Structure, Flow, and Risk

People sometimes ask my perspective, having left Iran many years ago, on how global systems actually function beneath the surface.

I tend to think about it less in terms of politics and more as a set of interlocking financial, physical, and risk frameworks that shape behavior.

Part of how I see this comes from my background. My dad was a petroleum engineer starting in the early 1950s, and my grandfather was a CEO in that world, so I grew up seeing how energy, geopolitics, and economics connect.

One way I think about it is as a global marketplace. Almost like a large, interconnected mall. Every country is a participant, operating within a system that depends on trust, security, and a stable medium of exchange.

After World War II, the system established at the Bretton Woods Agreement created a dollar-anchored world tied to gold. As U.S. spending expanded through the space race, Vietnam, and broader global commitments, that system evolved. By the early 1970s, the U.S. moved off gold, and a new structure emerged.

A key development was the alignment between the United States and Saudi Arabia, often associated with the diplomacy of Henry Kissinger, where global oil transactions became denominated in dollars. That linked energy flows directly to the U.S. financial system and reinforced the dollar’s central role in global finance.

Energy sits at the base of the system. The movement of energy enables the movement of everything else.

A large portion of that movement passes through a small number of narrow corridors: the Strait of Hormuz, the Bab el-Mandeb, the Suez Canal, the Strait of Malacca, and the Panama Canal.

These corridors are not just convenient. They are essential because they dramatically shorten distance and time.

Without the Suez route, traffic between Europe and Asia would have to move around the southern tip of Africa. That adds thousands of miles, weeks of transit time, higher fuel consumption, and significantly higher cost. The same is true for flows moving through Hormuz into the Red Sea and up toward Europe, or down toward Asia.

This applies not only to oil, but to goods, materials, and manufactured products. The system depends on efficient movement.

The stability of these corridors is supported by a combination of naval presence and longstanding agreements between nations that provide access, coordination, and continuity. Alliances such as the North Atlantic Treaty Organization, bilateral security arrangements in the Middle East, and access agreements across Europe and the Indo-Pacific create a framework where movement can occur reliably.

That structure has a geographic expression.

The Persian Gulf, Strait of Hormuz, Red Sea, and Bab el-Mandeb are supported by U.S. naval forces operating out of Bahrain (Fifth Fleet). The Mediterranean and access into the Black Sea are coordinated through partnerships with countries like Turkey under established agreements governing the straits (Sixth Fleet). The Western Pacific, including the Strait of Malacca, is supported through a network based in Japan and regional partners such as Singapore (Seventh Fleet).

This network is reinforced by basing and access agreements across Bahrain, Qatar, Kuwait, the United Arab Emirates, Saudi Arabia, Jordan, Iraq, Italy, Spain, Japan, South Korea, and Singapore. Together, these provide reach, logistics, and continuity across regions.

Within that framework, countries build their economic activity. Manufacturing, exports, energy imports, and capital formation all depend on reliable movement through these corridors.

At the center of this system is the ability to understand and price risk.

Modern insurance markets trace back to maritime trade. Lloyd’s of London began in the late 1600s as a gathering place where merchants and shipowners shared information and agreed to insure voyages. Over time, this evolved into a structured system where risk is distributed across participants and continuously priced.

Around the same period, Wall Street developed into a center for capital formation, credit, and financial instruments, allowing that risk to be absorbed and spread across markets.

These elements come together in what is essentially an actuarial system.

The corridors that carry energy and goods also carry enormous value. Oil tankers, container ships, and bulk carriers represent concentrated economic exposure. At the same time, the means to introduce uncertainty into these corridors can be relatively small.

A relatively low-cost disruption in a narrow passage can shift the probability of loss in a meaningful way. That asymmetry is what drives risk pricing.

When that happens, the first response is financial.

Insurance premiums adjust.
War risk coverage is updated.
Shipping routes and timing evolve.

That repricing moves through the system.

Insurance redistributes exposure.
Banking adjusts trade finance and credit.
Markets reprice energy, goods, and risk across balance sheets.

These adjustments can occur quickly, with small changes in perceived risk influencing pricing, liquidity, and behavior across multiple layers.

This is where Iran’s position becomes particularly relevant.

Iran sits alongside the Strait of Hormuz, one of the most critical corridors in the system. Its location allows it to influence conditions where a large portion of global energy supply transits.

That influence also extends across connected corridors through regional activity.

In the south, Houthi activity in Yemen affects flows through the Bab el-Mandeb and into the Red Sea, which directly connects to the Suez route.

In the eastern Mediterranean, dynamics involving groups such as Hezbollah and Hamas influence conditions around routes feeding into the Suez corridor and broader regional access.

These are connected segments of the same system. Conditions in one location can influence behavior across others, creating a pattern of distributed pressure along key pathways.

From an American perspective, a significant portion of defense spending supports the continuity of this system. Naval presence, alliances, and basing agreements help maintain stable movement through these corridors. That stability supports open trade, consistent energy flows, and a financial system that operates globally.

It also feeds back into domestic conditions. A system that supports global liquidity and reliable trade contributes to a strong dollar, access to capital, and relatively favorable borrowing conditions.

At a high level, the system rests on three connected elements.

Physical flow.
Predictable security.
The ability to price risk.

These elements operate together, linking geography, finance, and global trade into a single, continuously adjusting system.