The Munk Debates Podcast - Friday Focus: a regional war with global consequences

Episode Date: March 21, 2026

Rudyard and Janice believe we have entered into a critcial moment in this war and it is playing out in the Strait of Hormuz. This conflict is now about energy: who controls the flow of energy and who can better withstand the pain of higher energy prices. We are going to see a turning point this week; if neither side is willing to back down, the only outcome in this story is escalation. Meanwhile U.S. marines are currently on their way to the region suggesting the U.S. might attempt to cut off Iran's capacity to export oil by taking over Kharg Island. How will China, a major consumer of Iranian oil, react to this provocation? Why is this good news for Russia? And will the inflation of oil prices reshape Donald Trump's prospects in the upcoming midterms?Become a Munk Donor ($50 annually) to get 72-hour advanced access to the full length editions of Friday Focus and Munk Dialogues. Go to www.munkdebates.com to sign up. Hosted on Acast. See acast.com/privacy for more information.

What leverage does Iran have here? Exactly what you just talked about. Rudyard. Higher oil prices that will push inflation throughout the global economy and every oil importing country in the world. What bet do you make here, Redyard in this game of today? Welcome to the Friday Focus podcast for the 20th of March, 26. I'm Rudyard Griffiths, joined by Janice Gross Stein,

the founding director of the monks. School of Global Affairs. Well, Janice, we're coming to our audience late on Friday because we wanted to try to capture as much of the fast-breaking news out of the Middle East, the White House points in between. So thank you for staying up late in joining each other in our respective living rooms, as I'm sure many of our Friday focused listeners are right now. So, Janice, a hinge moment, I think, in this conflict.

this week and want to get your thoughts as to where we find ourselves late Friday night on the 20th of March. I think you're absolutely right, Roger, that it is a hinge moment. This conflict now turns on energy. Who controls the flow of energy and who can better withstand the pain of higher energy prices. It is going to play itself out in the Straits of Hormuz and Carg Island. There are Marines on their way. Marines are expeditionary forces. That's what they are. You don't send them unless you are planning to deploy them, either at naval bases or on the ground in some capacity, I believe this war is now going to be determined in the Gulf, in the straits, and by the capacity to endure higher oil prices.

Some, again, odd comments out of the president as we wrap up Friday night. Earlier, as stock markets closed, he kind of stated that he seemed to, happy for this war to continue on, that he had no plans for a ceasefire. And then literally, moments later, he said that the United States is considering winding down the war. Janice, what are we to make of this? These kind of whipsawing statements from the president. One moment, bellicose, at the other moment, seemingly looking over his shoulder. Maybe it was the bond market reaction today, a spike in borrowing costs in the United States and around the world, as investors anticipate a potential inflationary surge pushing through developed economies,

which would, of course, less than the value of those very bonds that bondholders have and that governments like the United States, especially heavily indebted ones, want to sell. When I heard those comments, and as you said, they were literally, it seemed to me, minutes apart, the only way I could understand those, Roger, is their market manipulating comments. They had nothing to do with the coherence of a strategy. You can't, I mean, you can't make any sense of a performance like that from a strategic point of view. So they are designed on a Friday to send market signals. I think that's the only way we can really understand it.

Bigger issue is those Marines that are on the way. And let me just take a moment. There's a famous game of chicken, which teenage boys play. Right? When you start down the road, a one-lane highway, and you're driving a motorcycle, a souped up one, and the real issue is who blinks first. And I can't tell you the number of stories that have been written about that. We're at that moment right now.

Iran would suffer terribly if its capacity to export oil. We're limited. It depends entirely now on that oil revenue to keep the lights on. to keep the remaining water plants going. It cannot exist if it does not export oil. That's the leverage the United States has. The other side, what leverage does Iran have here? Exactly what you just talked about.

Higher oil prices that will push inflation throughout the global economy and every oil importing country in the world. What bet do you make here? read geared in this game. Yeah. Another piece of this that's been introduced late Friday is the president in what's seemingly again, a fairly carefully scripted tweet. This is the one where he's kind of flagging that, you know, we've won and maybe we're winding

down. But he goes on to say that the Straits of Hermuz will have to be, quote, guarded and policed as necessary by other nations who use it. The United States does not, he says. He goes on to say that, you know, Iran's threat in the straits is, in a sense, America's problem despite having initiated this war and effectively elicited an Iranian response that has closed the straits. So again, with all these things, you don't know quite what to react to, or more importantly, what intensity of a reaction to allocate to anything that this president says.

But if there was a spectacular climb down in the works, surely, Janice, that would be it. It would be the United States to kind of walk away from this mess, say the obvious that the U.S. does have a lot of energy independence as the world's largest hydrocarrier. carbon producer and effectively the cleanup duty falls to, I don't know, China, the Asian powers, Europe, others who rely on liquefied natural gas and oil coming through the Straits of Hermos. I mean, that's clearly what the president was implying in that one remark. We're going to ignore for a moment. The other three he made that contradicted that state. But it's quite interesting because I was speaking to a senior diplomat today.

and this person said to me, well, isn't that great? He set the Middle East on fire. And as the fumes are starting to burn and spread, he says, we're walking away because we don't need the straits of four moves. You fix it. That is not an uncommon reaction with the president to walk away from this at this point, with Iran left in charge, of which countries can export oil. Let's add to this. Just one other factor I did. I was looking at some of the numbers.

There have been 55 attacks on energy infrastructure in the last week. In the Gulf, principally in the Gulf, there were one or two on the height for refinery, but that doesn't matter because it's not really a global oil export. 55. The Tahris and the Emirates are saying it's going to take months to repair. So I think that's an important thing for everybody to understand here. There's no, we pass the point where there was an easy, quick fix to this war. And if the war just stops in the next two days, we're not going to feel the effects

through the global economy. Those effects are already now baked in. Yeah, the IEA, the International Energy Association, saying in effect, this is the biggest supply shock, maybe in the history of oil markets, it may well already have started to rival the historic shock of the 1970s that you Janus remember and live through along, I'm sure, with many of our other listeners. We are seeing even right now tonight, I'm looking at global oil prices. It doesn't seem like the president's remarks have calmed Asian oil markets. We have spot prices across the board at $150 for oil delivered to India. Oman oil, I guess the difficulty of getting it out through the straight, $162 U.S. a barrel. there are reports that the Philippines has urged citizens to stay at home four days a week and not commute to work on the fifth day.

Similar, you know, demand destruction is happening in Vietnam with schools, education systems, workplaces closing down in the coming week on an advisory basis to try to limit domestic consumption. So, Janice, I think you're absolutely right. I guess it goes back to something we talked about last week is that the president could talk about winding down or he could talk about living the Straits of Hermos to others to sort out. But one, that assumes that Iran will go along with a reciprocal wind down, whatever that would mean euthamistically in their operations. What do you think the chances of that are right now? where do you see the Iranians at as we wrap up week three of this war and start to head towards the one month mark? Let's both acknowledge it is really difficult to get, you know, good information out of Iran

and even information about who the key decision makers are this moment and how they are making decisions. One interesting thing that I did find in the last day or two to read was a diary that possessed him, the president of Iran, his son he's writing every day and is publishing online and somehow that leaked and was translated. And I thought that diary captured much of the contradictions. On the one hand, of course, fierce, loyalty. to Iran, deep, deep worry about the security of his father, who he's very worried that his father will be a target of assassination. And the interesting part, Rudyard, was the description of how difficult it was for his father to communicate with other decision makers inside the country.

They're very reluctant to use cell phones or any other digital means. They're reluctant to come out and meet in person because of all the risks. And so he really, he was saying there is no centralized decision-making authority right now in the country. It's all decentralized. The military decision-making is decentralized. It's not really well-coordinated with political decision-making. And the vivid description of how difficult it is to make any decisions right now that are coordinated across the military, the revolutionary guards, and the political sector. If that's true or what he has written is even half true, your question is really telling.

Because you need some sort of coordination among decision makers, even to a decision maker, even to a question. accept an offer that's made. And it is really, really difficult now inside a run. I think you plan on confusion inside that elite now as they react to events. And so I don't think that a nice, orchestrated, neat, mutual wind down is in the cards, frankly. That's just not going to happen. It has been frustrating to jump between news sources because it's clear that Al Jazeera is censoring a lot of the strikes.

Same for Israel. It should be noted that the IDF has extensive blackouts on a lot of media reporting out of Israel. So it's hard to know what is happening. think, though, Janice, the fact that Iran continues to be able to counterstrike with real accuracy on specific energy targets, which are being reported out, those strikes, you'd have to assume that they're also striking with some efficiency on military targets, either American bases or targets in Israel. So while there may be disruption in the command and control, it's still seems Janice, maybe I'm a little surprised at the extent to which three months, sorry,

three weeks into this, the Iranians are able to push back. And as we saw after the attack on their gas fields shared with Qatar, they lashed out into today with attacks on energy infrastructure across the region, from Kuwait to Bahrain to Saudi Arabia. obviously the original counterattack against the Qatari portion of the gas field and export terminals. So what do you make of that? It doesn't seem that their capacity to go on the offensive has been neutralized as the president and others seem to claim. Well, you know, I always thought, Rudyard, that the pace at which they were firing as a metric for how this war was, was going, we had to take it with a grain of salt because it would be suicidal not to hold in reserve,

frankly, which is what I think they've done here. I also think that much of this plan was predelicated. It was worked out by Aytto Aou, How many before he died, they distributed the command structure, so there's a possibility. that simply on the receipt of some kind of even coded word in a message. That's a message to fire. So I think we, again, it's really hard. Nobody knows how many missile launches are left. And also there was a wave of attacks today that followed the strike, a wave that just washed over the pole gulf and Israel.

we don't know and I want to come back to one other point in a minute we don't know how much of these were missile attacks how many of these were drone attacks because Iran has thousands of drones. One really interesting puzzle is that there are private satellite providers who normally

you subscribe and you get good satellite pictures which you upload on your home computer the probably best one is planet. That stopped, or most of it has stopped since this war started. So it's not only military censors, it's the whole channel, which was providing really valuable pictures by which independent experts could verify what they're hearing for some reason. And it will be really fascinating to find out when this is over why.

but that feed has really, really slowed down. So let's turn our heads to the coming week and what we might expect. It sounds like you were saying earlier that there's game of chicken possibly going on here. The movements of these U.S. Marines could be, again, a bluff. Unfortunately, sometimes you've got to follow through on those bluffs if your bluff is called. And it sounded Janice, to connect what happened might happen next week, I believe the first arrival of the Marines from Japan would be in five to six days from now. So there's still time here. It sounded as if the Israeli attack on the Iranian gas fields was in a sense either a threat or an intimidation related to.

to the Straits of Hamoos. I think there's reasonably credible reporting that the Trump administration, despite the president's remarks, did approve that attack. And it was proved either on the basis of following through on a threat to do so if Iran didn't back off on the straits.

If you accept that, that would suggest, Janice, that both these drivers are strapped to their steering wheels. And right now, neither one of them seems inclined to swerve off the road and, you know, in classic game theory, make the first move. Yeah, I agree. I worry that we're going to see escalation this week, right? That's why I think this is one of the turning points in the story.

if neither side is willing to swerve, which means back off, climb down, it doesn't matter what word we use here. If neither side is willing to do that, the only outcome of this story is escalation. And I think that escalation is likely now before we see a decline in the intensity. I think you and I both know that that is not. not what most people expected when to start it. It wasn't what military people expected. It wasn't what energy economists expected.

Everybody thought this was going to be short and fast and people would put the brakes on. I think that's just wrong, Roger. This is an existential war for Iran. And let's look at one last piece that happened today, which was the execution of three dissenters, one of a very young man, a very well-known wrestler inside Iran. That's deliberate.

That is deliberate because the president had said that was a red line he drew in January when the protesters were on the streets. This was in his face. It was done. It was a taunt. It's a dare. It's a provocation.

and it's, look, you said you were going to do something and you're doing nothing. That's a very risky strategy when Marines are on their way. Yeah. So what, I mean, that seems to be the next big question is that will President Trump, in some shape or fashion, deploy U.S. troops on the ground, the proverbial kind of boots on the ground? If, again, he's all over the place from one hour to the next, you don't know. But if he's starting to send messaging that, you know, the Straits for Firmuz is everybody else's problem and not his, then maybe understandably this is not an administration that's going to consider a larger U.S. ground operation,

the type that would potentially involve, if you look at estimates, maybe thousands of troops to secure the Isman. at the straits to in a sense contain the shoreline, actually have some military control over the shoreline. If that's out the window, then where do you see this military deployment happening? Here's my worry about doing. It's a worry in all honesty. I think these Marines are destined for Kark Island.

Yeah. And for our listeners, Cargo Island is 400 miles away from the straits. So what does this really mean? I'm worried that their plan is to cut off Iran's capacity to export oil. In full knowledge that that is going to inflate the price of oil, the United States willing to take that risk. That, for the Iranians, leaves them with no sense.

choice, but either to retaliate by closing off entirely the export of oil or by reaching out and offering to negotiate. So let's play that out of a little bit more because that export terminal is important to China. China is a major consumer of Iranian oil. So President Trump has postponed. his April summit with Xi. I mean, how are the Chinese likely to react to something like that? Because surely Janus would be seen by the Chinese as an attempt by the Americans to, in a sense, kill two birds with one stone.

One hold Iran hostage and effectively say, it's time to negotiate. You know, we'll give you back your export terminal. You know, on these four conditions, one of which is free transit through the Straits of Fremuz and maybe a safe for the United States in the future of your energy sector and where this oil goes and what currency that oil is denominated in. That seems like to be an important subtext in a lot of this, Janus, is defending the U.S. dollar system. Americans are worried about this. They're worried about the rise of the Juan and China. and the fact that most oil is traded in dollars matters to the maintenance of the U.S. dollar as the global reserve currency.

So I see that little piece of geography, that island gen is becoming like a flashpoint for so many different issues that it go beyond Iran and really start to involve these great powers, China and the United States. It is fascinating because we should focus. on these two pieces of real estate. There's narrow isthmus that you talked about through which oil trends, you have to transit that. And it's the Iranians can control it just from the banks, where they have the missile placements on the banks,

and they can control the traffic. And Cargoyle, which is crucial to them, two small pieces of real estate, which makes there still a regional war, but with global consequences, with huge consequences for the global economy, particularly Asia, with huge consequences for China. The Chinese will be very, very concerned about this. Huge consequences for Russia.

This is a gift to Vladimir Putin. It is the gift that keeps on giving. The higher the price of oil goes every week, the better for him. And I don't think Putin is one bit upset that the Chinese are upset, frankly, in this story. Because it makes them more dependent on Russian energy. And it probably explains. Yeah. You know, I don't think Vladimir Putin was very happy being Xi Jinping's poodle,

which was increasingly what he was becoming. And so the right here. is the every center in these two places that we and I should be watching very terribly this next week. So then just to wrap this up, Janice, there's, you know, there's always the chance that, you know, peace breaks out. You know, the Chinese are calling on the French and a kind of China French initiative to try to de-escalate the French. French obviously have a long history with Iran and generally have been of all of Europe's interlockiers with Iran, one of the closer ones.

French energy companies have been involved in the Iranian revolutionary period in their energy sector. I don't know what to try to end this podcast on the fork in the road, from what you're feeling it sounds like you think. There's another phase of escalation here. Maybe a wrong geography, but right phraseology, a Mexican standoff over Iran's export terminal in the next maybe 10 days to two weeks. And then after that, Janice, could we hope for some kind of shakeout here? Because at the end of the day, as you said, Iran needs its oil to flow also. It has to transit the Straits of Hermuz with its oil to China.

It's kind of apparent geopolitical ally and probably the single largest, most important economic supporter of the Iranian revolutionary regime. So at the end of the day, everyone's longer term interests, you can see they all align here. The oil needs to get out. It needs to get to markets. There are different people that want it for different reasons. The Iranians want it for their reasons, the rest of the world for their own. So that's where we're headed, Janice. I guess it's just a question of time.

Yeah. And look, why don't we're headed there, Roger? Because that is the only real levers the United States has now with the Iranian regime. It's not, of course, they need to export this to China. But they have, you know, their economy is on the ropes, registered, in a way that is just unimaginable. But just think about this. The blackouts, there are short of electricity in Iran right now. They're short of water.

They cannot keep going unless they get access to the proceeds from selling oil. So this would be an enormous gamble, frankly. and it could go very badly wrong, and it could reshape Donald Trump's prospects in those midterms, which I'll vote today. We are almost at the first day of spring. Interestingly enough, it's Naurus in Iran, which is the traditional Iranian Persian holiday around the first day of spring.

It's almost the end of Ramadan. In a lot of the Gulf states, it is. And there's no celebrations. Let me tell you that. Yeah. Well, Janice, thanks for staying up late with me on a Friday night. If you're listening to this Saturday morning, as a valued monk member, thank you so much for letting us get you what we hope was the most kind of up-to-date

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please consider joining Elizabeth H and become a monk donor. You can do that right now on our website, www. monkdebates.com. N-U-M-U-N-K Debates withan-S.com. Janice, great conversation today. We will catch up, and needless to say, if there's an emergency episode dropping, Marines are landing on the beach again,

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