While events in the unprovoked Israeli-U.S. aggression against Iran remain in flux due mostly to the quixotic, contradictory and downright duplicitous policies and actions of a seemingly mentally unstable American president, it is quite difficult to assess the effects of the war on U.S. and world energy markets and thus their overall economies.
What is certain is that all wars are exercises in mass murder and the lowering of living standards for most. The notable exception, of course, is the Military Industrial Complex and the political class that wantonly feeds it.
The detrimental effect of war on human life outside of the killing is best explained by Henry Hazlitt’s “Broken Window” essay in his most popular book Economics in One Lesson. Building on the work of the great French economist Frédéric Bastiat’s essay “What is Seen and What is Not Seen,” Hazlitt’s analysis can be applied to the destructive aspect of warfare.
The labor, resources, and land that could have been used to create new capital and consumer goods – hammers, drills, tractors, refrigerators, cars, houses, etc. – have to be used to rebuild the destruction caused by bombs, drones, and missiles. Fewer goods and diminished and/or compromised infrastructure – water, heat, sewage, electricity – means that a society is worse off.
This obvious aspect of warfare is sometimes lost among even the most keen observers of geopolitics. A number of these analysts have opined that the Russian economy has not been adversely affected from the losses it has suffered during the Ukrainian conflict which most sources have estimated to be between 1 to 1.2 million in casualties – killed, seriously wounded, or missing. The Ukrainian losses are likely double as much.*
In economic terms, however, the loss is the foregone production that would have occurred (unseen) with the labor that these unfortunate souls would have contributed to the creation of goods and services.
More tragic is the hit to the Russian and Ukrainian populations that will be felt in the reduction of families and the children that would have been brought into the world. This is happening at a time when the white population of the world is shrinking at an alarming rate.
The same can be said for the U.S. economy in general. With renewed calls for greater spending to replace munitions used up on Iran and armaments and funding given to Israel, the Trump administration is asking for a “defense” budget of $1.5 trillion. While the request will undoubtedly be approved by a supine Congress, it will require further borrowing by the government adding to the already astronomical national debt of $39 trillion, at which it currently stands. It is estimated that, at its current pace, the debt will rise by $1 trillion every 100 days.
Applying the insights of Hazlitt and Bastiat, the opportunity cost of deficit spending will divert capital away from the creation of capital and consumer goods to the unproductive and wasteful production of military hardware.
One of the reasons that China has emerged as an economic superpower is that its spending on defense in proportion to what the United States spends has been quite low. Savings and investment could thus be plowed into China’s domestic industries. This, combined with a friendly business environment and low public and personal debt, has transformed a once communist economic basket case a couple of generations ago, into the world’s No. 1 industrial power.
The curtailment of Persian Gulf energy products has negatively affected China’s economy, although not as bad as the impact has been on other East Asian nations. In 2025, crude oil imports from the Persian Gulf to China totaled 11.55 million barrels per day, or about 558 million tons for the year, about 13% of which was coming from Iran.**
In anticipation of the conflict, China replenished its strategic oil reserves, but it has had to cut off its supply of refined oil to its East Asian trading partners, which has created a crisis in these markets and has damaged China’s export sales. If there is no resolution to the conflict, and Persian Gulf energy production is not returned to its pre-war levels, China can turn to Russia to make up the difference through the trans-Siberian pipeline.
America can better absorb the supply shock than most of its trading partners, since the importation of Persian Gulf oil has declined over the past five years to only about 8% of total U.S. crude imports, while its consumption of non-oil imports – aluminum, fertilizer, plastics, etc. – is negligible to its overall share of imports.***
If Persian Gulf-dependent nations who are trading partners with America have to spend more income on energy, there will be less available for the purchase of non-essential products. This will eventually affect the U.S. economy. This is another unseen consequence of the disastrous decision to make war upon the nation of Iran.
Similar to the unseen costs of the Iran war, the real reason for the conflict has been obfuscated. While the Trump administration’s stated objections have changed almost daily – ending Iran’s nuclear enrichment program, curtailing its ballistic missile capacity, supporting Iranian protestors – the real purpose of the war is part of the Greater Israel project described by Dr. Paul Craig Roberts:
Greater Israel consists of the entirety of the Middle East –
“from the Nile to Pakistan.” It formerly was “from the
Nile to the Euphrates,” but has been expanded to
Include the entirety of the Middle East.****
Iran is making a fundamental mistake by not “negotiating” on this point. According to Roberts, unless the Jewish state renounces Greater Israel, there will never by peace in the Middle East, and the costs both seen and unseen to the American and world economies will be severe.
*Grok, https://x.com/i/grok?conversation=2046234837766361447
**Grok, https://x.com/i/grok?conversation=2046233296506433959
***Grok, https://x.com/i/grok?conversation=2046235343486149108
****Paul Craig Roberts, “Greater Israel Wrecked the Peace Talks,” 12 April 2026, https://paulcraigroberts.org/vice-president-vance-blames-iran-for-wrecking-the-peace-talks/
Antonius Aquinas@antoniusaquinas
https://substack.com/@antoniusaquinas?
posted, eds. 4-27- ’26
Antonius Aquinas 