#iran + #politics

Oil demand is expected to contract by 80 kb/d this year, as the Iran war upends our global outlook. This is 730 kb/d less than in last month’s Report and a forecast 1.5 mb/d 2Q26 decline would be the sharpest since Covid-19 slashed fuel consumption. Initially, the deepest cuts in oil use have come in the Middle East and Asia Pacific, mainly for naphtha, LPG and jet fuel. However, demand destruction will spread as scarcity and higher prices persist.

Global oil supply plummeted by 10.1 mb/d to 97 mb/d in March, with continued attacks on energy infrastructure in the Middle East and ongoing restrictions to tanker movements through the Strait of Hormuz leading to the largest disruption in history. OPEC+ production fell 9.4 mb/d m-o-m to 42.4 mb/d while non-OPEC+ supply declined 770 kb/d m-o-m to 54.7 mb/d, as lower Qatari output offset gains in Brazil and the United States.

Global observed oil inventories fell by 85 mb in March, with stocks outside of the Middle East Gulf drawn down by a significant 205 mb (-6.6 mb/d) as flows through the Strait of Hormuz were choked off. At the same time, with limited outlets after the effective closure of the Strait, floating storage of crude and oil products in the Middle East rose by 100 mb and onshore crude stocks in the region were up by 20 mb. China added 40 mb of crude to tanks.

However, at the time of writing, it remains unclear whether the ceasefire will turn into a lasting peace and a return to regular shipping flows through the Strait of Hormuz. With oil-importing nations scrambling to source replacement barrels from an increasingly shrinking pool of supply, physical crude oil prices surged to record levels near $150/bbl, far above the prices in futures markets, with the physical-futures disconnect becoming increasingly acute. Even steeper gains have been seen for refined products, with middle distillate prices in Singapore reaching all-time highs above $290/bbl.

Resuming flows through the Strait of Hormuz remains the single most important variable in easing the pressure on energy supplies, prices and the global economy.

In early April, shipments through the Strait remained severely restricted, with loadings of crude, natural gas liquids and refined products averaging around 3.8 mb/d, compared with more than 20 mb/d in February ahead of the crisis. Exports through alternative routes – most notably from the west coast of Saudi Arabia and Fujairah on the east coast of the UAE, as well as the ITP pipeline that runs from Iraq to Ceyhan in Türkiye – had increased to 7.2 mb/d from less than 4 mb/d before the war. The overall loss in oil exports exceeds 13 mb/d, with associated production curtailment and damage to energy infrastructure in the region resulting in cumulative supply losses of more than 360 mb in March and 440 mb projected for April.

Overall, global oil demand is estimated to contract by 800 kb/d year-on-year in March and by 2.3 mb/d in April. Global oil demand is now projected to decline by 80 kb/d on average in 2026, compared to growth of 730 kb/d expected in last month’s Report.

Every US presidential administration since President Nixon has maintained an understanding with Israel under which the US and Israel do not acknowledge Israel’s nuclear weapons program, and the US doesn’t pressure Israel to sign the Non-Proliferation Treaty. The ambiguity has allowed the US presidents to provide military assistance without worrying about the 1976 Symington Amendment, a foreign assistance law that prohibits aid to countries that traffic in or receive nuclear enrichment equipment or technology outside of international safeguards.

Israel’s nuclear arsenal, which is estimated to be somewhere between 70 and 400 nuclear warheads, is almost always missing from the conversation in US media coverage and political discussions surrounding Iran’s nuclear program, which has never been used to develop weapons. Unlike Israel, Iran is a signatory of the NPT, and Ayatollah Ali Khamenei, the Iranian supreme leader killed by an Israeli strike on February 28, had maintained a Fatwa banning the development of nuclear weapons.

“The mullahs are desperate and scrambling,” he said at a recent Pentagon press briefing, referring to Iran’s Shiite Muslim clerics. He later recited Psalm 144, a passage of Scripture that Jews and Christians share: “Blessed be the Lord, my rock, who trains my hands for war and my fingers for battle.”

Hegseth has a history of defending the Crusades, the brutal medieval wars that pitted Christians against Muslims. In his 2020 book “American Crusade,” he wrote that those who enjoy Western civilization should “thank a crusader.” Two of his tattoos draw from crusader imagery: the Jerusalem Cross and the phrase “Deus Vult,” or “God wills it,” which Hegseth has called “the rallying cry of Christian knights as they marched to Jerusalem.”

Matthew D. Taylor, a visiting scholar at Georgetown who studies religious extremism and has been a frequent Hegseth critic, said, “The U.S. voluntarily going to war against a Muslim country with the military under the leadership of Pete Hegseth is exactly the kind of scenario that people like me were warning about before the election and throughout his appointment process.”

Taylor said Hegseth’s rhetoric and leadership “can only inflame and reinforce the fears and deep animosity that the regime in Iran has towards the U.S.”

Hegseth’s church network, the CREC, preaches a patriarchal form of Christianity, where women cannot serve in leadership, and pastors argue that homosexuality should be criminalized. Hegseth last year reposted a video in which a CREC pastor opposed women’s right to vote. Wilson, its most prominent leader, identifies as a Christian nationalist and preached at the Pentagon in February at Hegseth’s invitation.

Both Wilson and Hegseth have questioned Muslim immigration to the United States. Wilson argues the country should restrict Muslim immigration in order to remain predominantly Christian. In “American Crusade,” Hegseth lamented growing Muslim birth rates and that Muhammad was a popular boys’ name in the U.S.

As head of the armed forces, Hegseth has overseen changes that are in line with his conservative Christian worldview, including banning transgender troops, curtailing diversity initiatives and reviewing women in combat roles.

President Donald Trump’s military strikes in Iran have likely cost American taxpayers over $1 billion using cursory estimates—with hundreds of millions lost on lost aircraft over the weekend—with a price tag that could approach $100 billion, depending on how long it can stretch on.

As Congress returns to session this week amid a new conflict in the Middle East, a crucial question hangs over Washington: Who gets to decide when America's military can be sent to war?

The Constitution says that only Congress has that power, with limited exceptions. In the four days after hostilities began, the Trump administration has struggled to articulate whether any of those exceptions apply to this situation. Secretary of Defense Pete Hegseth has called this a "war," undermining the argument that it's a different kind of military action that doesn't require congressional authorization. Secretary of State Marco Rubio and others have said the strikes against Iran were in response to an imminent threat against American troops in the region—only to later back down from that claim. President Donald Trump has made overlapping and contradictory claims about the conflict's aims, and on Tuesday seemed to claim responsibility for initiating Saturday's attack.