The Peter Zeihan Podcast Series - Oil Markets Aren't Worried About Iran || Peter Zeihan

Episode Date: June 23, 2025

With everything going on between Israel and Iran right now, I know what you're thinking - it's time to run to Costco and fill up the gas tank. Hear me out though, we don't live in the same world we did a few decades ago.Join the Patreon here: https://www.patreon.com/PeterZeihanFull Newsletter: https://mailchi.mp/zeihan/oil-markets-arent-worried-about-iran

Hey all, Peter Zine here coming to you from a somewhat breezy and drizzly Colorado. Today we're going to talk about the attack that happened over the weekend in Iran. Israel's basically bombing the crap out of Iran going after the nuclear facilities. And contrary to popular concern, oil prices really haven't done all that much. They've moved less than 10%. Why do they not care? Why do I not care? Now, if you back up 20, 30, 40, 50, 60 years ago, any sort of spat in.

involving Israel in any way, immediately sent oil prices through the roof. And if it involved Iran, oh boy, howdy. Because the Persian Gulf remains, even today, the world's largest producer of crude and by far the world's largest exporter of the stuff. And with, in the modern day, the Europeans no longer taking crude from Russia because of the Ukraine war, it's become more important to global petroleum than it's ever been before. However, however, however, there is another factor, and that is the, U.S. Shale Revolution. The United States, in the last 20 years, has gone from the world's

largest importer of crude to, in gross terms, the second largest exporter, second only to Saudi Arabia. Doesn't mean we're completely immune to what's going on, but it does mean that we're dumping more than 10 million barrels a day of crude into this market than what we did before, closer to 15, actually, now that I think about it. And that changes the math for everything. Because if we did have a sharp cutoff of everything in the Persian Gulf, the United States would face some teething pains as we use some of the crude grades that we produce in refineries that weren't designed for it, but overall we'd be okay. And having that extra 10, 15 million barrels a day of global production

just means that in percentage terms, the Middle East doesn't matter nearly as much as it used to. Now, where does that take us more specifically? What would make us worry? I am of the opinion now that even if Iran decided it wanted to shut down the shipping lanes in the Persian Gulf, it probably couldn't. They've got a lot of small boats, a lot of them are really nothing more than speedboats. They could do some damage, but about the only thing that is going to get Iran any assistance, any sympathy in the international system is if it doesn't shut down the energy line

that allows countries like China to function. If it does that, it really is all on its own, except for the Russians, who would be happy to see global energy go up in smoke. Which means it's down to how good their military is. and Iran has never, ever, ever in its history been a naval power. Probably the last battle that Iran was really noteworthy. It was like against Sparta. And if you've seen, you know, those movies, you know exactly what I'm talking about.

It didn't end well. What would make me care? Well, if Iran were to take its military and surge it into Iraq and south through Kuwait and go for the Saudi oil fields with the intention of taking them offline, that would get my attention. Iraq plus Kuwait, you're talking 5 to 6 million barrels a day. Once you talk about the Saudi oil fields, you're talking about another 10. All of these Saudi oil fields are in the far east of the country, really close to gutter, in a Shia majority area.

And in theory, the Iranians who are also Shia religiously would get along with these people. So you could see some sort of rebellion happen at the same time. But for that to happen, that would be a big risk for Iran these days. One of the things we've seen with the Israeli attack, is Iran no longer has any meaningful air defense whatsoever, and it's generally easier to have static air defense, and it has mobile air defense. So if they take their army and throw it at Saudi Arabia, they would have no air cover at all. In addition, Iran does not have what we would consider to be a mechanized military. It's an inventory-heavy force. So you'd basically be sending, I don't know,

50,000, 100,000, 200,000 men marching through the desert 500 miles, leaving aside the logistical trained that would be easy pickings, they would be completely open to the sky the entire way. And so even a successful operation would be hugely costly for them. And a failed operation would mean the end of the Iranian government because the Iranian military wasn't designed to fight other countries. It was designed to occupy all of the non-Iranian, non-Persians in the country of Iran. Only about half the population are ethnically Persian. So if, if they were to do that, it would be incredibly risky. And unless they pull it off successfully, I still don't care. And neither should you.