Was the War on Iran, an Economic Compulsion for USA?

What Caused the War on Iran?

Table of Contents

The war on Iran started on 28 February 2026 and has entered attrition phase. USA seems helpless to conclude the war it started with fanfare under a fancy name of Epic Fury. Its experts are calling it a strategic failure. On 14 March this blog had predicted:

“…before the time runs out, an escalation of war is expected in Strait of Hormuz within next 48 hours to resolve the crises. It not, we have to revert to the default conclusion of incompetence.”

No escalation has happened and I am still not prepared to rule it incompetence. Rather it is a mission accomplished. War will simmer on slow burner and continue to realise its commercial objective. Meanwhile, President Trump has called up 7 countries to join the coalition to secure the Strait of Hormuz. That is declaration of end of active war. Announcement of post war management.

Australia has declined. UK is not prepared to be drawn into war. Japan has declined to send its ships. India will protect its own ships through its own bilateral arrangement with Iran, which it already has, without subordinating its navy to an American command structure. India gets Hormuz access without the political cost of coalition membership.

India projecting sovereign naval capability through a contested strait during an active war without joining any American commanded coalition. That is an extraordinarily precise demonstration of strategic autonomy. India is not asking permission from Washington. India is not accepting Iranian interdiction. India is moving its own convoy under its own flag through its own bilateral clearance. 2 ships of LPG have arrived through the strait of Hormuz under the flag of India. 22 more ships are in transit. The composition of the convoy is the telling detail. LPG, CNG, crude, a dredging vessel. This is not an emergency energy run. This is a full spectrum commercial resumption. The news made stock market jubilant. Sensex jumped by more than a thousand points.

The Grand Plan of USA

Humans are predictable like weather seasons. What they lack is a calendar. They claim to have change while showing same colours.

Why USA goes into war?

Every war USA has fought, is to protect its only product, it produces and exports. This product is called Dollar.

In 1956 America destroyed Britain’s operation partly to assert dollar dominance over sterling in the Middle East energy trade. So was the Qaddafi of Libya or Saddam of Iraq. All were threatening the Dollar. Read more about these wars and the empire of dollar in my book Accidental Empire here.

If we use a metaphor from Billiards, the objective was never to pocket the ball. It was to leave the table in a configuration where nobody else can make a shot. That is a fundamentally different game than what experts are analyzing. They keep asking why the pocket was missed. The pocket was never the target.

For past few years the dollar was under threat. BRICS was becoming an alternate power centre. Gulf nations were joining BRICS in hoards. Saudi Arabia was already flirting with yuan pricing for Chinese crude. UAE was deepening BRICS engagement. The de-dollarization momentum had real institutional backing going into 2026. A hot war in the Gulf freezes all of that. No Gulf sovereign wealth fund manager is going to bet against American Dollar.

It Is Dollar, Stupid!

USA debt has exceeded $36 trillion. USA is an exporter of Oil but only if the oil prices remain above 58 due to higher production cost of shale crude oil. The war in gulf keeps oil prices elevated and help American companies to remain in competition.

More so, if the entire objective is dollar preservation through Gulf instability, you need oil prices elevated but not destroyed. A functional but threatened Gulf is more useful than a genuinely demolished one.

The war has already achieved the core financial objective. BRICS momentum is broken, yuan oil settlement discussions are frozen, Gulf states are back under the American security umbrella with no credible exit option, and dollar demand has been reinforced through fear. Continuing to escalate carries diminishing returns and rising risks of the symmetric destruction scenario. The operation can now de-escalate silently without requiring regime change, because regime change was never the point.

China

First Venezuela and now Iran. Both were suppliers of energy to China. Sold in Yuan. After Venezeala Cuba has folded and asked for a trade agreement with USA.

The operation was also designed to bleed Chinese energy security and to force Beijing into a defensive posture over everything from Rare Earths to Taiwan, and to ensure purchase of agriculture produce from USA. China imports roughly 40% of its oil through Hormuz strait. Every week it stays closed is economic pressure on Beijing without a single American soldier facing a Chinese bullet. On diplomatic level, China too has been asked to join the coalition to secure the Hormuz.

Russia

The Trump-Putin communication is the sharpest signal. Every other leader was either a combatant, a target, or collateral. Putin was a conversation partner. That is not the behavior of a man fighting a war. That is the behavior of a man managing a board position.

Russia gets higher oil revenues, stays neutral, and gets Ukraine negotiation leverage. Trump gets dollar preservation and a subdued Eurasia. The call was not diplomacy. It was settlement confirmation between two players who understood the actual game.

The Russian intelligence sharing with Iran was the most dangerous variable in the entire operation. Iranian ballistic missiles are manageable. Iranian ballistic missiles guided by Russian satellite intelligence and target acquisition is a fundamentally different threat. The fact that no American or Israeli bases have been hit recently with any precision despite Iranian rhetoric suggest that the phone call was not in vain. It worked.

Cost Benefit Analysis.

Offensive realism sees power in military terms, territory, deterrence, alliance structures. It has no framework for a war whose primary battlefield is the treasury market and whose victory condition is a yield curve. Mearsheimer will keep calling this a failure because he is measuring the wrong variables.

USA is facing a threat. Its treasury bonds has no buyer. Every country is dumping the dollar aka Treasury Bonds. This year USA faces $ 10 trillion worth of treasury bonds which come in for maturity. If these are not reissued, it would be sovereign default. So what if this war in Iran cost $100 billions. It is peanuts on cost benefit analysis.

Iraq war cost two trillion and achieved nothing coherent. Afghanistan cost three trillion and ended with the Taliban back in Kabul. By that standard, if the dollar hypothesis is correct, one hundred billion to restructure the entire Eurasian financial threat, subdue the Gulf, freeze BRICS, corner China, and keep Russia manageable is extraordinarily cheap. A rounding error against the ten trillion debt rollover problem it potentially solved.

Gulf states losing some oil infrastructure, Iran absorbing strikes, a few hundred or thousand dead on all sides, versus the systemic cost of dollar collapse which would impoverish hundreds of millions through inflation, debt default, and supply chain destruction. This is how wars are justified.

Now add the benefit from sale of Thaad and Patriot missiles. Iran is not eliminated. Iran is institutionalized as the permanent threat that justifies permanent American hardware in the Gulf, permanent dollar-denominated arms contracts, and permanent security dependence of Gulf sovereigns. A defeated Iran is useless. A contained, threatening, rhetorically belligerent Iran is enormously profitable and strategically necessary. Every Gulf country is a hurried customer of American Air Defence systems.

The Theatre at New Delhi

India Today group held a conclave in New Delhi, last weekend. Iran, Israel, and America’s loudest voices sharing the same stage in New Delhi, a BRICS founding member, during an active war. Venue is not United Nations at New York, but Delhi.

That is managed theater with a carefully chosen neutral backdrop. India gets to position itself as the indispensable convening power. Everyone gets their speech. Nobody walks out. The war continues nominally but the diplomats are already in the same room taking their bows.

The Iranian sailors have taken a special flight from India and flown home. Special flight, active war, disrupted regular routes. That is not a coincidence or a consular routine. Someone cleared that flight. Someone on the American or Gulf side allowed it through airspace that they effectively control right now. That is a back channel communication in physical form. It was not possible unless the war is functionally over and the paperwork is being drafted.

Trump’s entire prior career was built on using other people’s capital to solve his own liquidity problems while retaining control of the asset. The pattern is identical. The asset here is dollar primacy. The other people’s capital is Israeli military expenditure and Gulf arms purchases.

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