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A week into US and Israeli military operations against Iran, where does the conflict stand? GoodFellows regulars Niall Ferguson, John Cochrane and H.R. McMaster discuss the odds of hostilities expanding, what the aftermath of “regime alteration” might resemble, a possible economic backlash should energy prices spike, plus a geopolitical shock felt in Beijing and Moscow.
Key Takeaways
The conflict is best understood as part of a broader geopolitical struggle. A point raised in the discussion frames the Iran conflict as “Gulf War III” within a wider “Cold War II,” reflecting strategic competition involving the United States, China, and Russia.
Military dominance does not resolve political uncertainty. While the Iranian regime’s military capabilities may be severely degraded, the political outcome inside Iran remains highly uncertain, with possible scenarios ranging from regime survival to internal fracture or civil conflict.
Stability in the Strait of Hormuz is the critical economic variable. Energy markets hinge on whether shipping can safely resume through the Strait of Hormuz. Even small threats—such as drones or missile attacks—can disrupt global oil flows.
An oil shock remains a serious global risk. A prolonged disruption of Gulf energy exports could produce an inflationary shock reminiscent of the 1970s, though the United States is less vulnerable today due to domestic energy production.
The United States may prioritize eliminating threats over managing political outcomes. One interpretation of US strategy suggests Washington may intervene militarily to stop external aggression without committing to rebuilding political order afterward.
China’s response is a major strategic uncertainty. Beijing’s muted reaction raises questions about how Chinese leaders interpret American military action and whether they might adjust their strategy—particularly regarding Taiwan.
Military operations reveal limits in Western defense production capacity. The rapid consumption of interceptor missiles and precision weapons highlights the shallow depth of current stockpiles and industrial capacity in modern warfare.
The conflict has implications far beyond the Middle East. Developments in Iran affect energy markets, NATO cohesion, US–China strategic competition, and Russia’s economic position, demonstrating the interconnected nature of global security.
European security vulnerabilities are becoming more visible. Iranian missile and drone capabilities illustrate emerging threats that European defense systems are not yet fully prepared to counter.
Notable Quotes
Niall Ferguson
“World War II didn’t just begin with a bang; it was several distinct wars that coalesced in late nineteen forty-one, and we already have one war raging in Eastern Europe. Now we have a war that began really in 2023, but it really escalated in the past week. This is Gulf War III, and it has to be understood in the context of Cold War II. Gulf War III, I think, is going to look a lot more like Gulf War I than Gulf War II, i.e., it’s a Desert Storm–type scenario.”
H.R. McMaster
“I see kind of three alternatives here. Alternative one is that there is a weakened Islamic Republic, a theocratic dictatorship that stays in power... The second alternative is that there’s a fracture within the security apparatus, and somebody emerges and says, ‘Enough of this... and we’re going to establish an alternative, a transitional government…’ The third would be a devolution into some form of civil war.”
John Cochrane
“It becomes World War III if another major power comes in on the side of Iran. And no one’s doing that. Not even China, which is losing access to a lot of oil here.”
John H. Cochrane is the Rose-Marie and Jack Anderson Senior Fellow at the Hoover Institution, Stanford University. An economist specializing in financial economics and macroeconomics, he is the author of The Fiscal Theory of the Price Level. He also authors a popular Substack called The Grumpy Economist.
Niall Ferguson is the Milbank Family Senior Fellow at the Hoover Institution, Stanford University. He is the author of sixteen books, including The Ascent of Money, Civilization, and Doom; columnist with the Free Press; founder of Greenmantle; and co-founder of the University of Austin.
H. R. McMaster is the Fouad and Michelle Ajami Senior Fellow at the Hoover Institution, Stanford University and distinguished visiting fellow at Arizona State University. He is author of the bestselling books Dereliction of Duty, Battlegrounds, and At War With Ourselves.