Iran’s tyrannical and ruthless regime is falling apart. Meanwhile, after once again slaughtering thousands of its own citizens for expressing their dreams of freedom and better governance, the Iranian regime resumed its nuclear capability and aggressive ICBM program. The regime’s overreliance on US inaction has cost it its leader, and its nuclear military capabilities are evaporating. Against this backdrop, the conflict has spread to the Gulf, threatening the Strait of Hormuz, a chokepoint for roughly a fifth of the world’s oil production, and forcing the rest of the world to reconsider how it prices energy risk and political alignment.
This is not another regional flare-up. This is a rupture in an old equilibrium in which sanctioned oil, shadow fleets and calibrated escalation kept markets stable enough to function. That balance is now breaking. In addition to a restructuring of the global energy order, a rapid political-military shift is taking place in the Middle East.
When I was in Afghanistan during the surge, Tehran’s active support of insurgents fighting US and Afghan forces created instability and amplified the violence for which civilians paid the ultimate price, a dynamic that many in several countries have tragically experienced for decades. But Iran has never been a managed regional problem.
Although its terrorism was widely seen as a Middle Eastern issue, its cyber and intelligence operations stretched across continents, with assassination plots also involving the US president. In terms of global implications, Iranian energy has always made its regime globally significant.
Cars drive on a highway as smoke rises from an oil warehouse after it appeared to be hit by an Israeli attack in Tehran, Iran, on Saturday, June 16, 2025. (AP Photo/Vahid Salemi)
At this stage of the conflict, the most economically relevant is the Strait of Hormuz, which Iran is trying to choke. Roughly one-fifth of the world’s oil and a substantial portion of its liquefied natural gas move through this narrow corridor. As the strikes intensified, ships halted transit, insurers reassessed exposure and operators rerouted their cargo. The markets adjusted immediately. Energy security and geopolitical stability are now inextricably linked; Maritime risks have become the pressure valve through which regional conflicts have global consequences.
This realignment did not start in the Gulf this weekend. It started with American actions in Venezuela. Caracas has the largest proven crude oil reserves in the world – about 303 billion barrels – and even marginal normalization under a more cooperative US government changes the supply calculus for Washington and its allies.
The new U.S.-Venezuela deal has already generated roughly $2 billion in transactions in just a few weeks, putting Venezuelan barrels back into wider circulation and changing the discount ecosystem that Moscow had become accustomed to. Combine that with a post-crisis Iran re-entering the markets under different conditions, and the shadow ecosystem of discounted, sanctioned crude – Russia, Iran, Venezuela – begins to fracture and reprice simultaneously.
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But the most consequential recalibration of energy supplies is through Beijing. China is essentially Iran’s oil export market. In 2025, China bought more than 80% of Iran’s oil shipments, averaging ~1.38 million barrels per day (bpd), about 13.4% of China’s marine crude imports – meaning Beijing is simultaneously Tehran’s economic lifeline and its strategic choke chain.
By turning a sanctioned producer into a quasi-captive supply relationship – maintained through gray market routing, reflagging and intermediary hubs – Beijing secured discounted barrels in normal times and leverage in crisis situations. Any continued disruption to Iranian flows will force China to make substitute purchases that tighten global markets and expose China’s own energy security; Iran exports about 1.6 million barrels per day, mainly to China, and such disruptions are forcing Beijing to focus on alternatives.
The relationship is therefore best understood as a dependency loop: Iran needs China for revenue and sanctions relief by proxy; China uses Iran as a discount supplier and as a pressure valve in the sanctioned crude system — a system that could be tightened or relaxed depending on Beijing’s broader negotiating position with Washington and its appetite for risk in the Gulf. That dependence between Iran and China is no longer stable. With Iran’s oil flows disrupted, China faces a choice between turning to alternative suppliers at higher costs or even tapping into strategic reserves. The tightening of global crude oil markets due to US actions in Venezuela and now Iran gives Washington leverage over energy prices.
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Beyond the tanker decks, this shift underscores the broader theme of reconfiguration: Resources once pooled to manage sanctions are now subject to heightened geopolitical risk, forcing China to reconsider dependencies as the US and its partners position themselves to shape the post-conflict energy order. Energy supply patterns will restructure global power relations. And where China is recalibrating exposure, Russia is recalculating opportunities.
The same forces that are reshaping China’s calculations are reshaping Moscow’s. As India scales back Russian purchases, Moscow has pushed more barrels to China, and Reuters reports that Russian crude oil imports from China hit new records in February, while Russian sellers have extended discounts to maintain demand. Urals was trading roughly $9-$11 below Brent for deliveries to China, and other Russian grades also fell sharply as sellers chased Chinese refiners.
The new U.S.-Venezuela deal has already generated roughly $2 billion in transactions in just a few weeks, putting Venezuelan barrels back into wider circulation and changing the discount ecosystem that Moscow had become accustomed to.
This is important because China is also the main buyer of sanctioned Iranian crude oil; the “discount market” is not infinite, so Russia and Iran are now competing for the same limited pool of Chinese buyers, making deeper concessions and idling cargoes – exactly the kind of dynamics of the sanctions economy.
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Add to that the West’s increasing focus on Russia’s “shadow fleet” and the risk of seizures or insurance denials, and you get an energy chessboard in which coercion moves from rhetoric to logistics: who can reliably ship, insure, and handle payments becomes as strategic as who can produce.
In that context, Russia’s loud warnings about Hormuz’s disruption are not just diplomacy, they are a reminder that Moscow benefits from volatility but also needs a functioning gray market channel to China, and that the Iranian crisis threatens to derail the low-cost ecosystem that Russia has used to finance its war in Ukraine. Structural realignment threatens the gray market architecture that Moscow has relied on.
Energy is just one layer of a global shift. Strategic minerals remain crucial. The Trump administration has increased economic and maritime pressure on Cuba and tightened an effective oil blockade that has choked fuel imports. President Donald Trump has approved tariffs targeting countries that supply oil to Havana.
This is not merely a punitive policy. It reflects a broader strategic doctrine: deny energy lifelines to hostile regimes and shift the Western Hemisphere’s resource base to American influence. Oil is just one domain. Rare earth elements are a strategic asset. Cuba’s nickel and cobalt production, combined with China’s increasing grip through export controls on rare earths, indicates that leverage is coming not just from the oil fields, but also from supply chains. America’s achievement of rare earth sovereignty will remain a strategic goal and such global realignment on this front is desperately needed.
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By the end of the first weekend, Iran seemed determined to hasten its own collapse by combining strategic mistakes with strategic mistakes. Iran thought it wise to respond to American and Israeli attacks by opposing them from half a dozen other countries. On Saturday afternoon, February 28, Iran launched attacks on seven sovereign nations: Bahrain, Saudi Arabia, the UAE, Kuwait, Qatar, Jordan and Israel. Shortly afterwards Oman was added.
These countries now have a legal and political basis to deepen security ties with the US and Israel that they could never have justified domestically before today. Iran has arguably done more to consolidate the anti-Iranian regional architecture in one afternoon than a decade of American diplomacy. In the coming weeks, expect accelerated normalization resulting from the Abraham Accord with Saudi Arabia.
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Any continued disruption to Iranian flows will force China to make replacement purchases that will tighten global markets and expose China’s own energy security…
After the regime massacred thousands of its own citizens as it demanded better governance, long-standing suspicions of US passivity cost the 1979 Revolution its dream of ruling Iranians forever. After 47 years, the leader has disappeared and key military capabilities are being dismantled.
The lesson is not just that the Iranian regime will fall. It is that when it falls amid energy bottlenecks and great power competition, supply chains, alliances and leverage structures change simultaneously. Iran’s collapse is not the end of the story; it is the catalyst for a broader redistribution of power over energy, alliances and great power influence. America should take full advantage of this changing dynamic.
The views expressed here are his own and do not reflect the policies or positions of the Department of Homeland Security, the Homeland Security Advisory Council, the United States Army, or the Department of War.
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