International Man: Iran is already turning the Strait of Hormuz into a geopolitical toll booth—restricting traffic, charging transit fees, and shutting out the US and its allies. If this continues, what happens to oil, trade, and the global economy, and is there anything the US military can do about it?

Doug Casey: I did a bit of research. Definitions are important; poorly defined words can only confuse issues. A “strait” is a narrow, naturally occurring body of water that joins two larger ones. They’re traditionally considered international waters. Hormuz is the best known at the moment. The Strait of Malacca between Indonesia and Malaysia narrows down to about 40 miles at its narrowest point. It has no tolls, although Malaysia, Indonesia, and Singapore have talked about them, since they incur expenses to clear Malacca of pirates. Turkey charges tolls for the Bosphorus, joining the Black and Mediterranean seas, not for a right of passage, but to cover the significant costs of the traffic.

Straits are natural choke points with significant economic value, similar to canals. The difference is that canals are man-made. Egypt grosses about $10 billion, netting about $4 billion per year, from the Suez Canal, controlling one end of the Red Sea. The Houthis closed off the Bab el Mandab strait at the other end of the Red Sea for a while; maybe they’ll do so again… The Panama Canal grosses about $5 billion and nets about $3 billion.

The Suez and Panama canals aren’t directly comparable to the Strait of Hormuz because they were constructed at great cost and are entirely within the bounds of one country. However, they give us an idea of its value. Around 100 large ships typically transit Hormuz daily. The Iranians seem to be talking about charging some or all of them about a million dollars per transit, amounting to about $35 billion per annum. A VLCC oil tanker typically carries about 2 million barrels of oil. That would amount to a fee of perhaps fifty cents or a dollar a barrel. Which is, to use a currently fashionable word, “sustainable”.

Of course, none of this was even an issue before the American-Israeli attack provoked the Iranians to institute controls and tolls as a countermeasure. Before the attack, it was free passage.

What can be done about the current state of affairs? We don’t have a very good idea of what the reality is. All we know is the propaganda from both sides—but we hear vastly more US propaganda, for obvious reasons. I’d say there’s nothing that the US military can do about it, because the Iranians have a thousand kilometers of rugged coastline from which they can attack any ship in the Gulf with drones, missiles, or mines, not to mention the 20-mile-wide Hormuz itself.

The U.S. Navy apparently withdrew the Fifth Fleet from Bahrain, at the northern end of the Gulf, before the attack, and has since been forced to withdraw over a thousand kilometers away from the Iranian shore for fear of attack. It’s reasonable to believe that the damage done to the USS Gerald Ford was caused by missile strikes, as opposed to a supposed “laundry fire.” The Navy doesn’t want to risk a few million-dollar missiles taking out a $15 billion aircraft carrier with all of its planes.

As of April 13, the US met Iran’s blockade with its own blockade. If it succeeds, that can only worsen “bigly” the economic damage of the war. But it’s unclear how the US will enforce it. Will it forcibly board and capture ships that come through? What if the ships resist boarders? What if they’re Chinese ships? Since the situation is changing unpredictably by the day, by the time you read this, the Iranians may have sunk a couple of US destroyers, and Trump, unhinged as he is, may threaten to nuke Tehran.

What’s certain is that the US Government has a big problem. It looks like a giant paper tiger that doesn’t dare deploy its high-tech Navy near a hostile shore. What, then, is the good of a navy?

International Man: Iran is reportedly accepting yuan, Bitcoin, and its own rial currency as payment for the Hormuz transit tolls. If more oil-related trade starts moving outside the dollar system, what does that mean for the dollar’s status as the world’s reserve currency and the ability of the US government to impose financial sanctions?

Doug Casey: The US Government has a problem with its currency. The dollar was once redeemable at a fixed price ($35) for gold. But since 1971, which precipitated the first Great Oil Crisis, it’s been a faith-based fiat currency, something called the petrodollar. Essentially, the Saudis promised to accept only dollars for their oil in exchange for military protection. But now it seems that being a US ally not only doesn’t yield safety, but can turn your country into a missile magnet.

The world sees that the dollar is rapidly depreciating. And, even worse, dollar assets can be arbitrarily confiscated, as they were with Russia. The BRICS have been making efforts to stop using the dollar. The US fiasco with Iran is accelerating de-dollarization. The US is increasingly seen as an out-of-control bully, a failing empire with an unreliable currency. Other countries want an alternative to the dollar. But it won’t be some other fiat currency. Governments have zero reason to trust each other or their currencies.

I believe the world is returning to gold, a money with no counterparty risk.

International Man: A ceasefire may calm headlines and markets for the moment… but how likely do you think Iran and the US will reach a permanent peace?

Doug Casey: The US and Israel launched a sneak attack in the midst of negotiations with Iran six weeks ago. The US Government is now trying to end the war it started, after seeing that it wouldn’t be the quick victory that they expected. The United States dropped enormous amounts of ordnance in both Korea and Vietnam, but neither surrendered. Neither will Iran.

As victims of an unprovoked attack, which cost them a huge amount of blood and treasure, the Iranians believe—correctly, I think—that they are entitled to compensation. And they’re planning on getting it. In the meantime, the war is actually benefiting them by raising oil prices, their main source of export revenue. They may also succeed in charging tolls through the Strait of Hormuz, something which they had never considered before. I expect that this war won’t end until they get direct compensation from both the US and Israel.

I say this not because I am a friend of the Iranian government. To the contrary, it’s a criminal regime. But that’s equally true of 40 or 50 others in the world. The US Government started this whole thing with the overthrow of Mosaddegh, who was popularly elected in 1953, replacing him with the Shah. While the Shah did some good things during his reign, he was a pigheaded authoritarian, a megalomaniac with notoriously nasty secret police. He was always viewed as an American puppet. Since his overthrow, the American government has gone out of its way to damage both the Mullahs’ regime and Iran itself.

They actively supported the Iraqi Saddam regime in an eight-year war against Iran, which probably killed a million Iranians. They expressed regret, but never really apologized for the USS Vincennes shooting down an Iran Air Flight 655, with 290 passengers, on its scheduled route to Dubai in 1988. The US has consistently attempted to bring down the country with sanctions, accusing it of being a major sponsor of terrorism, which is untrue. The Iranians support Hezbollah and Hamas, but their military actions have been against Israel, almost entirely in the region, never in the US. Meanwhile, the US and Israel have conducted numerous assassinations and bombings in Iran and many other countries.

Trump not only started the war at the behest of Israel’s Netanyahu regime, but also aggressively insults and threatens anybody and everybody he perceives as an opponent. He doesn’t seem to realize that people, especially foreign leaders, don’t take his vicious insults the way kids might take joshing and ranking each other in the locker room. They take it personally and will seek retribution. The Iranians absolutely won’t roll over. The war will continue indefinitely.

The US government has already lost this war. It’s punched a tar baby and can’t withdraw its fist. It’s further bankrupting itself, precipitating the Greater Depression, risking WW3, and destroying its moral standing. The only possible winner is Israel. Perhaps it’s trying to expand from the Nile to the Euphrates, as some say Yahweh has promised.

Israel may succeed in suppressing other enemy states in the region for a while. But that won’t solve their existential problem. There are about a billion and a half Muhammadans who are theologically and ideologically opposed to its very existence. And they haven’t made any new friends with their actions in Gaza, Iran, or Lebanon.

This problem is probably insoluble as long as Israel exists. In the meantime, count on this war continuing, including lots of problems in the transportation of oil, gas, and other materials through the Straits of Hormuz. And elsewhere. I feel bad for both Israel and its neighbors. But U.S. involvement can only make the situation much worse. It’s none of our business.

International Man: How do you see the Iran war affecting supply chains, inflation, and everyday living costs in the US and elsewhere?

Doug Casey: Oil and natural gas are used everywhere and in everything, scores of thousands of products; they’re the most important of all commodities. Oil from the Middle East keeps the Far East going, and the Far East is the world’s workshop. Until the situation is resolved, we can count on oil staying above $100 per barrel, perhaps much more. And growing shortages of many things.

International Man: The stock market is already fragile. We could see an oil shock hit at the same time the bond market is under pressure, and the Fed is boxed in. How do you see it playing out, and how are you positioned for it?

Doug Casey: This could be the pin that pops the bubble, which has been actively in search of a pin for a long time now. The Greater Depression has been inevitable for many years, lacking only a catalyst to set it off.

Higher oil and gas prices will result in much higher food prices, and even the unavailability of food. It is not just a question of higher gasoline prices in the US. That’s the most trivial consequence.

It will result in a significantly lower standard of living for people all around the world. I remain long gold but also oil, gas, coal, and uranium stocks. They have gone up a lot, which is to be expected coming out of a long bear market. Most of them have good dividend yields. Some have extraordinary dividend yields, which is a sign of how depressed they are.

The whole commodity complex, and the companies that produce them, is really the only place to be. Bonds, industrial common stocks, and most forms of real estate are definitely not the places to be.

Editor’s Note: This jump in energy prices is not a passing disruption. It is one more sign that the financial and political cracks are widening—and that Americans could soon be hit with a much broader economic reckoning.

To see what may come next and how to prepare now, see our urgent new video, The Most Dangerous Event of the 21st Century, where legendary investor Doug Casey lays out what’s ahead. Click here to watch it now for free.