When Everything Goes Wrong

Worst-Case Assumptions

Key Conclusions

1. Oil at $150-200 sustained for months, not weeks. Hormuz handles 21% of global oil transit (~21M bbl/day). Full closure with Gulf infrastructure damage removes 25-30% of global supply. Strategic reserves buy time (90-180 days), not solutions.^{[3] [7] [12]}
2. Iraq is the hidden catastrophe. 98% of Iraqi government revenue comes from oil exports through the Gulf. Under worst case, the Iraqi state effectively goes bankrupt within 2-3 months, triggering sectarian fragmentation and potential state collapse.^{[46] [13]}
3. 15M+ displaced people become the largest refugee crisis since WWII. Iran (7M), Iraq (3M), Lebanon (1.5M), Yemen (1M), and Gulf expat workers (500K) create a humanitarian emergency that overwhelms every neighboring country.^{[15] [40] [41]}
4. Global recession is unavoidable at $150+ sustained oil. Every $10/bbl increase in oil reduces global GDP by ~0.2%. At $150-200, the GDP hit is 2-4% across developed economies and 4-8% in energy-importing emerging markets.^{[14] [21] [27]}
5. Nuclear proliferation cascade is the worst second-order effect. Whether strikes succeed or fail, every regional power recalculates. Saudi Arabia, Turkey, and Egypt all pursue nuclear programs within 5 years. The NPT is dead in the Middle East.^{[8] [35] [38]}
6. Markets recover in 18-36 months, but the world is permanently different. Historical precedent (1973, 1979, 1990, 2022) shows markets find a bottom within 3-22 months. But the geopolitical order, alliance structures, and energy architecture are permanently altered.^{[55] [61]}