: But we haven’t seen anybody stab each other in the back, so far. 

JAFFE: Yes. But just remember that before the war you did have a president mysteriously have his helicopter crash, in Iran. And there—you know, the reporting today is that, you know, the former president, Ahmadinejad, was under, you know, quasi-house arrest. I mean, I don’t think it’s a—I don’t think it’s as level a system, Steven, as— 

COOK: Well, Ahmadinejad had long been a critic of the regime and under house arrest. And the killing of the previous president remains— 

JAFFE: A mystery. 

COOK: You know, open. We don’t really know. A mystery of what happened. What we do know is that since this war began there has been generally a coherent leadership that there has been very little regime fratricide. We expected that that would happen. And it hasn’t happened. 

JAFFE: Well, what I would say—and I hear you. And, you know, you spend a lot of time on this, so I don’t want to contradict you, but the people who are speaking about these proposals, the voice of (who’s saying ?), the reaction has changed over time, since we started having the negotiation. And it could just be that that’s spontaneous and they’re all in agreement, or it could be that there’s some shuffling around. And I think that—I think that we don’t know, ultimately, over time, what that outcome is going to be. And we don’t know exactly all the different pieces of how the bonyads and all these different institutions play out all, because we’ve shuffled people around. 

COOK: Well, I think the one thing that I really agree with you is, is that we don’t know what the outcome is going to be. We just don’t know what the outcome to be. But so far that doesn’t look like there’s been fratricide within the regime. 

FASKIANOS: OK. 

We are going to move on to the next question from Rose Minor, director of federal and interstate affairs for Washington Governor Bob Ferguson. 

Q: Hi. Thank you so much. Can you hear me OK? 

COOK: Yeah. We can hear you fine. 

Q: Awesome. Thank you. 

So, obviously, I mean, one of the big things I’m very concerned about are rising food prices. And states, we have had to go through, unfortunately, with SNAP cuts due to H.R. 1. So I’m thinking about everything all at the same time. And I just wanted to find out a little bit more about what are some other solutions that you all mentioned that farmers are moving towards, being that we will likely see high fertilizer prices. Washington state, we are an exporter for our ag products—wheat, apples—all over—you know, all over the world. So we really rely heavily, you know, on fertilizer. And we also have a population that relies on SNAP as well, as well as other food benefits. But I would just love to hear from you all what are some of these other solutions that farmers are thinking about? And when will we actually see rising food prices? Will it be early FY ’27, or will it be later this year? 

JAFFE: Well, you know, I guess I’m—you know, I’m an energy expert, as opposed to an agricultural expert. But, you know, you’re having—so the food that was in silos because of the trade tariffs and things like that, there was a lot of stored food products in the United States last year. And so that’s probably going to be helpful. But maybe we could expect some lower planting this year here in the United States, or, conversely, there are products that we import from other countries that are going to be affected by lower yields because of the fertilizer shortage, or the prices are going to be higher because of the higher price of fertilizer. So I think that is probably a bit inevitable.  

In some places people can go back to more traditional sources for fertilizer or more regenerative agriculture. There are countries, like in India and other places, where people have started experimenting with more regenerative agriculture for sustainability reasons. Here in the United States I would expect in a place like Washington state farmers might be able to turn to more natural methods. But, you know, it’s not going to replace the industrial-scale, you know, food system that was dependent on ammonia and urea, and with so much of that—you know, a third of that normally coming through the Strait of Hormuz. So, my opinion is there’s definitely going to be impacts. And, you know, I guess—I mean, I don’t know much about the agricultural cycle, but if you’re having the planting and you’re going to do the harvesting in the fall, that next level of food that’s going to come out into next year, I think, is going to be at a higher price. 

COOK: I don’t have anything to add other than that I really like Washington state apples. And I was not aware that food prices weren’t already up. (Laughs.) 

JAFFE: Right. 

COOK: Having just celebrated my wife’s birthday and she wanted steak. I had to empty out a 401(k) to pay for the check. (Laughs.) 

Irina, you’re muted. 

FASKIANOS: Sorry about that. I’m focused on the questions and who to go to next. We have a question from Brian Andrews, who’s a commissioner in Cranford, New Jersey.  

Can you talk about Pakistan’s role and how it has emerged as a go-between in the current U.S.-Iran conflict? Are there other countries playing important roles behind the scenes? And did the president’s trip to China have any impact on Beijing’s approach? So there’s a lot there to unpack. 

COOK: Yeah. I’ll start from the—I’ll start from the last part of the question, which is the answer is, no. I think that the Chinese are neither interested in their militarization of the Strait of Hormuz, nor—and they are interested in freedom of navigation, but they’re not particularly interested in helping the United States out of this problem that it currently finds itself.  

When it comes to Pakistan and other countries, there’s essentially four countries—Pakistan, Saudi Arabia, Egypt, and Turkey. But really, it’s a Pakistani show here. And it’s quite extraordinary that Pakistan is playing this role, given the fact that, you know, just a few years ago we discovered that Pakistan was harboring Osama bin Laden very close to Islamabad, which is the capital of—the capital of Pakistan. The idea that the Pakistanis didn’t know he was there is laughable. And Pakistan’s position in Washington, as a result, deteriorated markedly. They’ve been very, very smart since this president came to power. They’ve hired some of his favorite lobbyists, who are close to the administration. And they have taken advantage of the fact that they sit in a position now where they can communicate and have good communications with the United States as well as Tehran. 

And so but there are, I think, very serious questions about whether the Pakistanis are—can be a neutral party here. Because, remember, it’s not just a question of whether—it’s not just a war between the United States and Iran. It’s a United States, Israel, and Iran. And Pakistani leadership has called for the destruction of Israel and been, you know, not particularly forthcoming when it comes to relations or normalization with Israel. And then it was recently revealed that the Pakistanis allowed the Iranians to evacuate military equipment to Pakistan. So there are very, very, very significant questions about the role that the Pakistanis are playing. Right now it just seems that they are passing papers from one country to the next. They are not formulating any particularly new ideas. They are receiving proposals from both countries and passing them on to the next.  

As far as the Saudis, the Turks, and the Egyptians, there’s a lot of motion but no real action. There’s a lot of phone calling, a lot of consultation, and so on and so forth. I think there’s a signaling that’s going on, on the part of the Saudis in particular, by associating themselves with the Pakistanis and the Egyptians and the Turks on this, is to signal to the Iranians that they prefer a diplomatic outcome to this war, as opposed to other countries in the Gulf, like the United Arab Emirates, which has had a much more robust military response to Iranian attacks on Emirati soil, and have moved closer to the Israelis as a result of the conflict. So, again, we’re at a point where the Iranians believe that they have time on their side, and the president believes he has time on their side. So even if the Pakistanis were—let’s assume for a moment that they are of good will and can move the needle, they wouldn’t be able to.  

FASKIANOS: OK. 

I’m going to take the next question from Ashkon Jones, who’s a district representative for California Assemblyman LaShae Sharp-Collins. Also written several in the Q&A. So we’ll let you ask your question live. 

Q: Yes. Thank you.  

My question was, number one, how come the prices have plateaued, as the as the supply continues to appear more and more strained by the day? And then my second question was, how come there’s been, like, a lack of building any new refineries domestically since the 1970s? And how come none of our refineries can really process shale? 

JAFFE: So let’s start with the first one, because that’s the easiest one. We have some refineries that were built on the Gulf Coast, Pascagoula, Louisiana and some other places, where those companies, when they built those refineries, were expecting to forever be buying oil from Saudi Arabia and processing it in those refineries. So the refineries were constructed to refine what we call a heavy sour crude, that is of a particular quality. And then, you know, we have our ties with Mexico, and Venezuela, and so forth. And they also produce that same kind of heavy sour crude. But the oil that comes out of the ground from fracking is more like alcohol than asphalt. You know, heavy crude is more thick. It’s like what you see on television when they’re showing you this black gooey stuff. You know, in places like Nigeria some of the oil that gets produced is almost like alcohol quality. So the United States produces this very light oil.  

And those refineries that were built to run Canadian, and Venezuelan, and Saudi oil, they have all these special units that use those crudes. And so therefore the shale oil is not a substitute for that. So we do export some of that oil. That makes sense, because otherwise we wouldn’t have the balance of trade and all the benefits we get from exporting oil that we can’t actually refine. There’s a surplus of oil that’s hard to refine in the United States because it’s too nice a quality, in fact. And there are other markets that would pay a premium for it. So that kind of explains that part.  

And what I would say to you is, I mean, the United States has been exporting refined products. And up until this war there was, you know, kind of a surplus of refinery capacity, you know, globally. There were some new refineries. The new refinery built in Nigeria. And you had some new refineries coming on in India. And places in Asia anticipating the possibility of rising oil use in places like India and Southeast Asia. But, you know, you have to remember, even China has really moved to electrify its transportation fleet. And so I think it’s one in two cars in China today are electric cars, new cars being purchased. The Chinese have made a big effort to move their truck fleet. Some of it’s electrified, some of it’s on natural gas. And so the outlook for refining wasn’t 100 percent positive, because we have states like California that have really aggressive transportation policies to move oil out of transportation.  

And, you know, it depends how you feel about what you think petrochemical demand is going to be over time. I’d like to think that there’d be a day when people in the world would wake up and think, we just can’t keep throwing all this plastic in riverways and waterways. We have to live in a different way, and therefore even petrochemical demand would go down because we’re going to use much more recycled petrochemicals, or petrochemicals that come from a bio-based economy, more circularity. So it wasn’t an attractive thing to invest in refining, especially in the United States. So there is one refinery coming on now in South Texas, new project, but it wasn’t attractive because it wasn’t a growth industry.  

And, you know, I would hope that we’ll be able to stay that course and keep it not as a growth industry, because of the extreme environmental detriment that comes from some of these products. But in the end, the war might change that profile in the following way, depending on when these refineries that have been damaged can be repaired, are people going to be—my opinion is, people are going—energy security, you know, keeps moving around. You know, last year and the year before when the Russian event happened, everybody said that energy security was about affordability. Now all of a sudden, you know, reliability is more important, even than affordability. And reliability has to do with how resilient is the supply chain you have for the energy products you need.  

So, you have countries in Asia that were using liquefied petroleum gas for cooking. People have had to move to electric stoves. I mean, that’s been a highly disrupted market. People are looking at this whole resilience question. You know, what is the most resilient way to ensure that my energy supply is going to be available going forward? And I think, depending on how relations pan out over time, you know, are countries—you know, maybe not the United States—but are there other countries in Asia and in Africa that are going to—are they going to want to rely on energy that’s coming from inside the Strait of Hormuz? Is there going to be a day when this is all passed and we all say, oh, we don’t have to worry about that anymore? Are we, you know, per Eddie Fishman’s book—which I highly recommend—Chokepoints, are we all going to be, like, focused on chokepoints and supply chains all around the world, and so therefore the way we choose to use different energy commodities is going to change because everybody’s going to want their energy commodity to be domestic? 

So for the agricultural sector, and I worked on this when I was at University of California, you know, taking agricultural material and turning that into biogas, or turning that—we call it renewable natural gas in California, turning that into biodiesel, if you’re a country, and even a country like India, if you could take solar energy, which is easy and—you know, even Pakistan’s moving to solar energy—and you could take that energy and create green hydrogen, even though that’s ungodly expensive compared to other commodities right now, you know, maybe you would want to have a program to bring those costs down because, again, that would be domestic. So I think we’re going to see a change. If you think about 1973, the structural changes that came from that conflict was that over a thirty-year period we completely moved oil out of generating electricity in most countries in the world, but definitely here in the United States. So we’re going to see some of those structural changes going forward. And that influences how people feel about the long-term investment trend for refining. 

FASKIANOS: Thank you. 

I’m going to take the next question from Latifah Faisal: What is the impact of Saudi Arabia moving their sovereign wealth fund into crypto? And how will that impact the balance of power? She’s a board—she’s a board vice chair for Story County, Iowa. 

COOK: I’m going to say that that’s a question for Sebastian Mallaby or Rebecca Patterson, our colleagues. You know, crypto is obviously all the rage. It strikes me as a scam, but I don’t know enough about it.  

JAFFE: Let me just make one point. The crypto that the Iranians are using for paying the tolls—the proposed tolls, is actually a U.S. dollar-based cryptocurrency. And so it’s very hard to move the international system off the dollar. I mean, obviously there’s a lot of effort to do that in different means geopolitically. (Laughs.) But it’s actually pretty hard to do. And even with crypto, a lot of the cryptocurrencies are still convergent and based on the U.S. dollar, when they get valuated. 

FASKIANOS: All right. 

Next question from Erik Krauss, who’s a select board member from Hartford, a town in Vermont: If the strait reopens immediately, how long would it take for energy systems and commodity supply chains, including helium, fertilizer inputs, and sulfur, to return to normal? 

JAFFE: It varies from commodity to commodity. Some people are saying that the cooling tower that got bombed in Qatar, there were two trains of LNG, could take anywhere from two to five years to repair. Even if it’s just Qatar is going to gear back up the supplies that have been stopped, you know, still it’s not an instantaneous thing. I think—and oil, again—I hate to make everything so complicated—it varies. You know, for—I mean, Saudi Arabia is not going to have any difficulty. UAE won’t have any difficulty.  

In Kuwait and in Iran, the fields operate with what’s called enhanced recovery. That means we’re injecting natural gas, or we’re injecting water to help drive the pressure of the field, because the fields don’t have—because they’re older fields and they don’t have natural—as strong a natural pressure as they did when they were first discovered. So in those cases, you know, I’ve heard even in Iraq, which uses a lot of enhanced recovery, that people are saying it would take six to nine months for the Iraqis to get their fields back on track once the strait was reopened.  

People are in extreme disagreement about how long it would or wouldn’t take the Iranians to organize themselves. They have a lot of oil sitting on tankers. And that’s how they’ve kept their fields in production. A lot of disagreement on how long that would take. But same thing for Kuwait. Could take a few months for them to get themselves back in production. 

FASKIANOS: OK. 

Next question from Kyle Schwartz, who is in the California Senator Choi’s office: How concerned should we be about the reconfiguration of oil refineries in order to adjust for different slates of oil and the broader shift of the oil market, supply chain adjustments, and country of origin, as a result of this conflict? 

JAFFE: So I need a little bit more color into what you’re seeking. Are you asking if, because we have this need to produce more jet fuel that means we’re going to produce less gasoline? Like, exactly what detail are you looking for there? 

FASKIANOS: Kyle, if you can unmute, that would be great. Let’s see. 

Q: Sorry about that. 

Specifically in California there’s been discussions by oil companies and representatives of the oil industry that are concerned with having to reconfigure some of the current refineries in California to adjust for different country or origins of the oil—whether it’s from Canada, or Texas, or some other place—because of where it has been traditionally coming from is supposedly some percentage from the Middle East. And because of this conflict it seems there’s concern that we’ll have to reconfigure those refineries, which requires a downtime of some form. And then going from there in terms of cost in the regional area. So that, as well as, I guess, jet fuel.  

JAFFE: OK. So, you know, California is a pretty complex landscape for refining. What I would say to you is the oil that gets refined, the mix of oil that gets refined, absolutely does affect what we call the yield. So every crude oil has its own sort of fingerprint. And you mix them together and you get a certain yield when you run them through the different units. I mean, the California refineries are pretty oriented towards producing gasoline, but, you know, you’ve always had this struggle in the state about the fact that your gasoline is a little bit cut off, and you were sort of helped along by Singapore and other places that would send cargoes to the United States. So you’re going to have less imports from other places. 

In terms of how long would it take a particular refiner after they change their crude oil slate, if they’re talking about learning or coming up with a way of building a unit so that they can refine light sweet crude when they’ve been refining heavy crude, I mean, you’re talking about a major capital investment. I’m not sure that there’s anyone who’s going to make that capital investment today. They’re going to take a wait-and-see approach to see what happens. Canada has said they’re going to expand their pipeline to the United States. You’ve got a reopening, perhaps, that might stick in Venezuela. You know, Brazil has new oil coming online. So I’m not sure.  

A lot of times what actually happens, and you might be referring to, is that for me to change, you know, the mix of crudes I’m going to make, maybe I have to put the refinery into some kind of maintenance. And, you know, typically that maintenance period usually happens in March and April anyway. So in California, you know, one of the things that’s a big problem is that more than one refinery has a maintenance turnaround at the same time, it can really disrupt the supply balance in the state. On top of the fact that you’re not going to have as much imports from Singapore and, you know, other export refineries in Asia. So I could see that if there was going to be routine maintenance because the change in feedstock that it could cause a pop in gasoline prices in California.  

Which I was recently in California, and the prices were quite high. So, but I haven’t—you know, you’d have to look at individual refineries and see what maintenance exactly are they speaking about. You know, CEC now gets mandates that they can look at the refining margins of all those refineries. And now would be a time to look at that, and to see, you know, what’s substantive and what is long duration.  

FASKIANOS: Thank you. 

So I’m going to try to squeeze in this last question, and this is for you, Steven, from Marlon Green, councilor from Brockton, Mass.: In light of the current conflict, how might the religious and political landscapes of Iran, Israel, and the U.S. change over the next few years? And what consequences could those shifts have for the region and for local communities? An easy question to end on. 

COOK: Yeah, yeah, in two minutes. 

FASKIANOS: Do the best you can. (Laughs.) 

COOK: Look, I don’t—what’s happened in Iran is the sort of idea of an Islamic Republic has sort of fallen to the wayside many years ago. The previous ayatollah was really a creature of the Islamic Revolutionary Guard Corps. And his son, who is now nominally in control, is also a member of the Islamic Revolutionary Guard Corps. The idea that this is a clerical regime, or that it is what—Ayatollah Khomeini envisioned the rule of the clerics is, it’s very far from—it’s very far from that. As far as Iranian society goes, it’s very hard to know what is happening. Our interlocutors tend to be people who have been here for a long time, or people who go back and forth.  

And so we don’t know. We have anecdotal evidence that, you know, people are done with the Islamic Republic and want something very different. But I think the fact that the regime has been able to marshal people in support of the regime would suggest that the idea that everybody wants to get rid of the Islamic Republic is wrong. So, you know, and the fact that the defenders of the regime are willing to use massive amounts of force to keep people in check. The low end of the estimate from the big protests in December and January is 7,000 people killed. The high end is 30,000, over the course of a few days. So I think it doesn’t really matter, to be completely honest with you, in Iran. 

In Israel, I’m actually just embarking on writing a book about Israel and Israeli identity. And Israel is going through its messianic moment. And there is a real struggle going on within Israeli society over how Israelis are going to define themselves, and their state, and their relationship between their state and the world. And much of this has to do with a question of how much religion there should be in the public sphere, and how religious values should inform public policy. Which is an extraordinary statement, given where, you know, the founders of the state began. So and I think, you know, I don’t really want to comment, because it’ll take me much longer, on the United States. But there’s clearly been an undertow of religion, religious values, the fusing of religious values and nationalism in the United States over recent years, that are also changing our politics. 

FASKIANOS: Well, we are at the end of our time. Thank you both for your insights and analysis. We really appreciate it. Steven Cook and Amy Myers Jaffe. And to all of you for your questions. Sorry we could not get to them all. But we will have to return to this issue, which is going to be with us for a while. We’ll send out a link to the webinar and the transcript.  

Please visit CFR.org, ForeignAffairs.com, and ThinkGlobalHealth.org for the latest analysis on international trends. We are launching tonight the Future of America Strategy Initiative. And so you can tune in on our website at 5:15 for a panel on The Future of American Power with Senator Elissa Slotkin from Michigan and Senator Tim Sheehy from Montana. And then that will be followed by a panel on Charting a New Course for U.S. Foreign Policy. So tune in at 5:15 on our website for that. And you can also share suggestions for future webinars or request a personalized briefing with one of our experts by emailing [email protected]. So thank you, again, to you both, and to all of you for being with us today. 

COOK: Thanks, everyone. Cheers. 

JAFFE: Thank you, everyone. 

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