John Dizard: Watch for Rationing of Oil, Gas & By-Products

April 1, 2026 | In this edition of The Institutional Risk Analyst, we feature a special conversation with John Dizard, a veteran financial journalist and columnist known for his in-depth analysis of global macro investing, commodities, and currency markets, most notably for his 21-year tenure at the Financial Times. When we want to know what is happening in the world of energy, John is our first call. His views on the approaching economic collapse due to the US-Israeli war against Iran are disturbing but also suggest some investment themes that we address at the end of the discussion for our Premium Service subscribers.

The IRA: John, thank you for taking the time to speak with us today. We’ll dive right into the mess created by the Israeli-US attack on Iran. Where are we now, what, week three of the war? And the world still does not even begin to appreciate the true economic consequences.

Dizard: We're only finishing up week four, and the damage is already rapidly metastasizing. This is not a war that's going to be ending quickly. For one thing, the Iranians are not in a negotiating state. They're in an extortion state. And the impacts are already bad and are getting worse.

The IRA: We noticed that Iran is already extorting payments from ships seeking safe passage through the Strait of Hormuz. The damage to production, refining and chemical capacity in the Persian Gulf is severe and growing. This seems like quite a high price to pay for keeping Israeli Prime Minister Benjamin "Bibi" Netanyahu out of prison. How bad is the physical and economic damage from the war?

Dizard:  Let's start with jet fuel and diesel. Those are the most immediate and hardest-hit product streams. But when they started this war, I think that the White House or the planning team was looking solely at oil flows. They may have looked at the U. S.'s relatively good supply balance, but they didn't look at products. They didn't look at the US requirement to import sulfur, for example. For the U. S. to produce phosphate fertilizer, it has to process its own phosphate rock with sulfuric acid.

The IRA: The Trump Administration is not strong on advanced planning, in part because the team around President Trump never knows what he is going to say or do next. The US dependence on imported sulfur for a wide range of industrial processes probably did not come up in the pre-attack discussions at the White House. After all, the primary source of market data at the Trump White House is Newsmax.

Dizard: Most, around half, of traded sulfur in the world goes through the Strait of Hormuz. It's a byproduct of refining very sulfurous, or “sour”, crude. They take out the sulfur and export it. Sulfur wasn't being considered as a pain point in the past. Now it is. You need sulfuric acid in order to produce copper, steel, nickel and many other products. Apart from fertilizer, you really need it to keep an industrial society running. The White House didn't take that into account. The US may think that they have secure sources of mineral supply from allies, like, say, Australia. The trouble is, to mine things in Australia, you need diesel. The Australians went through a period of shutting down refineries, and they do not produce enough refined products themselves. Problem.

The IRA: Sounds like our friends in California. After we spoke last week, we started to ponder how this ill-advised adventure in Iran by the Trump Administration is going to hobble the global economy. But it is also going to sideline any pretentions about the environment and sustainability. Continue with your point about Australia.

Dizard: Australia imports diesel from either Asian refineries or Gulf refineries. The Asian suppliers, such as Korea, have shut off exports of diesel. California also imports their fuel and refined products or oil from Asia. Now, California has the same problem as Australia. They could import some from the US Gulf Coast, though that’s complicated by California’s unique gasoline blending requirements. There's going to be a serious supply crunch in California because of their refinery closures. I don't know how they're going to deal with this. It’s expensive to get gasoline and jet fuel in California and those products, as well as diesel, are about to become even more expensive and less available. Essentially, California will have to overturn their green regulatory framework and start to re-open refineries.

The IRA: That is an amusing thought. Watching California Governor Gavin Newsom deconstruct the green project before 2028 would be fun. But Australia and the rest of Asia is a more immediate and serious problem. What does the Iran war mean for Australia?

Dizard: The Australians don't have the diesel to mine the minerals that we are hoping to buy to become free of the Chinese supply chain. You could ration jet fuel as a luxury product for distant vacations or unnecessary business meetings. But diesel is the working-class fuel. You need it to farm. You need it to mine. You need it for backup power. You need it for everything. And if there was a price to keep one's eye on, it wouldn't be so much the gasoline price as the diesel price. Which is, of course, above gasoline. And this is affecting Asia first.

The IRA: Who is most impacted by the latest colonial confrontation with Iran? The US support for the Shah of Iran was just the most recent debacle. Baku was part of various Iranian empires for centuries before being ceded to the Russian Empire in 1813 The Russians annexed vast Persian territories in the Caucasus, in a series of wars during the 19th century. But of course nobody knows the history.

Dizard: It's already affected prices in Europe. Unless there's some miracle within the next few days, we're heading towards diesel rationing in Europe, jet fuel rationing, serious shortages. And, also, lower fertilizer application this year, which means lower food production next year. But it's the fuel products, I think, that are going to cause the most immediate severe shortages.

The IRA: The thing you said to me the other day, which you've already got into quite a lot, is the fact that it is the refined product and by products coming out of the Persian Gulf that really matter.

Dizard: Right. I think there was this misconception in Mar-a-Lago that the Gulf states just have these big, giant taps that crude oil somehow comes out of, and then it gets shipped on tankers. But it's also a vast industrial complex. Very, very large fertilizer producers, for example, who serve the needs of the entire world. Saudi Arabia exports a very large amount of phosphate fertilizer. The Gulf “oil” producers also export critical fertilizer products such as urea and ammonia, which are also used to reduce pollution from diesel engines. They export a lot of other key industrial input products, such as aluminum and naphtha.

The IRA: That is an impressive list. There are certain chemicals that an industrial society needs to function.

Dizard: Not to mention helium. Helium is exported from Qatar. It's a byproduct of gas production. Without helium, you can't produce semiconductors. You can't do MRIs. There are all kinds of things you can't do. And Qatar can't bring on helium production without bringing on its LNG production trains, which have already been damaged by Iranian strikes. Let's say the war is settled later today. It'll take a minimum of four weeks to get the undamaged trains back up to speed. More likely, this is going to go on for at least a couple of months longer. I think that's a best-case scenario. The industrial production impact of this conflict is going to be severe.

The IRA: What about India and the Far East?

Dizard: Taiwan, for example, has a, about a 10-day supply of LNG on hand. Those are their working supplies. There is no strategic reserve. They depend on a continuing stream of LNG tankers coming through their ports. That produced half of their electricity. How are they going to produce semiconductors with electric power and the helium? I mean, this isn't just a matter of the crude price going up or gasoline for Memorial Day driving. It's an industrial catastrophe for key products.

The IRA: Again, it sounds like a very expensive way of keeping Bibi Netanyahu out of jail. Very, very expensive. He needed a war to stay in office and avoid prosecution. President Trump has spoken about the investigation.

Dizard: Wars start for what people think are policy reasons, but war has a momentum of its own. That's true for the Iranians, and it's true for the U.S.  I don't know how much you remember of how long we hung around Vietnam, so we wouldn't be, you know, forced into a humiliating withdrawal, which eventually we were. Or Afghanistan for the same reason with the same outcome. This is going to go on a lot longer than even the people in power think it should.

The IRA: Given the appearances versus the realities that are driving a lot of this, John, can you see the U. S. putting boots on the ground in the Strait of Hormuz just to make everybody think they're addressing the problem when they really aren't? You know, obviously, that's not going to stop the attacks. Where do you, where do you put someone on the ground?

Dizard: Let's say they put them on the ground around the export terminal in Kharg Island, which has occupied a prominent place in President Trump's mind for 40 years or more. Let's say we put our boots on the ground there. Presumably, that cuts off Iranian exports. And they're still exporting about two and a half, 2.8 million barrels a day of crude and product. If that flow goes away, the Indians will be without propane to cook their food. You'll have an even worse supply shortfall in crude. It would be a disaster even before the Iranian attacks on the US occupying force.

The IRA: Well, yeah, and that's why Trump took the sanctions off the Russians, was to rebalance that supply equation, right?

Dizard: Well, yeah, and that hasn't worked perfectly well. I mean, on the one hand, the Russians can make more money, double their money per barrel, roughly, from what they were getting before the crisis. On the other hand they're also unable to solve the oil and products supply problem because they can't export as much as they were due to Ukrainian attacks on their export terminals and refineries. However they have managed to get the U.S. to back off from sanctions, which was an enormous strategic win. I think even with the cutbacks in crude exports, the Russians have done well out of this.

The IRA: It’s interesting to see the limits of great power.

Dizard: They've also diverted supplies of defense material away from Ukraine and to the Gulf. They've won on several points. Beyond the effects on Russia’s great-power aspirations, this war has the potential, if it goes on for six months, of turning from something that will accelerate a recession that may have already been brewing into a depression. It's a disaster from the point of view of the world's economy.

The IRA: It's funny, you know, I totally agree with you. I was talking to Komal Sri-Komar, the economist, this morning, and he's anxious to hear our discussion, by the way. And I said to him, 'How do we raise rates to fight inflation?' when the damage isn't just to oil production but to chemicals, which puts the whole world into an economic depression. And you have starvation, you have a lot of other privation around the world, especially in Africa and Asia. How do you ignore that and raise interest rates in the name of fighting inflation?

Dizard: Well, there is the idea of raising interest rates to create demand destruction by reducing credit use through price increases. But while I don't think the increase in oil prices will go away quickly, there are other areas of demand that are also going to be seriously impacted. The degree of U. S. dependency on products that come directly or indirectly from the Gulf is far larger than American leaders realize. Again, we can't make phosphate fertilizer without sulfuric acid, which you can't make without sulfur. And there isn't enough sulfur. Diesel, we need to import mined products from the rest of the world in order to make stuff and deliver it to US consumers. And “demand destruction” is not a winning campaign slogan.

The IRA: So you are talking about the type of shortages we have not seen since the 1970s?

Dizard: We're already talking about physical shortages of diesel and jet fuel. That'll affect the US as well as the rest of the world. For the moment there are significant product stockpiles in, for example, Japan, Korea and Europe. The supplies in Europe are probably leaky enough so that some of it could be re-exported. Even so, demand will bid up the price of diesel, which will come back to hit American farmers. So what, $10 a gallon for diesel? The U.S is a product exporter, but the world price feeds back to the U.S.

The IRA: That is a pretty grim prognosis. Is this about supply or price?

Dizard: Sulfuric acid is not just a price thing. What about helium? Not just a price thing. I don't think that the consequences— of this or of boots on the ground action— are being discussed in these terms in the White House.

The IRA: When do you think this reality comes to the people who make the decisions. When do you think this reality starts to arrive in Washington? You think anybody's talking to them?

Dizard: Weeks. Not months, weeks. For diesel supplies there'll be serious shortages within weeks. Jet fuel, it's already a problem flying to Asia. The US exports a lot of aircraft to Asia. Can Asian customers continue to take those deliveries if they cannot fly? What about the formerly fast-expanding Gulf carriers? If you fly to a long distance, you want to be sure that you're going to be able to refuel the plane when you get there.

The IRA: How about heavy oil for ships, John? Is this also impacting them?

Dizard: Well, yes, and most countries and operators subscribe to the IMO guidelines on clean maritime fuel. Now, the price of diesel also affects maritime fuel. Most shipping is done in diesel-fueled ships. So, yes, that is a problem. Heavy, high sulfur fuel it doesn't work so well with engines that are tuned, you know, to accept cleaner fuel. However, I noticed that the EPA in the U.S. is already reducing requirements for urea and ammonia additives that are used to reduce particulate emissions from diesel. I think it's because they see the shortages in ammonia and in urea. So already little things like that are happening. So there's likely to be a deterioration in air quality everywhere.

The IRA: For China, how do you see that now? You've been digesting all this for the past week.

Dizard: There’s a lot the Chinese can do to reduce the domestic impact of the Gulf war. They can reduce their LNG dependence by switching to coal-fired power plants. They're already doing that. They have substantial strategic reserves of crude and of products. So they can insulate their domestic economy for a long time. However, they also are very dependent on manufactured exports in order to keep the economy ticking over. And what they don't want is to see their customers either imploding economically or starving because they can't get enough fuel and fertilizer. I think that will motivate the Chinese to act as intermediaries to end the crisis. I don't know when that can happen. The Iranians think they're winning. And in some respects they are winning. They're having their military severely degraded and their country's a mess and people are being killed, including the leadership. But Iran has increased their apparent leverage over the world economy through their control of the Strait of Hormuz.

The IRA: The Iranians are prepared to wait. They can deny transit of the straits and they're not going to give that up because of a simple demand by the U. S. So, they're willing to live at a very low level. You know, the Revolutionary Guards, they're willing to let most citizens live at a very low level. But how do you think things look by, say, Election Day this year?

Dizard: Very bad. Very bad. I mean, let's be optimistic and say it's settled in a month. Let's say it's settled the beginning of May. At best, assuming the remaining production facilities and loading facilities and power facilities are undamaged in the region, it would take another month to get them back more or less on stream. Then it would take longer to get the ships repositioned to where they should be. And then you have at least six months to a year of restocking, because a lot of reserves and stocks of refined product and crude have been run down. They'll be restocked at a higher level. So, if we have a cease fire tomorrow, it could easily be a year before prices get down to where they were, even with the demand destruction.

The IRA: Thanks John. We should do another discussion later in the year.

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