This article was originally published by Truthout on April 09, 2026. It is shared here under a Creative Commons (CC BY-NC-ND 4.0) license.
On February 28, the U.S. and Israel expanded their joint genocidal war on Gaza onto Iran as well as Lebanon. After weeks of assassinations and bombing, President Donald Trump agreed to a ceasefire on April 7. This war of aggression by the U.S. and Israel is part of a continued attempt to wipe out any and all opposition to their dominance over the Middle East and its strategic energy reserves.
But they underestimated the capacity of the Iranian state. In addition to launching missile and drone attacks throughout the region, Iran blockaded the Strait of Hormuz, disrupting the production and shipment not only of fossil fuels but also an array of other commodities vital to global capitalism. With fossil fuel prices spiking and stocks crashing, Trump called off his threat to wipe out Iranian civilization and agreed to a ceasefire with Iran.
But Israel has already violated it, Iran has re-closed the Strait of Hormuz, and the ceasefire seems in jeopardy on the eve of negotiations for a settlement of the conflict in Pakistan. As a result, the world stands at the precipice of a multidimensional economic crisis.
In this interview for Truthout, Adam Hanieh discusses the U.S. and Israel’s imperialist goals, the war’s impact on the economies of the Global North and Global South, and its consequences for the geopolitical order as well as class and social struggles in the region and around the world. Hanieh is a professor in development studies and director of the SOAS Middle East Institute, University of London. He is author of Crude Capitalism: Oil, Corporate Power, and the Making of the World Market. This interview was conducted before the ceasefire and has been edited for clarity and length.
Ashley Smith: Clearly this war has been a disaster for the people of Iran. But the Iranian state has launched an asymmetric counteroffensive, targeted countries throughout the region, and shut down the Strait of Hormuz, and thereby disrupted the world economy. Why did the U.S. and Israel launch this war to begin with? What are the two states’ different war aims? How do they diverge? As the war has clearly backfired, what will they do to salvage it?
Adam Hanieh: The war needs to be placed in the wider context of a weakening of American power and a global environment marked by a range of deep political, economic, and ecological crises. Under Trump, Washington has been trying to reassert its global strength through a mix of military coercion, sanctions, tariff threats, and pressure on weaker states. In that sense, this war is not an aberration but part of a broader attempt to demonstrate that the U.S. can still dictate terms in strategically vital regions.
Any divergence between Israel and the U.S. is more a matter of emphasis than overall strategic goals.
The Middle East remains absolutely central here because of its importance to energy and other commodity flows, as well as its substantial financial surpluses that are reinvested globally. In 2025, nearly 15 million barrels per day of crude passed through Hormuz, about one-third of global crude trade. Most of these go eastward to China, India, and East Asia. This helps explain why Washington sees the region as a potential lever over rivals.
I don’t think there are major differences in U.S. and Israeli war aims. Both wanted to break Iran’s regional capacity, degrade its military infrastructure, and weaken the network of the various organizations aligned with Tehran across the Middle East. Lebanon is crucial in this respect, because Hezbollah has long fought against Israeli aggression — in this regard, Israel’s horrific onslaught in Lebanon has not received the attention it deserves in most media coverage.
I think any divergence between Israel and the U.S. is more a matter of emphasis than overall strategic goals. Israel tends to want a more thorough remaking of the regional balance in its favor, while the U.S. needs to consider the wider system of alliances it has built up over the decades. But the overlap is far greater than the difference.
The U.S. clearly underestimated Iran’s ability to respond asymmetrically, especially around the Strait of Hormuz. As such, Iran has not needed to “win” conventionally — by disrupting shipping, targeting energy infrastructure, and widening the field of conflict, it has shown that it can impose enormous costs on the world economy. It’s obviously very difficult to predict what the endgame will be.
Israel’s use of mass displacement and collective punishment are now completely normalized in the eyes of the world.
I do not think either the U.S. or Israel can easily get the clean victory they wanted, but neither can they afford to admit defeat. So perhaps the most likely outcome is a coerced and highly unstable arrangement that involves some partial reopening of Hormuz, some claim that Iran’s military capacities have been significantly degraded, and continued pressure on Iran’s regional allies, especially in Lebanon.
Israel, with the implicit greenlight from the U.S., has also launched a war on Lebanon, continued its genocide in Gaza, and escalated settlement in the West Bank. What are its aims here? What will this dimension of the war mean for the Lebanese, Palestinians, and the rest of the peoples of the region?
Away from media scrutiny, the Israeli military continues its blockade, destruction, and killing in Gaza. In the West Bank, we have seen a massive acceleration in settlement and settler violence against the Palestinian population. In Lebanon, Israel is trying to break Hezbollah and at the same time create a depopulated buffer zone in the south through bombardment, displacement, and reoccupation.
The human cost in Lebanon has been enormous, with more than a million people displaced. To put this in perspective for a U.S. audience, this is proportionally equivalent to more than the entire populations of California and Texas combined. What this really demonstrates is the ways in which Israel’s use of mass displacement and collective punishment are now completely normalized in the eyes of the world.
This war has cut off oil and natural gas supplies to the world and is dramatically impacting countries throughout the world. But too many people accept a stereotyped view of the region as just a source of fossil fuels. How have the economies of the region transformed themselves over the last few decades? How has that changed their role not only in the region, but in global capitalism?
Too many people still imagine the region, especially the Gulf countries, as simply giant oil spigots. What this misses is that the Gulf economies have fundamentally transformed over the past decade or so. They are now much more than simply producers of crude oil — they are major players in commodities (e.g. chemicals, fertilizers, and aluminium), maritime and air transport, and global finance. This is important because many of the basic inputs into global manufacturing and trade now originate in the Gulf, and what happens in the Gulf can quickly cascade through global supply chains.
One clear example is fertilizer. The Gulf produces roughly a third of global ammonia and urea, and this is crucial to food systems far beyond the region. The Middle East also accounted for more than 40 percent of global polyethylene exports last year, which is a massively important basic plastic and is why the conflict has sent shockwaves through manufacturing as well as energy markets. So, while the region is still indispensable to global energy flows, it is also deeply embedded in industrial production and the movement of goods across Asia, Africa, and Europe.
A further part of this transformation lies in the Gulf’s role within global finance. Over the last few decades, the region’s large and persistent current account surpluses have generated enormous pools of capital, much of it channeled through sovereign wealth funds, central banks, and other state-linked investment vehicles. These funds are deeply embedded in international equity markets, real estate, infrastructure, private equity, technology, and debt markets, and they have become increasingly important sources of liquidity and investment at a global scale.
These financial flows have a longer history in relation to American power. Since the 1970s, Gulf oil surpluses have played a significant role in U.S.-centered finance through what is described as petrodollar recycling: the channeling of oil revenues into dollar assets, Western banks, and U.S. financial markets. This recirculation of the Gulf’s financial surpluses helped sustain both the dollar’s international role and the wider architecture of U.S. financial power. This relationship is another reason why the Middle East is such a vital region to global capitalism.
Given all that, how will the war impact the world economy? What key industries will be impacted? How will it affect global finance and the world’s main stock markets? Where is global capitalism headed as a result?
The war is already having a major economic impact through the closure of Hormuz and damage to related energy and logistical infrastructure. This can be seen in higher oil and gas prices that are likely to persist throughout the year. Countries such as India are already increasing coal-fired power generation in anticipation of gas shortages. And of course, energy shocks feed through into the cost of transport, food, and everyday consumer prices, pushing inflation higher across the globe.
The war has deepened an already existing turn toward more militarized states and zero-sum economic and political competition.
There is also a substantial risk of shortages and price increases to fertilizers, chemicals, and other Gulf-produced commodities. Poorer countries are especially vulnerable here, because they have less fiscal capacity and many states in the Global South are already suffering from high levels of debt. One way this vulnerability might appear is in agriculture and food supplies. India’s domestic fertilizer industry, for instance, depends on the Gulf for nearly 80 percent of its ammonia imports; prolonged disruption of these supplies combined with higher energy costs could really impact food security in the country.
We also need to consider what a deep downturn in the Gulf might mean for the region’s migrant workforce. Migrant workers make up around half of the labor force across each of the Gulf monarchies, and millions of households in South Asia, the Middle East, and beyond depend on the remittances they send home. In an extended crisis, these workers may lose jobs, face deportation, or simply find themselves unable to keep sending money home at previous levels. A sharp fall in remittance flows would have serious effects on surrounding countries. This is exactly what happened during the 2008 global financial crisis and again during the COVID-19 pandemic. In that sense, migrant labor is one of the key channels through which crisis in the Gulf is transmitted outward to the wider global economy.
The overarching point is that this war is widening the deep systemic problems that were already present before February 28. Long before this war, global capitalism was marked by weak growth, mounting public and private debt, and overcapacity in many sectors. The war is intensifying all of these problems and pushing an already unstable system toward a much more serious breakdown. I think the possibility of a crash on the scale of 2008 or worse is very real if the war continues.
The war has undoubtedly impacted geopolitics. Already, Trump has lowered sanctions on Russian fossil fuels, enabling Russia to sustain its economy amid its imperialist war on Ukraine. What will the war mean for other great powers like China? What will this war mean for other states and their strategies and policies?
Russia has benefited directly from higher oil prices and the temporary waiving of some constraints on oil exports. That helps Moscow sustain export revenues and, by extension, its war in Ukraine. China faces a more contradictory position. On the other hand, the country has been systematically building up its oil reserves for a number of years, and its more diverse energy mix helps to insulate it from any immediate supply shock.
Prior to the war, many countries in the Global South were already facing what is widely acknowledged as the worst debt crisis in history.
It is noteworthy that foreign capital has been flowing into Chinese stocks and bonds over the last couple of weeks, which indicates that investors appear to view China as a relative “safe haven” at this moment. But if the war continues for a lengthy period of time, China will face difficulties because of its heavy reliance on Middle Eastern oil and gas. Chinese independent refiners are already cutting output as the prices of sanctioned Russian and Iranian crude rise and margins are squeezed.
More generally, the war has deepened an already existing turn toward more militarized states and zero-sum economic and political competition. This is because the war intersects with the wider systemic crises that I mentioned earlier, and which are forcing all states to find ways to manage and navigate global instability. This means expanding military spending, stockpiling energy and food, border securitization, and framing the control of raw materials and industrial capacity as matters of national security.
The other likely consequence is a renewed doubling down on fossil fuel production. Faced with supply disruption and price volatility, governments will move to lock themselves more deeply into existing hydrocarbon dependence. This means more oil and gas deals, the expansion of liquefied natural gas infrastructure, subsidies to domestic hydrocarbon production, and the rolling back of environmental regulations. Obviously, this just deepens the likelihood of future wars in the Middle East and elsewhere and worsens the accelerating climate emergency.
Finally, how will this war impact the people of the region, the Global South, and the Global North? How might it shape class and social struggles that have swept the world in the last couple of decades? How will ruling classes and especially the new authoritarian right in various countries likely respond?
As with all major crises, the impacts will be experienced very unequally. The most immediate and catastrophic costs are being felt in Iran and Lebanon through loss of life, displacement, destroyed infrastructure, and the massive ecological consequences of the war. For the wider Global South, the war is likely to mean higher food prices, higher transport costs, depressed trade, and worsening debt pressures.
The key question is whether popular anger can be turned against the system that produced this crisis, rather than channeled into a politics of national chauvinism and fear.
We need to remember that prior to the war, many countries in the Global South were already facing what is widely acknowledged as the worst debt crisis in history. In the Global North, the effects will be different but still severe. We are already seeing a renewed cost-of-living squeeze and expectations of much higher inflation over the coming year.
All of this will sharpen social antagonisms and may well open the way to renewed potential of mass protest. We should remember that the last two years have already produced a profound political radicalization among millions of people across the world, above all around the horrors of the genocide in Gaza. For many, Gaza has stripped away any lingering illusions about the existing order. It has brought into sharp relief the realities of a system that offers only war, obscene levels of inequality, climate collapse, and permanent insecurity.
Of course, this does not automatically translate into progressive politics. Crises of this kind can generate solidarity and new forms of internationalism, but they can also be seized upon by ruling classes and the authoritarian right. The danger is that a crisis produced by imperial war is re-coded as a justification for greater repression and renewed militarism. We can see this in the rush to frame the war in the language of national security. So, the key question is whether popular anger can be turned against the system that produced this crisis, rather than channeled into a politics of national chauvinism and fear.
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