Odd Lots - Greg Brew on Surging Energy and the 'Strategic Trap' of the War in Iran

Episode Date: March 20, 2026

The war in Iran has already lasted longer than many people might have expected. There was an initial assumption, after oil prices started surging, that President Trump could just declare victory at any moment. But that hasn't happened, and the longer this goes on, the more damage is being done to the region's energy infrastructure. Already a key gas plant in Qatar has been damaged so badly that it's expected to take it years to repair. On this episode, we speak with return guest Gregory Brew, a senior analyst at Eurasia Group who specializes in energy and Iran. Beyond his current work, Greg is the author of two books on the history of oil in Iran. We discuss the logic of the war from both the Iranian and American perspectives, and why the Trump administration may have walked into a "strategic trap" with no easy way to declare victory and get out. Read more:Iran Leaves an Isolated Trump Grappling With Historic Oil CrisisHow Iran Has Effectively Closed the Strait of Hormuz Only Bloomberg - Business News, Stock Markets, Finance, Breaking & World News subscribers can get the Odd Lots newsletter in their inbox each week, plus unlimited access to the site and app. Subscribe at  bloomberg.com/subscriptions/oddlots Subscribe to the Odd Lots NewsletterJoin the conversation: discord.gg/oddlotsSee omnystudio.com/listener for privacy information.

Bloomberg Audio Studios. Podcasts Radio News. Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Wisenpaw. And I'm Tracy Allaway. Tracy, we're recording this the morning of March 19th, around 9 a.m. That's how you know it's bad when you have to throw in the hour and the minutes. 9.07 a.m.

9.7 a.m. And I think the story right now is just the degree to which people are realizing more and more energy infrastructure. in the region. We're talking about the Iran war, of course. More and more energy infrastructure in the region. I mean, it's literally on fire. Yeah. The thing that I've noticed, having recorded these sort of emergency podcasts over the past, I guess, two weeks now is that we will talk about a hypothetical, like, you know, oh, what happens if Iran strikes the port of Solala in Oman? And then a couple days later, it happens, which gives you an indication of how quickly things are progressing. And one thing that has happened in just the past day or so,

since we recorded an episode with Bob Brackett on Nat Gas is we had Israel bombing Iran's infrastructure in the South Pars gas field. Yes. And that was kind of a hypothetical that we talked about with Bob and it happened shortly after. And then after that, we also had Iran bombing Katari energy assets in the South Pars. So it's just progressing very quickly. Our colleague, Dylan Griffiths, has put together a really excellent list. I mean, the thing was, so we did that episode sort of near the beginning or I've lost track of the time with Rory Johnston. And he said the closure of the Strait of Hormuz was itself the sort of hypothetical that was so extreme that it was almost not worth contemplating. So I think your framing is

excellent, all of these things that are just sort of like, you think about them as very bad possibilities, and one by one, they become realities. Our colleague Dylan Griffith has a really excellent, just sort of list of energy infrastructure damaged in Iran Warpiece, and it just goes down through the list. One of the refineries in the world shut down as a precautionary measure. Raz Tanura, a refinery in Saudi Arabia halted, various pipelines, gas facilities, and so forth. There's just a a lot that's damaged, which of course means that the straight of Hormuz is only one aspect. Maybe it gets opened. But then there's, of course, the question of like all the infrastructure that's been damaged

and how long it takes to come back online at anything near full capacity. Right. And this raises two interesting questions, I think. One is that it seems like the U.S. and maybe Israel to some extent weren't expecting Iran to hit back against various energy infrastructure, assets, or even cities. hard, right? And I think Trump has said a couple of times that he didn't expect Iran to, for instance, like go after targets in the UAE and places like that. So questions over what's happening there, like why did that become a strategy? And then secondly, the thing I'm wondering is how much financial

pressure does this actually put on Iran? Because at the moment, yes, some of its big gas producing things are getting hit and damaged. And it seems like that's going to cause some fallout. But on the other hand, if oil prices are spiking and if Iran can still get out some oil to a certain extent to places like China, is that actually a fiscal windfall for them? Like, can they withstand some of this chaos better than perhaps other places can? Right. And, you know, for the U.S., obviously a lot of this translates into higher prices at the pump, for some of the region in Gulf countries, I mean, it's just, it's GDP catastrophe, right? And some of the estimates for a some of the countries are expected to see a reduction in GDP.

I think I've seen numbers like 15 percent. Yeah. I mean, we're talking about, you know, that's depression levels, declines and so forth. And so the degree to which this drives a serious wage between Gulf countries in the United States is, of course, obviously, a big part of the story here. Anyway, and, of course, that makes the logic of the strikes, right? I mean, that makes Iran's logic seem very clear drive a wage between U.S. and its friends in the region and so forth. And so anyway, we need to understand both better, just how serious this damage is, the long-term fallout, because this is very important from economic story. And then the way to think about this damage in the context of war strategy itself and what constitutes success for Iran here as it tries to defend it.

And how all of this is actually playing on the ground in Iran because, of course, we don't have very good insight at any moment in time into domestic Iranian politics. Definitely not. All right. Well, we really do have the perfect guess. someone we've spoken to before, someone we turn to frequently when the discussion is about Iran or it's about oil and certainly some combination of the two. We're going to be speaking, of course, perfect guest. Greg Brew, senior analyst at Eurasia Group. He is the author of two books that directly relate to this. Petroleum and progress in Iran, oil development of the Cold War

and the struggle for Iran oil autocracy in the Cold War. So Greg, thank you so much for coming back on Adlaught. Hi, Joe. Hi, Tracy. Thanks for having me back. It must be nice, you know, you write these academic books with academic prices, with names that sound like academic books. And suddenly, suddenly they're actually in demand. Their current events. Suddenly they're relevant. Which cannot be said for all academics.

They weren't relevant before. They were very boring and only a handful of people cared about them. And now the number is slightly more than a handful, perhaps. It's definitely more than a handful. What do we just start off with the sort of very big picture, which is a number. just put on your energy analyst hat for a second. Then we'll get into all the sort of understanding Iran more, you know, from your energy analyst hat, how shocked are you by the sort of scale of destruction that we've seen with energy infrastructure over the last couple of weeks?

So I think I'm officially shocked after the events of the last 24 hours where you saw both Israel attack the South Pars gas field in Iran, which supplies 70 percent of Iran's gas supply. And then quite quickly, within hours, Iran responding by striking the Raslafan LNG processing facility in Qatar. But of course, over the last few weeks, we've seen widespread strikes on energy targets throughout the region. And then, of course, the closure of the Strait of Formuz, which, as you mentioned, and I've had very similar experiences to Rory in this way, over the last few years, whenever anybody asked me, you know, is Iran going to close the Strait of Formuz? I would say only as a last resort, only in the event that the regime feels that its survival is being threatened. And most of the time, I've been saying, we're not there yet. You know, whatever crisis this is, it's not that bad.

But this war, this attack was interpreted by Iran as a threat to its survival, a threat to the regime survival. And it responded in a way that it has been saying it would respond for a long time. So I have been shocked. But if I were a better Iran and energy analyst, maybe I shouldn't have been. Well, okay, explain that further because some people would say intuitively, if you strike Iran and immediately take out the Supreme Leader, that immediately frames the conflict as an existential one for Iran, right? So why this reluctance to believe up until, you know, maybe a day or so ago that they would go this far in their response? Well, I think the kind of collective understanding initially was that even though the war began with Israel assassinating Supreme Leader Ali Khomeini, which incidentally, the Iranians kind of expected, they had been making plans for the last several months of what to do in the event that Khomeini was assassinated. But I think the collective understanding of the war initially was that it was going to be a short war because the United States and because President Donald Trump didn't want a long war. So there was this belief. that, okay, things are bad. Iran has been attacked. It's being heavily bombed by the U.S. and

Israel. It's closing the Strait of Formuz, but Trump is going to de-escalate and it's going to end. Like, this isn't going to turn into a prolonged conflict. That's part of the reason why oil prices didn't really respond as aggressively initially as I think they've responded since. It's why, you know, futures didn't move very much in the first week or so of the war, because I think everyone was maybe in a state of shock and denial that the situation wasn't as bad as it really was, and that things were going to be wrapped up, things were going to be de-escalated. And I think on some basis, that was stemming from historical experience. Like, the war between Iran and Israel last June was also very intense, but it ended very quickly

with a very, very rapid ceasefire that allowed oil prices to fall. And in the past, Iran had done aggressive things. It had fired missiles at Israel. It had fired drones. But usually in a calibrated, kind of proportional way. And I think there was, over the first week of the war, there was this belief that, oh, Iran's not going to go that far, right? That they are going to ultimately, they're going to be deterred from being too aggressive. And I think on both sides, this understanding that Trump was going to de-escalate quickly

and that Iran was going to be restrained, both of those assumptions proved to be very inaccurate. And now that we're in the third week of the war, I think it's really settling in how bad this is, how bad this is going to be, and how much work it's going to take to de-escalate. Well, you know, obviously a big part of the reason that we want to talk to you is we think that you have greater insight into the sort of domestic politics in Iran better than most energy analysts that you're going to come across. But actually, let me flip the question and maybe not go to your academic wheelhouse, but just your take. You know, the expectation is Trump is going to taco because he can't stand oil at $100 or more and that this will prove to be a forcing mechanism for him to one day just declare victory.

They'll say, you know what, we've taken out enough infrastructure. They're no longer a threat. And as you mentioned, he hasn't. And if anything, it seems like we're bringing more assets to bear on the region. So this has taken people by surprise. As of right now, crude trading for about 113, very close to the crazy highs of Monday, March 9th. Do you have an idea for why perhaps the collective assumption of an imminent Trump taco has not borne out and why he has actually seems to be willing to accept some economic pain?

and prolonged this longer than just, you know, declaring victory anytime? Sure thing. I will say the only thing that's somewhat more challenging for an analyst in my position, more challenging than diving into the psychology of the Islamic Republic is diving into the psychology of Donald Trump. But I'm going to give it a shot. Okay. So, yeah, again, going off of historical experience, here was an individual, a person who had

been in the public eye for decades, who always seemed to be preoccupied by the price of gasoline. You go back over the last 30, 40 years. Trump is always talking about gas prices, right? Keeping gas prices low, how gas prices reflect poor governance, poor economic performance. You've got to keep gas prices low if you want to be successful. He talked about it a lot in his first term. He talked about it a lot last year coming up into this crisis. And then suddenly, we're in the context of a war.

Straight of four moves is closed. 20% of the global oil supply is being disrupted or shut in in some way. Gas prices are climbing to highs that we're going to. We haven't seen in years. Oil is over 100. And then suddenly Trump is acting like, that doesn't matter. Like he doesn't care. It's curious.

I think it comes down to a couple of things. I think it comes down to, in this context, he is maybe more conscious of looking weak than taking the taco and taking the short term win and seeing the economic indicators, the financial indicators swing back in his favor. I think the size and scale of this conflict, the fact that it's not just

sort of the adventure in Venezuela or putting pressure on Russia. It's a war. There are dozens of U.S. warships, hundreds of planes, thousands of U.S. personnel, GCC states, allies to the United States that are under consistent fire. It's a big deal. And to Taco now would not only, I think, expose the president to criticism in a way that maybe he hasn't been exposed over previous foreign policy adventures, where he's always sort of managed to escape looking very tough, looking very assertive.

If he does back down right now, it feeds directly into the Iranians' narrative of victory. This sense that Iran is tougher, more resilient, more able to withstand pain, and that eventually they will outlast not only the United States, but more specifically, the U.S. president. That is entirely what is driving Iran's strategy from the opening of the war. Joe, to Greg's point about Donald Trump having a long history of talking about oil prices, not many people know that there is, in fact, a deleted scene from Home Alone, too, in which he stops to talk to McColley Colkin about high prices at the pump. Are you serious? No.

Yeah, they talk about gas taxes. Yeah, that's right. Just start rambling in the hotel halls. Okay, I realize this is kind of a difficult question because I'm not even sure that Trump himself knows. But do you get a sense of what victory actually looks like? in his mind for this particular situation? So I think, and there's been some good reporting on this, so I think we can accept it as fact,

although it's irrelevant for the reasons I'll state. Going into this, there was a belief in the administration and perhaps a belief from the president himself that there was an opportunity in Iran to replicate the experience in Venezuela, that there was a way to kill Ali Chaminet, the Supreme Leader, and that in the wake of his death, a group of Iranian leaders would come to the four and would pursue policies that aligned with U.S.

interests. There was a belief that that was possible. Now, the problem, which they encountered immediately, was that the individuals they expected to lead that political shift inside Iran were also killed alongside Ali Khamenei in the opening hours of the war. So the opening, the opportunity to achieve of Venezuela, disappeared in the opening hours, leaving the president, I think, and the United States. States with a problem regarding war goals. Now, they have done tremendous damage to Iran's military

capabilities. Missiles, missile stockpiles, missile productions, Iran's Navy, as the White House loves to advertise, has been taking tremendous damage. So Iran is absolutely being weakened by this war, but I don't know if that's enough for the president to justify the war. The war's scale, the economic cost, the risks that were associated. If the war ends, if the war ends, the president, the president, with just Trump saying, we've weakened Iran, we're not going to have to deal with them again, that's insufficient because he is probably getting advice inside the White House and from the Pentagon that if the war ends now, Iran will likely rebuild. You know, they rebuilt the damage that was done to them following last year's war. They rebuilt most of that damage within six

months. It'll probably take them longer to rebuild the damage from this war, but they will almost certainly do it. Also, if the war ends now, Iran, will leave probably feeling emboldened, having felt that their strategy of targeting the straight, targeting GCC states worked. So if the war goal is just to weaken Iran militarily, they've done that, but it's probably insufficient. Right now, what I imagine the president is thinking about is, what can I do against Iran that allows me to claim a more decisive victory and offers me a politically and also strategically viable off-ramp? The problem I think they're dealing with right now is that there are no good options.

to pursue that outcome. I'm trying to think about how to ask this question in a way that doesn't, well, that's accurate and a little bit sensitive. But I have this feeling, this sense, and I'm very far from an Iran expert, an Iranian history expert, but I have this sense that Western commentators, particularly older ones who perhaps sort of remember the Cold War, et cetera, had this vision of Iranian society as one in which there is a very broad mass of people that are like deep down liberals who are dying to cast off their hijabs who want to dance lascivously to rock music and live as Westerners,

etc. And that there is this very small group of religious hardliners oppressing them that have no credibility within society. And that the moment you decapitate these bearded mullough, that everyone will suddenly live the free Western liberal life that they've been longing to for decades, et cetera, and that all you needed to do is topple this. First of all, is that an accurate characterization of how many sort of think tank thinkers in D.C. view Iran and how different is that gap between the complexities and realities of essentially Iranian domestic politics?

Well, I'll avoid naming names because a lot of the think tank folks in D.C. are friends of mine. But I will say this. You know, the Secretary of State Marco Rubio likes to say this a lot. I think it's a line that he thinks conveys meaning and significance. And I actually think he's right. There is a huge gap between the Iranian people and the Iranian regime, the regime of the Islamic Republic.

There's overwhelming evidence to suggest that most Iranians don't support most of the policies that the regime pursued. Okay. Both the social policies at home, very restrictive policies on how you can do. how you can act, the kinds of businesses that cannot be operated. There are laws prohibiting co-ed activities. Increasingly, I should note that a lot of these laws are being flouted openly. People are just aren't obeying them anymore and the regime is having a hard time enforcing

them. More broadly, there's resistance to a lot of the policies the regime has pursued, backing foreign proxies or regional proxies like Hezbollah or the Houthis in Yemen, you know, spending money propping up Assad in Syria, spending huge amounts of money, building up a nuclear program, which resulted in incredibly onerous Western and U.S. sanctions. And then just the general sense that there are elections in Iran, but they're not really free or fair. Lots of candidates that people would vote for are barred from running for office. There are candidates, there are politicians who have spoken out on the subjects of reform, on democratization. They are silenced. They are arrested

or put under house arrest. So it's an incredibly restrictive political environment and one that a lot of Iranians don't support. On the sort of broader ideological frame, there is a core of support for the Islamic Republic as a political experiment. There is still this group of people inside the country. It's hard to estimate precisely their size, but one estimate you can go on is when there are elections for president, for instance, there was one in 2024, the super hardline candidate, the candidate who is extremely anti-U.S., who is all for doubling down on hijab and other tough social policies, that candidate usually gets 14 to 15 million votes. And when the regime has demonstrations, when there are official days of celebration, when they come out and they hold marches,

very often these marches are pretty well attended. People do show up. The regime can probably count on the support of a hardcore of maybe 10 to 15 to 20 percent of the population. That's probably enough for them to stay in power. The other aspect of this, and it's not a uniquely Iranian story. Decades of repression and, you know, monitoring political dissent, restricting the political environment, what that means is that there's really no organized political opposition inside Iran. There's no, you know, opposition candidate or opposition leader who's, you know, fighting the good fight. There are some individuals, but they're not really at the level that they could organize an alternative government. The other aspect of it is,

there are whole institutions that are built into the fabric of the Islamic Republic, the IRG see the Islamic Revolutionary Guard Corps kind of being the most important, but it's really just one of many who exist solely to preserve the regime from internal and external threats. They also happen to have all of the guns. So as with other authoritarian governments, not just today, but going back, you know, 50, 60 years, this is an environment, this is a political context where the mass of people don't really support the government and would love to see a different government, but it's difficult for them to implement change. given the obstacles that they face.

And unfortunately, January was illustrative of all of those realities. The attempt to affect change through popular demonstration was put down with overwhelming and lethal force. Just going back to Trump and potential off-ramps here. I mean, one thing we know about Trump is that he really seems to like owning stuff, right? And he seems to like taking stuff that he doesn't necessarily have exploits. sovereignty over. And there happened some rumblings recently about possibly taking the straight of Ormuse and having some sort of coalition with allies where they would control that particular passage. First of all, do you get the sense that that's actually an off ramp that he's thinking

seriously about? And then secondly, is that realistically an option for the U.S. to do, given that its allies in particular don't seem to be particular fans of the Trump administration at this moment in time. Yeah. So on the first question, I think, again, speaking to how kind of problematic the context of this crisis is for Trump politically and strategically, if he chooses to de-escalate, you know, he looks weak and he hands Iran a pretty significant win. I also think that it's, it's difficult for him to de-escalate with the situation and Hormuz being what it is, with traffic at a standstill. And, you know, to make matters worse, the Iranians allowing certain ships through. Yeah. Right? They've been making bilateral deals with Pakistan, with India,

to allow a couple of ships through at a time, demonstrating, for all intents and purposes, that they control the Strait of Hormuz, not the United States or not anyone else. So I think it's very problematic for Trump to decide to wind down combat operations, wind down this war against Iran, without having dealt with the strait in some way.

The problem is there are no good ways of doing that. They're trying to degrade Iran's capabilities, you know, bombing its drones, bombing its missiles, to a point where ships will feel comfortable, moving through the strait. But it's taking them a long time to do that because Iran has a lot of missiles and it has a lot of drones. And the geography of the Strait of Hormuz, parts of it are extremely mountainous. Iran has spent decades building positions to do this. I mean, again, it speaks back to their

strategy. They've been preparing for this for a long time. This is a war that they've been thinking about fighting for a very long time. So it's taking the U.S. a while to weaken Iran to the point that the tankers and the other ships feel comfortable using the strait. On the question of an international coalition, you know, bringing in more states, more countries, bringing in more ships, would make this easier? The problem, of course, is that the United States, the Trump administration, doesn't have the best relationship with most of its European allies. There was an attempt initially to put together an international group, to bring in the French, bring in the British, bring in others. And the Europeans were initially on board. The problem, though, was that

that shifted with Trump using this maybe as a sort of. source of leverage of trying to get the Europeans to actively join the war and bomb the Iranians, not just protect ships. Also using this to maybe move the Europeans on issues like NATO funding on issues like Russia, Ukraine. And so the Europeans moved from saying, okay, we'll help you to you're on your own. You know, we'll come and help move ships through the strait, but only if there's de-escalation. So it's another aspect of the kind of strategic trap that the United States finds itself in. It's fighting an enemy who can't really be fully deterred or degraded, an enemy that is resisting, being coerced or forced into capitulating, an enemy that can't

undergo a political change through decapitation. You know, like they're killing leaders, but those leaders are just being replaced very often by more hardline figures. And the problems associated with reopening the straight are just proving to be, I think, far more challenging than they had expected, if they had expected to deal with this at all. There's evidence to suggest that the administration didn't really think too much about more moves when it launched this war. Can you talk to us about just, I mean, you mentioned the European allies. Can you talk to us just about the future of America's relationship with some of the Gulf friends, the UAE, Saudi, et cetera, and the degree to which this could permanently alter the trajectory of that relationship? I mean, they didn't start

this war and now they have all this damage to their economy. Exactly, exactly. And it also, you know, it speaks to the longer term issues that this war represents. Because if you assume that the war is going to end in some kind of limited fashion, right, the Islamic Republic's not going to collapse. There's not going to be a regime change. The war is going to end with Iran still having a couple of drones and missiles left over, very weakened, but still there. The issue for the GCC, for the Gulf states, with that scenario is that it's extremely dangerous. They are now facing a regional power that is comfortable attacking them aggressively if it gets attacked, even if they had nothing to do with it.

And again, it's part of Iran's strategy. They're trying to impose as much pain as they can on everybody in order to raise the costs of this ever happening again. They're thinking not only about this war, but they're thinking about future wars. They're trying to restore deterrence. And this puts the GCC states in a very, very awkward position. On the one hand, many of them would like to see this war end, more conclusively, with the threat of Iran, not just degraded, but neutralized, because leaving it in place is so dangerous to them.

On the other hand, they likely know that that's impossible, that this isn't going to end with regime change. So what do they do? I think counterintuitively in the short term, most of them are going to pursue closer relationships with the United States because they have no other choice. They need to improve their security. Most of them right now are relying on U.S. support for their air defenses. They need the U.S. to restock their supply of interceptors.

They need the U.S. to help them shoot down Iranian drones, Iranian missiles. Also, historically, all the states of the GCC depend on the United States for protection. They have their own militaries. They are generally not regarded as being extremely capable. So they do need ties to the U.S. to secure themselves. And this war has, if anything, made that relationship with U.S. all the more important. But that's not enough. because they've now seen that if the U.S. attacks Iran, they will be on the front lines.

So they're likely going to have to balance that somehow. They're likely going to have to balance that by perhaps pursuing closer relationships with each other. There was already kind of some momentum before this war on regional security relationships. Saudi and Egypt becoming closer. The UAE and Israel pursuing closer ties. Saudi and Pakistan have a mutual defense treaty now. They will come to each other's protection. They will come to each other's aid if they're attacked, although Pakistan is not attacking Iran, even though Iran is attacking Saudi Arabia. So the full value of that agreement is maybe somewhat suspect. But that I think is another potential avenue that they may go down. They may look to one another to improve their security,

rather than depending on the United States, which is proving to be in the short term, a crucial ally, but in the long term, a very problematic partner. So on that note, why did Iran actually decide to go after countries that did not attack them? You know, Gulf countries, ex-Israel, and the United States. Because again, like, it's never really done this before. And the expectation, certainly, of people who moved to places like Dubai and Abu Dhabi, and I count myself in that bracket, was that Iran probably wasn't going to ever target them. It relates to Iran's broader strategy. Not only its strategy for surviving this war, but its strategy for improving its deterrence and reducing the possibility of this happening again,

of future attacks. The bigger scenario that the Iranians are more concerned about is a scenario where Iran turns into Lebanon or Iran turns into Syria, a country that you can just bomb, that Israel can just bomb whenever it wants to. They're very, very concerned about that becoming the new status quo. So that is what's driving their strategy. They want to restore deterrence. And their way of doing that is indicating to everyone, the United States, Israel, the GCC, but the entire world that attacking us is not worth it, that we will respond by imposing more pain, more costs on you than you can impose on us. The Iranians love to demonstrate this. They love to talk about this. And I think they are illustrating it, that they are more resilient, that they can take the hit,

that it doesn't matter that the U.S. and Israel have air superiority over Iran. It doesn't matter that they're killing leaders or striking targets in the hundreds, in the thousands. That at the end of the day, the Iranian government, the Iranian military, is more resilient and can outlast any of its competitors. Now, the reason why they're striking the GCC is there are two reasons for this. One, more immediately, the GCC is a more tempting target. These are soft targets. Energy infrastructure, it's fairly easy to do damage to a level that causes the facilities to have to be shut down for repairs. The GCC do have air defenses, but the targets, the Iranians, the Iranians, it's very easy to do damage to a level that Iranians have been going after are not hardened in the way that, you know, U.S. bases or Israel

are hardened. Israel is extremely well defended with its multi-layered air defense systems, with its civil defense, you know, systems. Israel is kind of a fortress state in many ways because it has sort of lived under the threat of outside attack for so long. The GCC isn't like that. And on top of that, it speaks directly, Tracy, to what you're saying. The Iranians are trying to show the GCC states, and particularly the UAE, your model of economic development, this idea that you can turn the Gulf into an island of stability with tourism, with finance, with tech, with hotels, all of that will go away if we keep being attacked. If the U.S. and Israel keep bombing us, we are going to turn the Gulf into a live fire zone, and eventually that will make your economic development plans

impossible to achieve. So they're imposing all these pain. They're imposing all this cost. The second reason they're doing this is they are indicating to the GCC that their relationship with the United States is untenable, that so long as they allow the U.S. to have bases in the region, so long as they allow the U.S. to support their security, that from the point of view of Iran, they are U.S. allies, they are U.S. instruments, and that makes them legitimate targets. Yeah, Joe, just on the U.A.E, I think this is a really important point to stress because I think a lot of people don't realize that they're not seeing everything that's happening in places like Dubai and Abu Dhabi at the moment because you have, you know, very strict state control on the images that are allowed to come out there. And in fact, I think we've seen at least one person arrested for sharing a photo of a drone strike or something like that. So stuff is happening there.

And it's stuff that if you're an expat who came to that city thinking that, you're a expat who came to that city thinking that. it is safe and secure. You never really would have imagined. By the way, headline breaking just now from Reuters, Iran's attacks, damage, 17% of Qatar's LNG capacity for three to five years. Greg, tell us about Kyrgy Island. I'd never heard of it before a week ago. It's a place that's very close to my heart, Joe, because it's, I researched a little

bit about it when I wrote my book, which is all about, you know, the 50s, the 60s, the sort of origins of Iran's oil industry. I didn't get around actually mentioning it, though. Unfortunately, I think I had to cut that reference for space. I hate when that happens. Yeah. I know. It's a real bummer.

So Carg Island is a big... I just want to say Cargoyland has the name of like alleged... For thousands of years, invaders have tried to take Carg Island. The lost treasure of Carg Island. Yeah, every all the great civilizations have met their demise on Carg Island. It has that sort of sound, like great powers all like taking the knee. But anyway, tell us what Carg Island is. Oh, sure. Their ghosts haunt to the beaches to this very day. So, Karg Island is a very small island. It's smaller than Manhattan. It's just off the coast of Iran, about 15 miles off the coast. It's at the north end of the Persian Gulf. So a little bit close to Kuwait, that neighborhood. And it is Iran's principal oil exporting terminal. It handles around 80 to 90 percent of Iran's crude exports. Iran exports around 1.5, 1.6 million barrels a day. Almost all of it goes through Karg.

And there are kind of two big reasons for that. Because Iran does have other export ports that it can export crude products, LPG from. Karg is the big one. The two reasons for it is it's designed to handle VLCC's, the biggest oil tankers. It has several berths that can handle, I think, up to seven tankers at a time. So it's a very large facility. It was originally built, incidentally, it was built in the early 1960s by Western companies that were active in Iran at the time, specifically because it was for.

favorable for birthing the largest tankers. So that's what it was originally designed for. It's also close to Iran's main oil fields. So it's fed by a number of pipelines from the coast that bring crude directly from Iran's major oil fields in the province of Kazakhstan and southwest Iran. So geographically, it's well positioned. The facilities there are designed to handle a lot of oil better than any other facility in Iran. And that's what makes it so important. And that's why the U.S. is so interested in it, because there is a belief, there is a theory that if you seize Kareg Island, or if you destroy it, but I think they're thinking more about taking it, then you have sufficient leverage over Iran that you can get them to do what you want,

because you've cut off their financial lifeline. You've eliminated their ability to export oil, ergo they will be forced to do what you want in order to start exporting oil again. That's the thinking. The problem I have with that, that theory is that I don't think it's right. Okay, say more. Okay, so first of all, as I mentioned, Iran has other means of exporting oil. It has other export terminals. There's one at the town of Jask, east of the Strait of Hormuz, that the Iranians have

built up precisely because they're concerned about their reliance on cargo. It's smaller, but it can still handle probably about a million barrels a day with the other terminals operating. So if they lose cargo, they can still export crude. But let's say that the U.S. goes all out and takes out all these terminals, right? either bombs them or sends in the Marines to storm the beaches and seize the terminals. And Iran suddenly can't export any oil from these ports. Iran still has a limited capability of exporting oil by rail.

They have a rail link with Russia. They're trying to build out a rail link with China. Now, they can't move much. But open source and Iranian media has revealed that they have several hundred oil tanker cars that are sufficient for moving probably the equivalent of 100 to 150,000 barrels of oil a day, if they were running all out. The other element of this is that Iran has, because it's been operating under sanction for so long,

Iran, or I should say the regime, has means of moving oil that are not as easily observed. So oil gets smuggled out, particularly through Iraq. It gets loaded onto smaller tankers and smuggled out. Iran is a very, very large refining base, and it's been very profitable for groups attached to the Islamic Revolutionary Guard Corps to buy crude inside Iran, refine it, and then smuggle it out of the country and sell it for huge profits

because oil is subsidized inside Iran. So you can get it for virtually nothing and then you can sell it in another. So there's other ways that they can move energy and move oil without having to rely on CARG. A lot of those ways are controlled by the IRGC, which would probably become even more powerful in the event that Iran loses CARG. because suddenly they have greater control over a smaller fiscal pie. And this also speaks to the psychology of the event. The Americans, I think, assume, or perhaps elements of the Trump administration assume, oh, if we take CARG, then they have to do what we say, because they're going to want to export oil again.

I think that misunderstands that, let's say, psychological characteristics of not only the Islamic Republic, but also of the Iranian state. They will respond extremely negatively to U.S. soldiers on Iranian soil. they will respond very negatively to any overt attempt to force capitulation. And I think certainly for the short term and probably for the medium and long term as well, they would rather live under greater financial pressure and an inability to export oil in volume than to capitulate to a U.S. pressure campaign that involves the invasion of Iranian territory. This reminds me of something that I wanted to ask exactly on this point, which is I think

one of the like underappreciated facts of this particular situation is that Iran's been sanctioned for a while. Yeah. And this gray market infrastructure already exists. And so I'm curious, but assuming that if the U.S. were to try to crack down on some of that sanctioned oil and the way it actually gets out of the country, would you expect that gray market system to start to break? or would you expect to see it sort of like, I guess maybe formalized to an extent or grow even stronger in the face of U.S. pressure like on Kark Island? Well, it's been a long-running dilemma for the United States, which is, you know, how to make sanctions work on Iran. I mean, part of the reason why we're now in a shooting war with Iran is because

sanctions didn't work. Sanctions were designed to change Iran's behavior, to force them to make concessions. Iran found ways around the sanctions, refused to make concessions, and the U.S. felt, I think, compelled to some extent to use military force, although I think there were lots of other reasons on top of that. If the U.S. were to, let's say, take Karg, but also to try to really vigorously eliminate Iran's ability to export oil, first of all, I think it would have to be pretty comprehensive, and I think it would have to be pretty aggressive, and it would have to be sustained for quite a while, right, patrolling Iran's coastline. It's about 1,200 kilometers long. stopping any and all ships that are trying to exit Iran's export terminals, clamping down on overland routes. Iran smuggles oil through Iraq. It also smuggles a certain amount of oil through Turkey and into the Caucasus and into Pakistan. That trade is much more difficult for the U.S. to interdict. And that's where a lot of this illicit kind of gray market activity happens on top of the black market activity.

So I think the upshot of trying to cut off the flow of oil with the means that the U.S. has, including military force and interdiction, only incentivizes the Iranians to turn to these alternative routes. At the same time, what you're doing on the market level is you're putting more upward pressure on prices. Yeah. You're creating an environment of higher prices, which only further incentivizes gray and black market activity

because now the profits are even better. It's interesting, any country that has some heavily subsidized domestic, price of anything, we're going to keep the domestic price of gasoline or oil well below the global market price. I mean, that's just a banana for smugglers, right? I mean, like, that must be just like the more you press that button, the greater the incentive is for someone to find that

and move it on to the world market. I mean, I think this was, of course, a story in the sort of late Soviet era. You have these, like, price controls. And then you have these quasi-state companies just absolutely making a fortune, finding a way to, like, you know, sell the locally made toaster in Europe or whatever it is. just make a fortune. I hadn't really thought about that, though, in the context of Iranian oil. All right, let's just go back to the pure energy question. I mentioned the damage that we've already seen in just a few weeks of the war to LNG exports and et cetera. There has been this

obvious mismatch and expectations. A lot of people think Trump would fold. Perhaps the reason oil isn't higher currently right now is still this sort of embedded expectation that Trump can't take this much longer. Let's just say it goes on, like, how bad could this get? And do you think that still today, the price of oil reflects perhaps an unrealistic expectation that this war is going to end soon? And how much do things just compound and metastasize the longer this goes on? And where might we see the price of some of this stuff? What does it look like in your crystal ball? So I think expectations are definitely shifting or have shifted to the belief that this is likely going to go on. for a while and that the supply effect is now such that prices are going to stay high for the rest of this year.

High relative to what we thought that they would be, right? When we entered 2026, there was this broad expectation that this was going to be a pretty soft market, that there was going to be an imbalance supply over demand, demand growth was going to be pretty soft, pretty sluggish. And that was going to keep prices low. It was going to keep them in the 60s, maybe in the 50s per barrel. That is all changed now. I think seeing oil prices fall below $75 a barrel by the end of the year is pretty unlikely, even if this conflict wraps up very quickly. I mean, looking at three things. The front month, the Brent front month, being at about 113, 112, I think that's approaching

realistic expectations because Hormuz is still closed, because some amount of crude is getting out via Saudi and UAE pipelines, but those pipelines are vulnerable and they can be disrupted. And as we've seen, the Iranians have the ability to do pretty significant damage to energy infrastructure if they really go for it. I mean, Joe, you mentioned the damage done to the Qatar facility last night. That was, I believe, one missile that got through. Wow. And caused enough damage that they'll have to keep the facility off for a long time

and has now cut production for years to some extent. And so that's one missile. And I think they could do more if they wanted. They could go after tankers more aggressively. Like they're keeping their powder dry in the Strait of Formuz for the most part. They're usually, they're mostly operating off of threats. So if things were to get worse, which they very well could, prices could go higher.

The other price point to look at is spot price for physical cargoes coming out of the region. If the front month is around 111, and that's the futures, the price of a barrel of Omanee crude right now, you go to Oman, you buy a barrel of oil, is over $150 a barrel.

That's the premium that's now being placed on Middle East production, out of Oman, out of the UAE. And those prices are coming through Asia, and the Asians are now bidding up the price of oil coming from other markets, So you're going to start seeing that reflected elsewhere, right? Oil coming out of the U.S. is going to start ticking up.

Oil coming out of other production hubs is going to start ticking up. The final point that I would say, the final sort of price point that I would look at is when you look at the curve, when you look at prices over the next 12 months, all of them are higher than they were a week ago, and they're still coming up. They're still rising. The expectations are that this isn't going to end soon. And even if it does, the size of the physical disruption that we've seen so far is going to create constraints on sort of. supply going through the next 12 months. And that's even with releases from strategic petroleum

reserves, right? The U.S. releasing oil, other IEA members releasing oil, that's going to alleviate the pressure somewhat. But at the same time, those are stockpiles that are going to have to be refilled. And I think everybody is going to be very concerned about having a low inventory of oil when this war is over because everyone's going to be thinking about this happening again if the Iranians survive, which they are likely to. Also, doesn't it take a while for oil released from the SPR to actually get into the market, which I think is also underappreciated. Yes, it's slow. It's a slow process. The U.S. can only, they say that they can release 1.4 million barrels a day. It's probably more like 1 million barrels a day. And it eats into U.S. crude export

capacity. So if you're releasing oil from the SPR, you're kind of holding back on crude exports from commercial producers because they all come out of the same infrastructure. The SPR releases are more a signal. They're more a saying, like, the inventories, you know, here's oil that will be on the market over the next three to four months to make up for a physical shortfall, an actual shortfall of supply. Because if there weren't SPR releases and everyone was just forced to eat the supply loss, which is approximately 10 million barrels a day right now, I mean, that's 10% of global supply that is just not getting to where it needs to go. So I just have one last question. Since the theme of this conversation or one of the themes has been this idea of hypotheticals

turning into reality, just going back to the old Strait of Hormuz closure thought experiment that probably everyone in oil and gas has dedicated some time to in recent decades, now that it's actually happening, is there anything about the situation that has surprised you as it's been playing out? And you know, honestly, what's been surprising to me, two things that have been surprising to me. How little the Iranians have needed to do to Hormuz to keep it shut. They've struck about a dozen tankers. They haven't sunk any, as far as I know. They haven't laid more than a few minds as far as anyone is aware. Activity at Hormuz has been pretty quiet because as soon as the war began and as soon as the Iranians said straight of Hormuz is now closed, all the shippers stopped.

Nothing was moving. The threat was enough to keep it closed, which I thought was surprising. The second surprising point, and this kind of feeds into the first, is that I was told, my understanding was that this was a scenario the U.S. Navy had prepared for, they had lots of plans in place, they knew what they needed to do to keep Hormuz open in the event that the Iranians tried to shut it. And then the Iranians shut the Strait of Hormuz, and the U.S. response has been insufficient. It's not only that they haven't like done enough to open the straight, it's that they didn't seem to have expected this at all, that the Iranians would respond to this kind of an attack by playing their principal Trump card. So between the effectiveness of the Iranian strategy and the lack of a strong U.S.

response, a strong U.S. effective response, has been really surprising to me. Greg Brew, fascinating conversation. Love catching up with you, truly the perfect guest. Thank you so much for coming back on Lhapov. Thank you so much for having me back. Greg's just the best. He's so good. I mean, you know, all of our guests are perfect guests.

That's right. That's right. But Greg is a perfect guest. Truly the perfect guest. No, that was a fascinating conversation. I mean, I think he laid out very clearly the strategic difficulties that the U.S. now faces. And actually, you know, you mentioned Carg Island sounding like, you know, a place where great powers. Yeah.

Julius Caesar met his demise at Carg Island, Alexander the Great, you know, whatever. So I was thinking, like, one of the first. So I was thinking, like, one of the things that still amazes me is that geography still matters in the world, right? Like, you have all this high-tech, high-tech missiles, high-tech drones. But actually, we're still limited by geography in many ways. I had that thought when he mentioned how mountainous the areas were around the Strait of Hormuz. And it's like, okay, why can't the U.S. simply take out Iran's capacity to fire drones and missiles at the ships going through? Well, it's heavily fortified deep in the mountains in the air.

not easy to spot, not easy to target, etc. So yes, geography, geology, et cetera, extremely important to this question. The other thing I was thinking, this is a very serious conversation, and this is not a very serious comment. But, you know, he mentioned very large crude carriers, VLCCs. I love how literal that name is. Whenever I hear anyone mention that, I just think, like, there was a guy one day who invented the ship. And he was like, you know what? We're not going to call it like a brig or a schooner.

or something. We're just going to call it what it is, a very large crude carrier. That is very funny, actually. Look, there was a lot there. The other thing, and I think it was the last point, is this idea that, and it's sort of ominous, which is everyone sort of assumed that the Navy would have had a straight-in-form moves plan, given the amount of time and energy that's been thought about contingencies and what a disaster this would be. And yet. And then it closes, and then it's like, oh, what are we doing? we're going to have a plan. You know, it's very, everything felt so far is we are planning to have a plan and so forth.

And so the idea that you'd start this war with at least the possibility of the straight being closed and then it's closed. And you basically do nothing and nothing passes at all. Pretty worrisome on, I suppose, both a sort of immediate and long-term level about what the state of planning and then the state of military capacity for what should have been at least a possibility. understood from the very beginning. Yes. And also, there's just an asymmetry at play here, which is like every day that goes on that sees some significant energy asset, whether it's in Iran or in Qatar or elsewhere in the Gulf region, that like echoes for months. Right? Like the daily time frame for those assets getting destroyed is very short. So just in two or three weeks, we've seen a lot of stuff get damaged. But the time frame for the actual impacts of all of that to come to fruition and ripple throughout the economy are very, very long. Yes. And so I just think like the with every day this goes on with every additional bit of infrastructure damage, it just gets worse and worse.

It gets worse or worse. And as you said, these are one missile, right? Right. And some of these instances. And you're talking about years of damage to infrastructure, which is pretty ominous for any sort of expectation that, again, Trump. could taco, right? He could declare war and still talk about years of repercussions from this. So, yes, pretty serious consequences to all of this. All right. On that note, shall we leave it there?

Let's leave it there. This has been another episode of the Odd Lots Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway. And I'm Joe Wisenthal. You can follow me at the stalwart. Follow our guest, Gregory at G. Brew 24. Follow our producers. Carmen Rodriguez at Carmen Armin, Dashobin. a Dashbot and Kail Brooks and Kail Brooks. And for more odd lots content, go to Bloomberg.com slash oddlots. We have a daily newsletter on all of our episodes. And you can chat about all these topics 24-7 in our Discord.

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