The Gulf War: Hidden Vulnerabilities and Strategic Failures

History will not be kind to this war. Its shape is sculpted by blunder. Its aftermath will be characterized by the political and economic cost of failure to achieve any war aim worth fighting for. Bad judgements were made of the resilience and war aims of the Iranian IRGC regime. There was no preparation for the IRGC offensive against the Gulf states. There was an imaginative failure to anticipate how Iran would weaponize the Gulf (and Red Sea) as analogous to a ‘nuclear option’. And there was outright forgetfulness of the US population of the Middle East and the 20,000 seamen trapped by the war, for whom no rescue plans were prepared.

But there is an overarching failure that cannot be laid at the door of Donald Trump and his team. It is the decade long perpetuation and deepening of the strategic vulnerability of the global economy to supply chain disruptions – notably choke points like the Gulf but not limited to it.

War is, at its most inhuman, a Supply Chain disruption. It interrupts the normal flow of the economy in ways that last for years. As a supply chain crisis, war shares common features with pandemics and debt crises, albeit potentially more severe. Shared features there may be, but from the beginning of the War, the Gulf appeared as different. Almost instantaneously red lights started to flash on economic radar screens signalling seemingly unrelated wide-flung disruptions. There were no lags and little commonality between the many local crises unfolding. That was new.

Western Australia ran out of petrol. Michael O’Leary said fewer jets would fly fewer routes less cheaply. Pacific Islanders ran out of electricity, which depended upon diesel for production. The Philippines declared a national emergency. The Japanese rushed to release strategic oil reserves (and are about to do so again). So did the US – but made the reserve barrels so expensive that little (40%) of the offer was taken up. The Koreans, who have 26 ships stuck in the Gulf, discovered that its petroleum reserves would run out in 26 days.

And worse than that, South Korea’s technology industry depends on Helium from Qatar. Qatar now produces 28-30% of world supply, up from 10-12% a decade ago. South Korea gets nearly two thirds of its Helium supply from the Gulf. Helium as a raw material is a critical input to Semiconductor manufacturing, MRI scanners and fibre optic cable. It was, I thought, odd that such a risky source should have been allowed to become a strategic vulnerability for such a critical industry while no one was looking! This then became the theme of my further research.

Research in Strategic Vulnerability Indices

Watching the radar screen as winking warning lights started flashing led me to check with the NY Fed what they thought of the crisis. Not much was the answer. The New York Fed Global Supply Chain Pressure Index (GSCPI) peaked at over 4 standard deviations (SD) above its mean back in January 2022 (at the time of the Russian invasion of Ukraine). Today it lies 0.68 SD above the mean! That hardly corresponds to the global crisis narrative!

Discouraged, I headed back to Michal O’Leary’s doom prophesy. After all, the successful are not always dumb, provided they stick to the subject of what they are good at doing. I found this: 10 years ago, Europe (Geographic) produced and consumed 1,250 kbpd (thousands of kerosene barrels per day). Today, refinery capacity has not changed. Consumption has grown 16%. And now Europe imports 400 kbpd (27% of modern consumption) – mainly from the Gulf (40% of imports) and the US (30%). So, we shall indeed face at least an 11% short fall of supply once stocks are exhausted. Unless, of course, normal traffic is restored to the Gulf in short order.

This was a wake-up call. What if the need for securitization of global supply chains, which was supposed to be one of the principal lessons learned from Covid, had not been learned after all?

To check the universality of such strategic malfeasance a few simple tables were all that was needed. For each of 15 countries I could get information on, I put together four definitions of strategic vulnerability to critical energy imports from unstable regions. The four criteria are:

• Criterion 1: can you refine your own crude oil, or do you depend on imported refined oil products? Measure: refining capacity/consumption of total refined oil and products.
• Criterion 2: can you fuel shipping or do you have to import bunker fuel? Measure: Consumption of marine fuel less production of marine fuel/consumption of marine fuel.
• Criterion 3: can you keep the planes flying with domestic refined jet fuel? Measure: Kerosene imports/jet fuel consumption.
• Criterion 4: Do you depend on Gulf Stuff (oil and LNG) to keep the lights on? Measure: Data is usually published by utilities but in a few cases derived from: total electricity output less output from coal & renewables.

The four criteria were calculated as energy import vulnerability ratios for the 15 countries for which data is available for the last decade (Brazil, China, Germany, Indonesia, Italy, Japan, Netherlands, Saudi Arabia, South Korea, Singapore, Spain, Thailand, UAE, the United Kingdom and the United States). Broadly put, the vulnerability ratios show how much of energy consumption is imported by different vital sectors of an economy. Despite the flawed economics of double counting a consolidated table, averaging all four criteria was also computed. Before we gauge what these measures tell us about strategic energy vulnerability, let us look at the economics of the disruption they could cause.

The Logic of Disruption is Simple

Firstly, virtually no crude oil, refined products or LNG are flowing from the Gulf. Indeed, if the flows normalized tomorrow, it would take at least 5 months to get supply back to 60% of normal Gulf levels. Meanwhile demand (for which read GDP) has to be destroyed to make markets balance. That process is only just beginning.

Secondly, the Gulf war has made all countries hoard crude oil, refined products and LNG. It has also created a shortage of tankers to move this stuff. Ergo, if your country depended on imports of any of these products, you are, to put it mildly, screwed.

Third, the first stage of a supply disruption is that prices for the disrupted product rise in anticipation of shortage of it. As do the prices of anything made from the disrupted product. But at this point of the crisis, the product is still there – either because the supply chain is long and disruption takes a while to ripple through to consumers, or because inventories of the disrupted product can be drawn down.

Then comes the second stage – the crunch – when the product is not there anymore and output of anything that depends on it comes to a hard stop.

Broadly put, the first stage destroys demand through inflation. The second wave destroys supply by just stopping it. Both are like big waves looking over each other as they crash in succession on the shore of our economy.

Put it another way! It takes 30-40 days for a tanker to get from the Gulf to Shanghai, Rotterdam or the East Coast of the US. That means the last ones arrived at the weekend. Only when they stop coming do we enter stage two of the disruption crisis – the one when output stops. That is the hard part. That is where we stand.

The results of my crude (no pun intended!) analysis of economic vulnerability to this scenario are quite a revelation!

• The energy import vulnerability of 11 out of the 13 countries measured increased for each of the four criteria over the last decade, listed above.
• Only China, the US and, by corollary, the Gulf oil producers themselves reduced their energy import vulnerability overall.
• For the 11 countries where it became worse, the median increase was +17% in imported energy vulnerability. Imports of liquid fossil fuels increased their market share of total energy consumption by 18 percentage points.
• Making this more concrete, take electricity! Imported oil and gas increased their share of total energy consumption by 7% in the last decade for all 15 countries being considered.

A caveat! These findings cover oil and LNG vulnerabilities. That is core to strategic economic autonomy. Not much happens without energy.

But the increase in vulnerability is not limited to energy. Gulf-sourced inorganic fertilizer exports account for 15-22% of global usage. Compared to a decade ago, that is an increase of 8% from the total inorganic fertilizer supply. According to the Kiel Institute there are 50 products for which Gulf suppliers account for 15% or more of global exports worth $773 billion in annual trade. OECD Supply Chain Resilience Scoring shows that the energy sector is in a better place than either bulk shipping (where geopolitical fracturing offsets improvements in stocking infrastructure) and for container supply chains (where diversification of product manufacture and better supply chain visibility is offset by dependence on unstable choke points and bigger and less flexible container ships). And that is before we come to the vulnerabilities of airfreight and cyber linked distribution.

Nor is shipping vulnerability exposure limited to the Gulf. The Gulf raises the issue of other choke points, for which the Gulf may set a precedent for freedom of navigation – or lack of it. Choke points such as the Straits of Malacca and the Taiwan Straits are 4-5 times bigger than the Straits of Hormuz, in terms of percentage of seaborn trade, although not as energy intensive. And then there is Suez/Bab-El-Mandeb, Panama, Gibraltar, the Bosporus and the Danish Straits which are all about the same size as Hormuz and are also vulnerable to war or acts of war and terrorism.

In sum: Covid was a warning about global supply chain disruption. At a macro level it that should have put an end to running the global economy like a ‘just-in-time’ factory. It called for some economic efficiency to be sacrificed for more economic security. Little has been done and what has is almost fully offset by rising economic and geopolitical fragmentation, and the weaponization of economic policy and tools.

Leading to the following considerations for policy makers:

• Increased disruption and weaponization of components of the global economy: these will become even more effective and destructive unless supply chains are securitized.
• The tools of disruption will expand (for example, to cover choke points and strategic raw materials).
• The scope of disruption will spread beyond shipping (for example, airfreight and cyber control and commercial activities).
• Disruptions will be managed by hostile powers to co-opt populists to their cause (for example, the Irish populist energy protests threatening an incumbent government, with a significant social media presence from Irish xenophobic groups, and Iranian social media).
• Populists will use disruptions to gain or hold on to power and justify this by promoting disinformation ‘explaining’ the disruption to their advantage.
• Countries that get into trouble due to their own failure to protect their strategic autonomy will fall more easily under the protection of countries that are better managed and have expansionary ambitions (for example, South Pacific Nations and China).
• The narrative that disruptions are the result of fatal flaws in democracy and free market systems is a powerful tool of powers that oppose both.

© David Roche, 2026, published by RUSI with permission of the author.

The views expressed in this Commentary are the author's, and do not represent those of RUSI or any other institution.

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