Richard D. Wolff & Michael Hudson: Oil Prices About to Surge? Persian Gulf & Red Sea Threat
Quick Read
Summary
Takeaways
- ❖Financial markets, including crude oil and gold, remained remarkably stable despite intense media speculation about an imminent war in the Middle East.
- ❖Predictions suggest an Iran conflict could push oil prices over $100-$120 per barrel, potentially triggering a global debt crisis for oil-importing nations.
- ❖Michael Hudson suggests that US leaders, including Trump, might view war as an opportunity for personal financial gain through market speculation.
- ❖Richard D. Wolff frames current US foreign policy as a 'colonialism revived,' where military power compensates for declining economic and political global authority.
- ❖The US is increasingly isolated on the global stage, with UN votes often showing only the US and Israel in alignment.
- ❖Wolff argues that a war with Iran would be a 'third and final mistake' for the US military, following defeats in Vietnam and Afghanistan, given Iran's strength and allies.
- ❖Rubio's speeches at the Munich Security Conference advocated for the US to act solely in its self-interest, repudiating international law and global institutions like the UN.
- ❖Russia and China have provided Iran with advanced air defenses and naval capabilities, making a US attack far riskier and potentially leading to rapid, total retaliation.
- ❖China views a potential US war with Iran as a 'dress rehearsal' for future US attempts to isolate and attack China, particularly by weaponizing global oil trade.
- ❖The US refusal to pay its arrears to the UN threatens the organization's existence, symbolizing a broader rejection of international cooperation.
- ❖The speakers warn that US actions are mobilizing the rest of the world against it, potentially leading to self-destruction in the medium to long run.
Insights
1Market Stability vs. War Predictions
Despite widespread media predictions of an imminent war in the Middle East, financial markets, including crude oil, remained remarkably stable. Crude oil was up less than 2% to $66.25, only slightly higher than $62 at the start of the week. Gold also saw only a slight recovery, just over $5,000 an ounce, and the dollar remained stable. This suggests financial markets perceive the military buildup as 'for show' or a negotiating tactic, rather than a precursor to actual conflict.
Crude oil up less than 2% to $66.25, from $62 at the start of the week. Gold recovered slightly to just over $5,000 an ounce. Dollar remained stable.
2Economic Consequences of a Strait of Hormuz Blockade
If a war occurs, Iran's easiest and most effective first move would be to sink a ship in the Strait of Hormuz, blocking global oil flow from Saudi Arabia and other Gulf states. This would cause oil prices to surge to over $100-$120 per barrel, leading to a financial crisis. Global South countries and other oil importers would be unable to pay their foreign debts, as they cannot afford both energy and debt servicing, leading to a 'force majeure' event and destabilization of banking.
Iran sinking a ship in Hormuz, blocking Saudi and Arab oil, causing prices to go over $100-$120 a barrel, squeezing Global South countries from paying foreign debts.
3US 'Colonialism Revived' Through Military Power
Richard D. Wolff argues that the US is reasserting a form of colonialism, driven by military power, to compensate for its declining economic and political influence. He cites the reaffirmation of the Monroe Doctrine in Latin America and military actions like harassing Cuba and executing people in boats. The US lacks the economic power of China and the geographical resources of Russia, leading it to seek control over territories like Greenland and Canada, and to delegate Middle East management to Israel.
Rubio's speech at Munich Security Conference suggesting colonialism is back. US using military to hassle Cuba, snatch Venezuelan leaders, execute people in boats. US lacks economic power of China and geography of Russia.
4Iran War as a 'Third and Final Mistake' for US Military
Wolff draws parallels between a potential Iran war and past US military defeats in Vietnam and Afghanistan. He argues that the US was more powerful and its opposition weaker in those conflicts. Iran is a larger, more developed country with stronger allies (Russia and China), making a US victory highly unlikely. This could represent a 'third and final mistake' of military overreach for the American empire, accelerating its decline.
US defeated in Vietnam (1970s) against weaker Russia/China-backed North Vietnam. US defeated in Afghanistan against Taliban. Iran is bigger, better developed, with more and stronger allies.
5China's View: Iran War as a 'Dress Rehearsal'
China perceives a potential US war with Iran as a 'dress rehearsal' for future US actions against it. The US aims to control Near Eastern, Venezuelan, and Iranian oil to weaponize the global oil trade and deprive China of energy. China understands that an American victory in Iran would embolden US politicians and military to attempt similar actions against China. Consequently, China is committed to protecting Iran, including using its submarines against US naval assets and supplying advanced armaments.
China realizes US is the enemy, wants to destroy it. US military bases aim to encircle China. Iran war is a 'dress rehearsal' for America against China. US wants to weaponize oil trade against China.
Bottom Line
The market's calm reaction to escalating Middle East tensions might not be a sign of peace, but rather a reflection of market paralysis or insider knowledge being exploited.
This suggests that traditional market indicators might be misleading in highly politicized conflicts, potentially masking significant, underpriced risks that could lead to sudden, extreme volatility.
Sophisticated investors could explore strategies to profit from sudden, sharp market dislocations if a conflict erupts, or hedge against such 'black swan' events that the broader market is currently ignoring.
The US's rejection of international law and institutions (like the UN) is not merely a policy shift but a deliberate move towards a 'ruler-based order' where the US dictates global terms.
This fundamentally alters the landscape of international relations, increasing global instability and reducing avenues for peaceful resolution, as other nations are forced to align or resist a unilateral power.
Nations and businesses should re-evaluate their reliance on existing international frameworks and consider diversifying alliances and supply chains to mitigate risks from a less predictable, 'ruler-based' global environment.
Europe's refusal to send delegations to Trump's 'Board of Peace' meeting, despite agreeing to participate, signals a nascent recognition of its 'tributary' status to the US and a potential shift towards asserting its own interests.
This suggests a growing divergence between European and US geopolitical interests, potentially leading to Europe seeking alternative alliances (e.g., with Canada and Greenland for resources) to escape US hegemony.
Businesses should monitor European geopolitical shifts for new trade agreements, resource partnerships, and investment opportunities that emerge from a more independent European foreign policy.
Key Concepts
Colonialism Revived
Richard D. Wolff uses this model to describe the current US foreign policy, where military force is used to assert global dominance and control regions (e.g., Latin America, Middle East) because the US lacks the economic and political power it once had. This resembles historical colonialism but relies primarily on military might rather than economic development or political authority.
Declining Empire's Overreach
Wolff applies this historical pattern, suggesting that declining empires often attempt 'one more campaign' or 'overreach' militarily, which ultimately leads to their downfall. He frames a potential war with Iran as this 'third and final mistake' for the US, following Vietnam and Afghanistan, given Iran's strength and alliances.
Ruler-Based Order
Michael Hudson uses this term (coined by a Patreon commenter) to describe the US's desired international system, replacing the 'rules-based order.' In this model, there are no real international rules or laws; instead, the United States dictates what happens, acting solely in its perceived self-interest and rejecting international institutions like the UN.
Lessons
- Monitor geopolitical tensions in the Middle East, particularly around the Strait of Hormuz, for potential oil price volatility and global economic destabilization.
- Re-evaluate long-term investment strategies and supply chain resilience, considering a potential shift in global economic and political power away from the US and towards a multi-polar world.
- Assess the implications of a 'ruler-based order' on international trade, legal frameworks, and political stability, preparing for increased unilateral actions by major powers.
Quotes
"The market's remarkably stable. Uh you have crude oil up less than 20 than 2%. Uh it's only up to 66 and a quarter right now. Uh and it's that's not up that much from $62 at the start of this week."
"If there is a war, oil is going to go way up to over $100 a barrel and considerably up maybe 120 or more a barrel. uh because there's going to be uh interruption of oil and Iran's going to sink a ship in Cormuz Hormuz the oil gulf which is going to block Saudi Arabia and the other Arab countries from uh adding their oil onto the world market."
"What is going on here now is beginning to take a particular shape. And I'm going to use the word colonial. There is the reaffirmation of the Monroe doctrine. Latin America is ours."
"Mr. Rubio came very close to suggesting that colonialism is back and that we ought to be supportive of it. He he he he substituted the word culture, our culture. We have to protect our culture and all of this other stuff."
"We don't need to dismantle the global institutions of the old war but we have to rebuild them. uh and we can't allow uh those who blatantly and openly threaten our citizens and endanger our global sub stability to shield themselves behind abstractions of international law."
"We may be on the edge of what will be looked back on as the third and final mistake of the American military. You thought you could win in Vietnam. You didn't. You thought you could win in Afghanistan 20 years later and you didn't. And now you think you're going to win in Iran. You're not."
"If America can win in Iran, that will give the American politicians and the American army and navy and marines and air force the idea that somehow they can uh repeat the uh a victory uh hypothetical victory in Iran uh in China. So I think China realizes this is sort of the uh the test case for what America may want to do with it."
"We don't want to be the people who manage the decline in an orderly way. Notice he admitted the decline of the American empire. We don't want to manage it in an orderly way. That's a way of saying we're going to be disorderly."
Q&A
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