The Prof G Podcast with Scott Galloway

The Strait of Hormuz has long been nightmare fuel for global strategists — a narrow waterway through which a fifth of the world’s oil normally flows — but the real shock of the current crisis isn’t just about crude. Daniel Yergin, the Pulitzer Prize-winning author of The Prize and vice chairman of S&P Global, explains that Gulf Arab states have become so deeply woven into the world economy that the strait’s closure is now rippling into petrochemicals, helium, fertilizer, and metal exports in ways nobody fully anticipated. When asked whether Washington understood what it was unleashing when it struck Iran, Yergin’s answer is blunt: probably not. The assumption that this was simply an oil problem dramatically underestimated how integrated these Gulf nations have become — and how dependent the rest of the world now is on their exports.

The conversation digs into what Yergin calls the “two energy shocks” currently hitting the global economy. The first is the negative shock from the Gulf disruption, which is devastating Asia — restaurants shutting down in India, gasoline rationing, flights cancelled. Europe is feeling it through rising inflation and jet fuel shortages. Africa faces a fertilizer crisis that could devastate harvests. The second shock is more positive: the massive buildout of AI data centers in the United States, with $700 billion flowing into that infrastructure, which is providing an enormous economic offset that no other country can match right now. Yergin doesn’t mince words when he says the U.S. has been “much more insulated” than anyone else because of the shale revolution — a transformation he clearly regards as one of the most consequential geopolitical shifts of the past two decades.

One of the most unsettling threads running through the discussion is the question of who actually holds power here. Yergin notes that Iran has essentially been wargaming this scenario for years, building missile capabilities and devolving authority to new leaders within the IRGC, which he describes as both a military force and an ideological movement. “Martyrdom is part of the ideology,” he says flatly. The notion that the regime was weak because of internal protests may have been a misread — the IRGC controls all the guns. This puts the U.S. in a genuinely difficult position: the strait remains open only as long as Iran chooses to keep it that way, and any negotiated solution requires finding interlocutors credible enough to make a deal on the other side.

Yergin offers a surprisingly nuanced assessment of winners and losers. China, he argues, is a winner — it stayed out of the conflict while building up reserves and can now play the role of responsible global actor. Vladimir Putin is a winner too, since higher oil prices replenish his war chest and attention has shifted away from Ukraine. Ukraine itself, against all odds, is emerging as a beneficiary because it has developed drone warfare expertise that’s suddenly in demand across the Gulf. The U.S. isn’t losing outright, Yergin suggests, because the AI-driven economy is providing ballast — but the political pressure of gasoline prices remains an enormous variable heading into an election season. “There’s no price in the United States that matters more politically than the price of gasoline,” he notes.

When the conversation turns to the future, Yergin is emphatic that this crisis will accelerate diversification trends already in motion. Countries that learned the lesson of energy dependence after COVID and the Russia-Ukraine war are now learning it again at a deeper level. Renewables will get a boost — not primarily for climate reasons, but for energy security. Vietnam is already pivoting from LNG projects to Chinese solar panels. The nuclear renaissance is real, with new reactor companies going public at nine-billion-dollar valuations and even Germany rethinking its nuclear phase-out. Yergin’s core message: there is no miracle solution to powering a $120 trillion global economy, but diversification of supply and a balanced energy portfolio — both for nations and for the world — is the only rational path forward.

Surprising Insights

• Ukraine has become a geopolitical winner by accident: its hard-won expertise in drone warfare is now being contracted by Gulf states desperate to defend against Iranian attacks, giving it leverage and income it never expected.
• China deliberately stayed quiet during the U.S.-Iran escalation and is now positioned as the responsible global actor while simultaneously benefiting from cheap Iranian oil that it stockpiled in advance.
• The Strait of Hormuz’s importance has expanded far beyond oil — it now carries everything from petrochemicals and helium to fertilizer and steel, meaning its closure affects semiconductor production, agriculture, and manufacturing in ways that weren’t on anyone’s radar even a few months ago.
• European energy weakness predates this crisis — Yergin describes a chronic problem of throttled investment and regulatory burden that has already caused deindustrialization, and the current disruption is now accentuating those existing vulnerabilities.
• Vladimir Putin is profiting from the chaos even though Russia wasn’t directly involved: higher oil prices refill his war chest from Ukraine, and global attention has shifted away from that conflict entirely.

Practical Takeaways

• Watch refined product prices, not just crude: Yergin emphasizes tracking jet fuel, diesel, and LPG prices as leading indicators of real-world shortages and economic pain.
• Diversification is survival for countries and companies: Whether it’s energy sources, supply chains, or supplier nations, building resilience into your portfolio is no longer optional.
• Understand that the U.S. market is still partly insulated but not isolated: American consumers will feel price increases at the pump, and political pressure from those prices could shape policy decisions in unexpected ways.
• Energy security concerns will drive investment into unexpected places: Nuclear, solar, and new oil provinces in Africa and South America are all getting a second look as a result of this crisis.
• Recognize that markets may be mispricing oil risk: Physical traders see deeper supply disruptions ahead than financial markets are currently reflecting, suggesting elevated volatility and potential price spikes.