An Era of Weaponized Interdependence Begins

The closure of the Strait of Hormuz did more than spike oil prices. It exposed how energy, technology, and geopolitics can no longer be managed as separate issues. Governments that treated them as such paid a price as did global investors. Three lessons stand out for those still operating on pre-Iran War assumptions – and none of them bode well for the next crisis.  

First, energy shocks no longer hit only importers. Conventional wisdom said oil shocks hurt importers and helped exporters. Hormuz challenged this logic.  

America imports just 2.5% of Hormuz crude exports — more than 80% of it goes to Asia. Yet U.S. jet fuel prices doubled. The May CPI report rounded out the story, posting a 4.2% increase in prices versus the year prior on major gains for energy. South Korea, the world’s second-largest jet fuel exporter, routes 70% of its crude through Hormuz and supplies nearly 90% of West Coast jet fuel. When Korean refineries lost crude inflow, Americans paid for it through higher airfares, for example. 

This is how shocks transmit now. The relevant question is no longer which country buys directly from the disrupted region, rather how many steps in the supply chain it takes before it gets there. America imports nearly 8 million barrels a day, exports more than 10 million, and consumes more than 20 million. It is fully integrated in global energy markets. Energy abundance does not equal energy security.  

U.S. LNG Exports and China’s Nonrenewable Power Share

Note. The figure plots U.S. liquefied natural gas (LNG) exports in billion cubic feet per day (right axis, blue solid and dashed line) and the share of nonrenewable electricity generation in China’s total generation (left axis, red solid and dashed line). For both lines, the dashes mark projected values. The vertical dashed gray lines denote the annexation of Crimea (2014), the Russian invasion of Ukraine (2022), and the escalation of the Israel–Iran conflict (March 2026). Sources: U.S. Energy Information Administration (EIA) Annual Energy Outlook, International Energy Statistics, and author calculations.

Second, America’s energy buffer is on borrowed time. Both China and the U.S. absorbed the shock better than Europe or Asia. But the reasons differ sharply, and so does the durability.  

China’s buffer is driven by deliberate policy choices. Beijing leads the world in solar and wind power generation, and battery manufacturing. China holds the largest strategic petroleum reserve on the planet and it continues to buy discounted Russian and Iranian crude outside Western sanctions. As the world decarbonizes, China’s energy hand will grow stronger. 

America’s cushion is market driven and more transient. LNG export constraints have kept U.S. domestic gas prices low even as European prices roughly doubled. But that spread won’t last forever. A wave of new LNG export capacity has already been approved. In the not distant future, U.S. natural gas prices will converge toward global levels. What is true today of jet fuel will become true of electricity and heating bills tomorrow. 

Markets pricing the U.S. as durably energy-secure are extrapolating from a buffer with an expiry date. That date does not line up well with the growing demand from the AI revolution.  

Third, energy, technology and geopolitics are deeply intertwined. For decades after Iran’s 1979 break with the West, the U.S. has secured the Gulf on the strength of its military. The recent Iran conflict has changed this calculus as the U.S. and its allies expended about half of their Patriot interceptor stockpiles in the first weeks of combat. Replenishing them depends on rare-earth supply chains where China holds a 50% to 90% global share. The munitions used to defend Gulf partners pass through Chinese-controlled inputs. 

Treating these as separate policy domains, with separate agencies, separate budgets, and separate doctrines, is the real American vulnerability. Industrial policy in China, by contrast, has grown broader and more systematic over time — vertically across production layers and horizontally across sectors.  Iran has shown how to exploit the weaknesses of this U.S. governance structure.  

Two consequences follow if governments and global investors continue treating these issues as separate. Markets will keep getting blindsided by moves they cannot trace to direct exposures. And policymakers will keep losing chokepoint contests because each weapon — chip controls, oil embargoes, sanctions — only works when the opponent has no countermeasures in the arsenal.  

The Iran war is the preview: a regional conflict the U.S. cannot decisively resolve despite overwhelming military and economic power, because the opponent had a chokepoint — oil and drones — at the intersection of energy and military technology. 

Chokepoint exposure is a strategic risk for businesses, not just an operational one. Energy security and supply-chain resilience must be embedded in investor portfolio construction. The winners over the next several years will be those who treat weaponized interdependence as something to plan and optimize around.  

The next shock will arrive through an indirect channel — a missing component, a sanctioned exchange, a port that refuses access — and move faster than firms and markets can adjust.  The Iran war is the proof: resource abundance and military might no longer secure a country, let alone keep it ahead.