Plain English with Derek Thompson — “Is China the Winner of the Iran War?”

Episode Date: April 3, 2026
Host: Derek Thompson
Guest: Alex Turnbull, financial analyst and writer

Episode Overview

This episode explores the sweeping global repercussions of the ongoing Iran war, focusing on unexpected winners and losers in the aftermath of massive energy disruptions. Through a historical lens, host Derek Thompson and guest Alex Turnbull analyze how energy crises reshape economies, politics, and geopolitics, with special attention to second-order consequences. Center stage is the question: Is China emerging as the main beneficiary from the chaos?

Key Discussion Points & Insights

1. Historical Echoes: How Energy Crises Reshape Worlds

• Derek opens by linking the 1970s oil shocks to transformative events—the fall of the Soviet Union, the rise of Japan’s electronics industry, and the ascent of the modern Republican Party.
• Just as the oil crises of the 1970s produced enduring effects beyond gas lines and inflation, the Iran war’s closure of the Strait of Hormuz is triggering ripples across the globe.

“The Strait of Hormuz… is a little bit like the global economy’s ACL.” (Derek, 05:39)

• Immediate effects: Extreme energy shortages, price spikes, and governments urging citizens to “use less” worldwide (Australia, EU, Thailand, Egypt, Philippines, Sri Lanka, Laos).

2. Pacific Islands: Strategic Dots and Diesel Crisis

[07:54–13:42]

• Pacific islands (Fiji, Tonga, Vanuatu, New Caledonia) face an acute diesel shortage.
• Their vulnerability is not just economic but geopolitical: If the US cannot support these islands, China can step in with fuel—potentially securing new ports and military presence.

“They will face the choice of either collapse or sourcing diesel from say China. And China will have an ask there.” (Alex, 08:55)

• Loss of these islands jeopardizes America’s ability to project power and support allies, especially regarding Taiwan.

3. Taiwan’s ‘Aircon vs. Chips’ Dilemma

[13:42–16:38]

• Taiwan relies heavily on LNG for electricity, juggling surging summer demand for air conditioning with massive industrial need (notably in semiconductor production).

“We're very quickly going to get into a not so much guns and butter, but aircon or chips type scenario in Taiwan.” (Alex, 14:21)

• Taiwan, and potentially Korea, must ration energy between consumer comfort and economic output (semiconductors vital for US and global AI industries).

4. Allies’ Silence and Political Fallout

[16:38–19:06]

• Despite dire consequences, US allies are not publicly denouncing US actions, likely due to diplomatic protocol.
• The ongoing crisis could permanently shift allegiances in the Pacific, possibly tilting power toward China.

“So we're starting to go through a process which may not be reversible easily or perhaps ever. So… the longer this goes on, that becomes a possibility.” (Alex, 19:08)

5. Europe’s Energy Sorting—from Renewables to Crisis

[19:49–24:00]

• Europe is enforcing demand reduction (remote work, cutting travel).
• Resilience varies: Spain, France, Scandinavia (nuclear/renewables) are “orderly,” while Germany and Italy (gas-dependent) are “back in the bad place.” (Alex, 21:22)
• Crisis may accelerate renewable energy buildouts—ironically benefiting China, the dominant solar equipment supplier.

“This will lead to more demand for Chinese products… But in the short term, I think they will go bananas.” (Alex, 23:38)

• The war also exposes the vulnerability of the fossil fuel supply chain to drone and missile attacks.

6. The Strategic Shift: Insecurity of Global Fossil Fuel Markets

[24:00–31:39]

• The war demonstrates that global fossil markets—long protected by assumptions of safe maritime passage—are now exposed to persistent drone threats.

“If you move a very large crude carrier, you assume the insurance is cheap, that it's going to turn up on time and that it can be unmolested in the open ocean. And now the problem we have is that you are under threat…” (Alex, 26:20)

• Insurance costs and supply risk are likely to rise, accelerating the move toward locally sourced energy (renewables, nuclear) for security reasons.
• Derek draws a parallel: “We should want the solar panel that powers our car to be on the roof of our neighbor who we love in our good old Republican town.” (Derek, 30:23)

7. Winners in the New Energy Geography

[34:24–36:30]

• Surprise winners: Latin American and West African oil producers, who can export without traversing geopolitical chokepoints.
• China, as the world’s chief supplier of renewables and beneficiary of shifting Pacific allegiance, stands to gain strategically and economically.
• Middle East oil/gas producers are weakened; the risk calculus for importing countries fundamentally changes.

8. Drone Warfare: Flattening Global Military Power

[37:40–42:12]

• Drones empower smaller states to threaten or deter major powers—undermining traditional US force projection.

“You can have the citizen drone pilot and within that range… you can have a very functional kind of territorial army.” (Alex, 39:10)

• The rise of drone warfare creates “a deep flattening of the field” (Alex, 39:58), shifting focus to societal resilience in food, power, and decentralized defense.

9. Policy Responses: Beyond the Federal Reserve

[42:12–49:31]

• The old model—using the Federal Reserve to fight inflation—isn’t enough in the face of persistent energy shocks from war and supply chain attacks.
• Strategic reserves are one answer: The US and Australia have both legislated measures to build large reserves of critical commodities.

“What's really good is if you have these tools and your enemy knows that you cannot be hurt severely by their ability to withdraw supply or block trade… then they're not going to do it because it won't work.” (Alex, 48:30)

• These policies sit on the boundary between globalization and protectionism—they don’t reject trade but provide buffers against supply disruptions.

10. AI Sector at Risk: Chip Supply Chain Turmoil

[49:31–52:31]

• AI progress is threatened: Energy and petrochemical shortages (notably helium, key for chip manufacture) are already disrupting production.
• Constraints will hit “lower value” chips first, but if the war persists, even high-end production (e.g., Nvidia’s AI chips) will slow.
• China, with domestic supply and access via Russia, could circumvent these shortages—another advantage.

“This could very seriously slow US Data center expansion and AI development. At the same time is China is probably going to source helium from Russia and will not have any of these material constraints…” (Alex, 52:15)

Notable Quotes & Memorable Moments

• On the big picture of energy geopolitics:
  “This is a war with very few winners. But one of those winners might be China.” (Derek, 06:56)
• On pure consequences:
  “If this goes on for a month or two, politics here will change in a way that will be very hard to change back.” (Alex, 10:55)
• On policy adaptation:
  “You don't give someone an advantage willingly. Do you want to give your enemy a vote on things like your country's inflation rate?” (Alex, 31:39)
• On new military realities:
  “The paradigm… where you could have a B2 take off and then flatten stuff… I think that's over now.” (Alex, 41:52)
• On shifting industrial winners:
  “Winner, China. Winner, Solar. Winner, Latin America. Winner, future drone warfare… Loser, artificial intelligence.” (Derek, 52:31)

Timestamps for Key Segments

• Historical context & 1970s oil crisis: 00:07–06:56
• Pacific Islands diesel crisis & strategic stakes: 07:54–13:42
• Taiwan’s energy crunch / "Aircon vs. chips": 13:42–16:38
• Why US allies aren’t complaining publicly: 16:38–19:06
• Europe’s energy response & renewables shift: 19:49–24:00
• Vulnerability of seaborne fossil supply: 24:00–31:39
• Winners in new energy geopolitics: 34:24–36:30
• Impact of drone warfare: 37:40–42:12
• Strategic reserves & policy responses: 42:12–49:31
• AI chip shortage threat: 49:31–52:31

Final Takeaways

• The Iran war has acted as a catalyst, exposing the world’s energy vulnerabilities and shifting strategic, economic, and technological power balances—most notably toward China.
• Second-order effects may long outlast the conflict: New supply lines, the acceleration of renewables, empowered mid-size powers, and a more “in-sourced” world economy.
• The AI sector, so vital to the current and future economy, may ironically be among the biggest losers, while China—adapting and exploiting these shifts—emerges well positioned for the next phase of global competition.

For a detailed, firsthand dive, listen to the full episode.