I imagine the main consequence is going to be complete collapse of faith in the US being able to protect their vassals. The Gulf states invested incredible amounts of money in the US, they allowed Americans to put their bases there, and expected American protection in return. Now they’re seeing that the US can’t even protect themselves, let alone provide protection to them. And the rest of the world now sees it too. Europeans were already chaffing, and now the US dumped another huge turd on them. Korea and Japan are likely in a panic now. Philippines are already trying to cozy up to China.
On top of that, Iran now demands that oil going through the strait is settled in yuan. This is a direct attack on the petrodollar which builds on Russia selling oil outside the dollar system already. At this point the whole status of the dollar as a reserve currency is coming under threat.
It’s also not clear that prices will stay where they are going forward. Right now it’s being amortized by the release of the reserves and the fact that tankers that topped up before the strait was closed are still on the way. Once that dries up, we’ll see what the real effect is. And Iran could just choose to prioritize friendly states while continuing to choke off access to the vassals in Europe.
If G7 economies start tanking as a result of that, they’re necessarily going to drag US down with them as well. Even the current shock is already impactful for Americans.
I imagine the main consequence is going to be complete collapse of faith in the US being able to protect their vassals. The Gulf states invested incredible amounts of money in the US, they allowed Americans to put their bases there, and expected American protection in return. Now they’re seeing that the US can’t even protect themselves, let alone provide protection to them. And the rest of the world now sees it too. Europeans were already chaffing, and now the US dumped another huge turd on them. Korea and Japan are likely in a panic now. Philippines are already trying to cozy up to China.
On top of that, Iran now demands that oil going through the strait is settled in yuan. This is a direct attack on the petrodollar which builds on Russia selling oil outside the dollar system already. At this point the whole status of the dollar as a reserve currency is coming under threat.
It’s also not clear that prices will stay where they are going forward. Right now it’s being amortized by the release of the reserves and the fact that tankers that topped up before the strait was closed are still on the way. Once that dries up, we’ll see what the real effect is. And Iran could just choose to prioritize friendly states while continuing to choke off access to the vassals in Europe.
If G7 economies start tanking as a result of that, they’re necessarily going to drag US down with them as well. Even the current shock is already impactful for Americans.