Sunday Essay 19 - 2026
Iran, the United States and the System That Cannot Fully Stabilise
SUNDAY ESSAYS
5/3/2026
By early May 2026, the Iran–United States confrontation had moved beyond the familiar language of escalation and deterrence. It is no longer sufficient to describe events in terms of rising tension or potential de-escalation. What is now visible is something more structural: a global system operating under sustained constraint, where no single actor—regardless of capability—can fully stabilise outcomes. The conflict has evolved into a test not only of geopolitical power, but of how energy systems, markets and policy frameworks behave when pressure is continuous rather than episodic.
At the centre of this evolving system remains the Strait of Hormuz. For decades, its significance was defined by volume, a narrow maritime passage through which a substantial share of the world’s oil supply moved with relative predictability. Today, that framing is no longer sufficient. The defining variable has shifted from volume to reliability. The question is no longer simply whether oil can pass through the strait, but whether it can do so consistently, without disruption, and at a cost that allows markets to function normally.
That consistency has broken down in a way that is difficult to reverse. Shipping activity has declined sharply, not only because of direct threats or physical constraints, but because of how risk is now perceived. Insurance premiums have increased, shipping companies have adjusted routes, and buyers have begun to favour alternative supply chains, even when those alternatives are less efficient. This behavioural shift is critical. It reflects a loss of confidence that persists even when the immediate conditions appear manageable.
What emerges from this is a distinction that defines the current moment. Infrastructure can be reopened, but confidence cannot be restored on demand. It requires time, stability and a reduction in volatility—conditions that are not currently present. As a result, the system begins to reorganise around uncertainty rather than waiting for clarity.
Iran’s position within this system illustrates how influence can be exercised without direct control. It does not need to close the Strait of Hormuz to affect global markets fully. The capacity to introduce uncertainty—through delays, inspections or the possibility of escalation—is sufficient to alter behaviour. This form of leverage is indirect but effective. It shapes expectations, and in doing so, it shapes outcomes.
The United States operates through a different mechanism. Its influence is rooted in enforcement—naval presence, financial systems and the ability to impose sanctions that restrict trade flows. These tools allow it to apply pressure not only to Iran but also to the broader network through which energy is traded. Yet this form of control has limits. Enforcement must be sustained over time, and it can be circumvented through alternative channels. It does not eliminate uncertainty; it often redistributes it.
The interaction between these two forms of power produces a system that is neither controlled nor uncontrolled, but constrained. Iran can disrupt but not stabilise. The United States can enforce but not resolve. The result is a narrowing of flexibility across the system, where outcomes are shaped by competing pressures rather than directed by a single force.
Energy markets offer the clearest expression of this dynamic. Oil prices have risen significantly, but more important than the level of prices is the nature of their movement. Volatility has become persistent. Prices respond quickly to developments, but they do not return to previous baselines. This reflects a deeper change in how markets interpret information. They are no longer reacting to isolated events; they are adjusting to a prolonged condition of uncertainty.
This adjustment is not limited to pricing. It extends to behaviour. Strategic reserves are being utilised more actively, refining activity is being recalibrated, and consumption patterns are beginning to shift. High prices are encouraging efficiency measures and reducing demand in both industrial and consumer contexts. This process, often described as demand destruction, is not a sign of recovery. It is a sign of constraint. The system is reducing activity to function within tighter limits.
The economic implications of this shift are significant. Energy costs are embedded across production processes, meaning that increases are transmitted through multiple layers of the economy. Transport becomes more expensive, manufacturing margins are compressed, and consumer prices rise. These effects reinforce one another, creating a cycle that is difficult to reverse.
At the same time, growth begins to slow. Businesses delay investment, consumers reduce discretionary spending, and overall economic momentum weakens. The coexistence of rising prices and slowing growth produces a familiar but challenging condition. It is not simply inflation, and it is not simply recession. It is a combination of both pressures operating simultaneously.
This environment places central banks in a particularly difficult position. The policy frameworks developed over recent decades assume a degree of stability in external conditions. When inflation is driven primarily by domestic demand, interest rates can be adjusted to influence behaviour. When inflation is driven by external energy shocks, the effectiveness of those tools is reduced.
Policymakers are therefore operating within a narrower range of options. Maintaining higher interest rates may help contain inflation, but it also risks deepening the economic slowdown. Lowering rates may support growth, but it can reinforce inflationary pressures that originate outside the domestic economy. This creates a tension that cannot be easily resolved through conventional policy measures.
The implications of this constraint vary across regions. Europe, with its reliance on imported energy, is particularly exposed. Rising costs affect industrial competitiveness, while governments face increasing pressure to support households and businesses. Fiscal and monetary policies must be coordinated more closely, yet the scope for effective intervention is limited.
The United Kingdom reflects a similar pattern, where improvements in economic conditions are offset by renewed external pressure. Timing plays a crucial role. When shocks occur during periods of recovery, their impact is amplified, delaying stabilisation and increasing uncertainty.
The United States presents a more complex case. While consumers face higher fuel costs, the country’s position as a significant energy producer provides a degree of insulation. Increased exports allow it to benefit from higher global prices, even as domestic inflation rises. This creates a divergence within the system, where the same shock produces different outcomes depending on structural position.
This divergence is even more pronounced when considering developing economies. In many cases, energy and food costs represent a substantial share of household expenditure. Increases in these costs translate directly into reduced purchasing power and heightened economic vulnerability. The consequences are not only economic, but also social and political. Rising costs can lead to instability, which in turn affects broader regional and global dynamics.
Financial markets reflect these layered pressures. Rather than converging toward a single safe haven, capital flows have become more dispersed. Investors are seeking resilience rather than certainty, allocating across different asset classes in an attempt to manage risk. This behaviour suggests a shift in how stability is perceived. It is no longer associated with a specific asset or institution, but with the ability to adapt to changing conditions.
Volatility, in this context, is not an anomaly. It is becoming a defining characteristic of the system.
At the geopolitical level, the limitations of control are increasingly evident. The United States possesses significant military and financial capabilities, yet it cannot fully secure energy flows without escalating the conflict in ways that carry additional risks. Iran, while unable to dominate the system, retains the capacity to prevent normalisation. This creates a persistent tension in which influence is exercised, but outcomes remain uncertain.
China’s position adds another dimension to this landscape. As a major importer of energy, it is directly affected by disruptions in the Middle East. Its response, however, has been characterised by adaptation rather than confrontation. By diversifying supply, increasing reserves and exploring alternative arrangements, it is seeking to reduce vulnerability rather than assert control. This approach reflects a broader shift in how power is understood. Flexibility and resilience become more valuable than dominance.
At the same time, the structure of the global system is becoming more fragmented. Traditional mechanisms of trade and pricing are being supplemented by alternative networks that operate alongside them. These networks are less transparent, more complex and more difficult to regulate. They reduce the effectiveness of traditional tools of control, such as sanctions, while increasing the overall complexity of the system.
Despite these challenges, the system continues to function. Energy flows have not ceased entirely, markets remain active, and institutions continue to respond. This resilience is not accidental. It reflects adaptations developed over time in response to previous crises. However, resilience does not imply stability. It indicates the ability to continue operating under pressure, not the absence of vulnerability.
This distinction is crucial for understanding what comes next. A system that operates under constraint behaves differently from one that operates under stability. Flexibility is reduced, responses are slower, and the margin for error is smaller. Each additional shock has a cumulative effect, increasing the likelihood of more significant disruption.
Looking forward, the central question is not whether the current conflict will escalate further, but how the system will evolve under sustained pressure. Even if tensions ease, the structural changes that have been set in motion are likely to persist. Energy markets will remain sensitive to geopolitical developments, policy environments will remain constrained and economic outcomes will continue to be shaped by external factors.
The system is not returning to its previous state. It is transitioning into a new phase, one characterised by greater complexity, increased uncertainty and a heightened dependence on coordination.
This leads to a broader conclusion. The defining feature of the current moment is not power in the traditional sense. It is a limitation. No actor can fully control outcomes, and no system can be fully stabilised through unilateral action. Influence exists, but it operates within boundaries.
In such an environment, stability is no longer something that can be imposed. It must be managed, negotiated and sustained over time.
That is the deeper transformation now underway.
References:
Reuters — Strait of Hormuz shipping disruption and reduced traffic
Reuters — Oil price outlook and prolonged Iran conflict risk
Reuters — U.S. naval blockade impact on Iranian exports and floating storage
Reuters — Oil volatility and market reaction to escalation risk
Reuters — Stagflation risks and global economic pressure
https://www.reuters.com/business/energy/global-markets-stagflation-graphic-2026-04-30/
Reuters — U.S. crude exports and inventory dynamics
Reuters — China resisting U.S. sanctions on Iranian-linked oil trade
Al Jazeera — Iran shadow fleet and sanctions evasion
International Monetary Fund — Growth slowdown and inflation pressure
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