In truth, there are no real winners. Iran has taken heavy
punishment from US and Israeli attacks which have degraded a considerable part
of its military capacity and resulted in thousands of civilian casualties. But
the US may have lost something even more important – credibility. It cannot
claim to have achieved its initial goals of regime change and elimination of
the Iranian nuclear programme (despite claims that the programme was ‘obliterated’
in 2025). The Iranian government remains in place even after the assassination
of Supreme Leader Khamenei; it retains the ability to launch missiles against
its neighbours and it still possesses its stock of enriched uranium. Moreover,
Iran has now exerted control over the Strait of Hormuz, a waterway where it
once merely harassed shipping but where it now dictates the terms of passage
for the 20% of global oil traffic that flows through it.
History suggests that previous episodes of Western
involvement in the Middle East have exacerbated rather than improved local
security conditions. Recent cases have included the 2001 invasion of
Afghanistan and the 2003 invasion of Iraq which precipitated acute sectarian
polarisation and a near-disintegration of Iraq’s social fabric. Nothing that
has happened in recent weeks suggests that the cycle will be broken this time
around. Indeed, events since 7 October 2023 have ratcheted up global tensions
in a way not seen since the Yom Kippur war of 1973. Israel’s actions alone have
represented a disproportionate use of military force but US strikes against
Iran represent an even more consequential strategic miscalculation, with the
potential for far‑reaching geopolitical repercussions.
1. US actions will have more adverse
geopolitical consequences than previous episodes
The litany of miscalculation and bombast on the part of the
US Administration needs no repetition here but it is having profound
consequences which could lead to a change in the geopolitical order. Although
it made less strident claims during the Vietnam War, the US made a similar geopolitical
miscalculation in the 1960s when launching its military power against a
supposedly weaker opponent. But it was able to recover from that episode by
virtue of being the unchallenged global economic leader. While the war placed
fiscal and social strains on the US, the underlying economic engine was so
powerful that recovery was almost structurally guaranteed. Along with this
economic dominance, the US retained its position as the leader of the western
alliance. Today, the size of China’s economy means it is now a near‑peer
economic rival, while India and the EU represent sizeable economies that dilute
US dominance. Trump’s erratic foreign policy means that erstwhile allies no
longer have the same degree of trust in the US, whose leadership of the western
alliance has been severely strained.
2.
The western alliance has experienced a
profound change
None of this is to say that the US will not remain the
strongest western power, both economically and politically. A post‑Trump
administration may well re‑anchor US foreign policy in its
traditional liberal democratic values, leading to a renewed warmth in
transatlantic relations. But
as the journalist Lewis Goodall recently noted, the widening gulf between
Europe and the US MAGA movement is increasingly about values and “the divide
runs deeper than policy, deeper than politics, deeper than any single leader
can bridge.”
Trump’s recent threats to pull out of NATO would certainly undermine
European security guarantees. But it would also reduce US ability to project
its power around the globe. At the same time, efforts to draw European partners
into the Middle East war and Trump’s ambitions towards Greenland have reminded
Europe that partnership is not the same as dependence, and that it cannot
afford to outsource its interests. It now understands the limits of external
guarantees and the need to take fuller responsibility for its own security and
economic resilience.
This will, of course, have serious military and economic
implications for both Europe and the US. In 2023 and 2024, more than half of
non-US NATO military spending went to US-owned companies, so the US stands to
lose economically if Europe reduces its dependency. But Europe is also heavily
dependent on the technology embedded in US-produced military equipment which
will not be easy to replace (for a fuller discussion of these issues, see
this excellent piece from the Bruegel think tank). The western alliance has
served all sides well over the last 80 years. Its demise would not benefit any
of its members.
3.
Trump has played into China’s hands
Large parts of the Middle East, particularly the Gulf
states, have traditionally adopted a pro-US stance, relying on it for
protection from hostile actors. But Iran’s missile attacks on Gulf states which
host US military facilities have raised questions about just how much
protection the US is able and willing to give. This raises the incentive for
them to be more amenable to Chinese overtures as China seeks to expand its
sphere of influence.
In East Asia, questions have been raised around China’s
ambitions towards Taiwan and how far the US would be prepared to go to defend
it. It is notable that Cheng Li-wun, the chair of Taiwan’s Kuomintang (KMT),
this week met with Xi Jinping in Beijing, the first such contact in a decade. While
there is no suggestion that the People’s Republic is planning a military
invasion, Chinese military planners will undoubtedly have taken on board just
how quickly the US is prepared to expend resources in pursuit of its goals, and
how Iran has been able to absorb the military onslaught against it. Indeed, one
of Trump’s biggest blunders has been to expose the limits of military power
when confronted by a determined adversary. Deterrence is strongest when
overwhelming force is implied, not when it must be used, particularly when it
does not actually achieve its goals.
4.
Acceleration of global fragmentation
Historians may look back at the events of March 2026 and
conclude that this was the point at which the position of the US at the top of
the global geopolitical order became less certain. China has been able to sit
on the sidelines and watch the US alienate its allies. One outcome might be a
reduction in reliance on the US for security and a greater willingness to
explore trade and financial payments infrastructure based on anchors other than
the dollar. It is important to emphasise that this will not happen overnight –
there will be no sudden rupture – but it could result in a gradual erosion of
US dominance as parallel networks gain traction at the margin. This risks a
more fragmented global landscape characterised by competing spheres of
influence, reduced policy coordination and a diminished capacity to
collectively manage cross-border shocks.
5.
Rising tail risks
One cause for concern is that there will be a significant
widening in the distribution of risks. A global environment which has been
built on a system of deterrence and sharply delineated red lines is
increasingly subject to ambiguity. This increases scope for miscalculation by
multiple actors operating in close proximity which in turn raises the
likelihood of low-probability, high-impact events, ranging from unintended
military escalation to a more sustained disruption of critical chokepoints (as
we are seeing in the Strait of Hormuz today, but this could equally be a
disruption of computer chip supply or some other critical material). In this
environment, these risks are not independent: an initial shock could trigger a
cascade of responses, amplifying its impact well beyond the original incident.
The result is a more unstable equilibrium in which periods of apparent calm
mask an underlying increase in systemic vulnerability, and where geopolitical
developments are more likely to generate abrupt and non-linear shifts in the
global landscape.
Last word
Some, all or none of the above risks could materialise. It
may be that the Trump era represents a temporary blip in the global order and
that the west will settle on a stable equilibrium once he leaves office. But it
would be complacent to assume a return to the old normality. Something has fundamentally
changed: the certainties of the old global order have given way to a more
volatile and fragmented system, where stability can no longer be assumed and
where shocks, whether geopolitical or economic, are likely to be both more
frequent and more disruptive. And this is likely to have economic costs as
European countries make greater provision for defence spending, diverting
resources away from more productive investment and placing additional strain on
already stretched public finances. A more fragmented and less predictable
global environment will weigh on trade, investment and policy coordination,
reinforcing the drag on growth. The cumulative effect is a world economy that
is not only more exposed to shocks, but less well equipped to absorb them.
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