Mariano Browne
Last week, we noted how modern strategic thinking in business has been influenced by military theory and practice. However, whilst there are analogies in the techniques, the similarity quickly ends as war is a very expensive and destructive business. Few people would want a long war, as it magnifies the destruction and the cost of rebuilding. Therefore, military planners must be clear about the objectives they wish to achieve before they undertake a war and balance those objectives with the direct and indirect costs. No one in their right mind will start a war that they do not expect to win.
The US-Israel war is now in its 16th day. Key questions remain: How long will it last? What impact will it have on the global economy? Will Trinidad and Tobago gain any lasting benefit?
Perhaps it was expected that decapitation strikes against Iranian leaders would bring a quick end to military action, as in Venezuela. But Iran is no Venezuela, and this is no “short-term excursion.” Now it is clear Mr Trump has blundered into an open-ended conflict. He did not consider the predictable economic consequences: higher oil prices, disrupted trade, destabilised markets, and rising inflation. The problem is that things may worsen as the war drags on.
No one expected Iran to counter overwhelming US military strength. Iran’s navy and what remained of its air force were quickly destroyed. Yet Iran’s war plans relied on a war of attrition using its homegrown drones and hypersonic missiles. Superior US and Israeli air power may devastate assets, but they cannot win a war without infantry.
Therefore, while Iran lacks the capacity to win a direct military conflict with the US, its control of the Straits of Hormuz (21 miles wide, not 30 as previously reported) allows it to threaten 20 per cent of the global energy supply.
Only 77 ships crossed the Strait between March 1 and 11, per Lloyd’s List Intelligence. Iran-affiliated vessels accounted for the majority, followed by Greece and China; this marks a significant decline from 1,229 passages in the same period in 2025. This substantial drop, along with missile strikes on energy facilities in Bahrain, Iraq, Qatar, Saudi Arabia, and the UAE, has intensified market volatility and price spikes, weakening global economic stability and increasing uncertainty for energy-dependent sectors.
Iran has calculated that its missiles would have a profound effect on world energy prices, thereby driving inflation and galvanising political opinion in the corridors of power. Iran’s actions are driving up prices in the world energy market, with a knock-on effect on the prices of sulphur, sulphuric acid, helium and fertilisers, all products that pass through the Strait of Hormuz. Energy is a key ingredient in all societies, and any price increase drives inflation. The other byproducts affect agribusiness and, therefore, food prices as well as the manufacture of semiconductor chips, the basis of automation and modern communication. Gulf states also depend on shipping for their food imports.
US military supremacy cannot reverse these effects. Two US air carrier strike groups are in the Gulf region, with a third on its way. Naval protection was promised, but none has been provided. Instead, the US has lifted sanctions on Russian oil and gas purchases. This week, the International Energy Agency (IEA), a Paris-based body founded in 1974 to ensure reliable and affordable energy, authorised the release of 400 million barrels of oil from reserves. Crude oil prices, however, remained above US$100.
IMF Managing Director Kristalina Georgieva warned policymakers to prepare for the possibility that the Middle East conflict could create new economic pressures across global markets. Speaking during a symposium hosted by Japan’s finance ministry in Tokyo, she said a 10 per cent rise in oil prices that persists for most of the year would add about 40 basis points to global inflation.
Since February 28, oil prices have increased by an average of 40 per cent, suggesting this could add 1.6 per cent to the estimated global inflation rate of 3.8 per cent, bringing it to 5.4 per cent. Experts are beginning to consider stagflation (economic depression with inflation) as the most likely outcome.
Fuel imports account for the largest share of total imports across all Caribbean territories, including T&T, and therefore represent the biggest use of foreign exchange. This negative effect will hurt the region. Conversely, T&T exports of oil, natural gas and its petrochemical derivatives account for the largest share of export earnings. Therefore, one could expect these exports to benefit from higher prices for energy-related products. This is not straightforward, as the Gulf War has also led to a tripling of tanker and insurance rates. An informal conversation with an energy executive suggests that these higher rates have offset price increases for cargoes leaving T&T.
The 2026 national budget outcome is already compromised by the 10 per cent salary adjustment to the PSA. The estimated deficit will be twice as high. The government must borrow to finance this deficit, increasing its already heavy reliance on debt. The last billion-dollar loan on the international market by GORTT in January carried an interest rate 45 per cent higher than the bond it replaced, raising the government’s debt servicing costs. Further borrowing will be even more expensive, as the Gulf War is driving global interest rates higher.
It is not clear that the economic impacts of this Gulf War will result in a net positive benefit for T&T. Don’t count your chickens before they hatch.
Mariano Browne is the chief executive officer of the UWI Arthur Lok Jack Global School of Business.
