The Biggest Oil Disruption in History 3/9/26

Summary

Squawk Pod – "The Biggest Oil Disruption in History"

Date: March 9, 2026

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Episode Overview

This episode of Squawk Pod zeroes in on an historic oil market shock triggered by conflict in Iran. With the Strait of Hormuz nearly frozen, global crude prices surge to near-record levels and market participants grapple with the possibility of prolonged supply disruptions. Anchors Joe Kernan, Becky Quick, and Andrew Ross Sorkin dissect the energy chaos with on-the-ground reporting from Dan Murphy, policy analysis from Biden administration energy veteran Amos Hochstein, and geopolitical insight from Jared Cohen (now of Goldman Sachs), who brings a rare, first-hand perspective on Iran’s internal dynamics. The conversation traverses the market’s swift response, geopolitical stakes (notably China’s posture and the potential for escalation), the fragility of Iran’s regime, and how this crisis could reverberate for weeks or months.

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Key Segments & Discussion Points

1. Breaking Down the Oil Shock (01:02–07:48)

Market Turbulence

• Oil prices skyrocket: WTI trades above $100/barrel, Brent approaches $120—highest since 2022 (02:02–02:42).
• Tightening of Brent-WTI differential attributed to a short squeeze on WTI.
• Weekly context: WTI posts a 35% gain last week, the largest ever (02:42).

Supply Choke Points

• Strait of Hormuz freezes: Tankers won’t sail through due to conflict, stranding millions of barrels daily (03:13).
• Storage crisis: Producers like Iraq, Kuwait, and UAE are forced to cut output as regional storage nears capacity—25 days’ worth remains (06:29).
• Market goes from expected surplus to steep deficit: Goldman Sachs warns of $150/barrel oil if disruptions persist (03:13–04:46).
• Quote:

  “Traders are now pricing in a severe disruption to global supply. … That artery [Strait of Hormuz] is effectively frozen.” – Dan Murphy (03:13)

Global Repercussions

• G7 explores coordinated release of strategic reserves.
• Markets and policymakers in Europe, Asia, and the U.S. scramble to assess fallout.

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2. Geopolitics in Focus: Iran’s Allies and China’s Dilemma (04:46–05:11; 33:05–34:12)

• China’s strategic stake:

  “China is the primary buyer of Iranian crude … policymakers in Beijing have been suggesting they will not hold back on their relationship with Iran.” – Dan Murphy (05:11)

• China absorbs 13–16% of its total seaborne crude imports from Iran (Jared Cohen, 33:08).
• Despite massive energy risk, China remains publicly quiet, raising uncertainty.

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3. Policy and Security Analysis with Amos Hochstein (10:47–24:52)

Nature and Scale of the Crisis

• Biggest oil crisis in history:

  “This is the biggest shortage and energy crisis we’ve had in global history.” – Amos Hochstein (13:26)

• Disruptions affect not only crude but also refined products like jet fuel and diesel.

The Nuclear Question vs. Regime Stability

• Not just about nukes: While Iran’s uranium stockpile and enrichment have been long-term concerns, current actions are less about nuclear weapons and more about targeting Iran’s war machine and regime viability (15:18–16:46).
• Historically, U.S. actions have been tempered by fears of global oil shocks, especially concern for Asian and European allies.

Pathways and "Off Ramps"

• Potential for 'victory' declaration: U.S. and Israel can declare significant degradation of Iran’s military and infrastructure, then halt (17:09–18:49).

• The regime’s surprising ability to rapidly appoint a new supreme leader signals its resilience.

• Cumulative economic damage if conflict persists:

  “If you’re talking about three to four more weeks, the cumulative economic damage is going to be globally, not just the United States.” – Amos Hochstein (17:09)

Escalation Risks and Setbacks

• Risks from “mission creep”; longer conflict makes oil production recovery harder—the longer fields are shut, the harder and slower restart becomes (19:21).
• LNG and oil supply chains under unprecedented stress.

Political Pressure Points

• President Trump is most susceptible to voter pain from price spikes:

  “I don’t think that President Trump is concerned about China or … other allies … What he’s really concerned about is what’s happening here in the United States. … We’re probably going to go to $4 [per gallon] in the coming week.” – Amos Hochstein (22:46)

• Previous scenarios show he could reverse course if domestic cost gets too high.

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4. Iran From the Inside: Jared Cohen’s Unique Insights (26:47–40:32)

Decentralized “Autopilot” Conflict

• After the death of Iran’s top leaders, real power operates “on autopilot”—a war machine capable of acting without clear top-down direction (25:05, 27:59).
• Quote:

  “No leader in Iran has the authority, the information, and the access to that decentralized machine to guarantee cessation of hostilities.” – Jared Cohen (28:24)

• “Finale first” strategy: Iran let loose its biggest barrages early before assets could be destroyed (29:20).

Outlook for Hostilities

• Missiles and drones have dropped (by 80–90%), suggesting shift to a new “shadow war” phase—potential for asymmetric cyber and physical attacks across the region (30:36–31:44).

Blockade’s Economic Toll

• Strait of Hormuz closure impacts oil (20% of global flow) but also a third of global fertilizers.

• “Until drones and missiles stop flying in the air … you’re just not going to see LNG reactivated through the Strait.” – Jared Cohen (31:56)

Protest Dynamics & Regime Resilience

• Iranian society is broadly secular, yet protests sputter due to brutally repressive crackdowns and lack of credible opposition leaders (34:27–36:28).

• “It’s very easy to start a revolution. It’s very hard to finish one. … I’ve never met a significant number of Iranians who can tell you who in the country they want to lead.” – Jared Cohen (35:07)

• Even after killing 32,000 protesters, regime remains in control; strong contrast with opposition strength in places like Venezuela.

Risk of Prolonged Crisis

• Likelier this drags on if not resolved this week; impact could stretch months or even years (39:31–40:32).
• Multiple global terror and sabotage risks remain due to Iran's shadow network.

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5. Notable Quotes & Memorable Moments

| Timestamp | Speaker | Quote | |-----------|------------------|----------------------------------------------------------------------------------| | 03:13 | Dan Murphy | “One of the most dramatic repricings the energy markets have seen in decades.” | | 13:26 | Amos Hochstein | “This is the biggest shortage and energy crisis we’ve had in global history.” | | 17:09 | Amos Hochstein | “If you’re talking about three to four more weeks, the cumulative economic damage is going to be globally, not just the United States.” | | 22:46 | Amos Hochstein | “What he’s really concerned about is what’s happening here in the United States.” | | 27:59 | Jared Cohen | “What it looks like is a reverse fireworks display where they began with the finale…” | | 28:24 | Jared Cohen | “No leader in Iran has the authority, the information, and the access to that decentralized machine to guarantee cessation of hostilities.” | | 31:56 | Jared Cohen | “Until drones and missiles stop flying in the air … you’re just not going to see LNG reactivated through the Strait.” | | 35:07 | Jared Cohen | “It’s very easy to start a revolution. It’s very hard to finish one.” |

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Timestamps for Key Segments

• Oil Markets Open & Immediate Reactions: 01:02–03:13
• Supply Disruptions and Middle East Report: 03:13–07:48
• Iran’s Internal Transition & China’s Position: 05:11–06:14; 33:05–34:12
• Amos Hochstein on Policy, Risks, and Scenarios: 10:47–24:52
• Jared Cohen on Iran’s Youth, Regime, and the Shadow War: 26:47–40:32

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Conclusion

The episode delivers a high-intensity, on-the-ground analysis of an oil crisis with truly global ramifications—market panic, geopolitical chain reactions, and the real risk of economic shockwaves far beyond the Middle East. The experts lay bare the complex web of oil, politics, and security threats: not just highlighting market fears, but explaining how “autopilot” war machines, regime resilience, and missing off-ramps could keep the world on edge far longer than most expect.

Squawk Pod rides the line between hard news, expert interviews, and lived experience—making this episode essential listening for anyone needing to understand why a distant blockade can shove the world’s economy to the brink.

Transcript

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[Andrew Ross Sorkin]

Bring in show music, please.

[Becky Quick]

Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod. Oil surging to its highest level in years on disruption fears sparked by the Iran war.

[Joe Kernan]

Crude nearly touched 120 a barrel.

[Becky Quick]

Our reporter in the Middle East, Dan Murphy on the price push.

[Dan Murphy]

One of the most dramatic repricings the energy markets have seen in decades.

[Becky Quick]

The market response is swift. Investors nervously watching supply energy policy veteran Amos Hochstein.

[Amos Hochstein]

I think at some point, if you're talking about three to four more weeks, the cumulative economic damage is going to be globally, not just the United States.

[Becky Quick]

Plus, a conversation with Jared Cohen of Goldman Sachs, who lived in Iran researching youth movements. Where will the country and its people go from here?

[Jared Cohen]

I think if it doesn't end this week, it's much more likely to drag out significantly further.

[Becky Quick]

It is Monday, March 9, 2026. Squawk Pod begins right now.

[Jared Cohen]

Stand back. You buy in three, two, one.

[Becky Quick]

Good morning, everyone. Welcome to Squawk Box right here on cnbc. We are live from the NASDAQ markets at Times Square. I'm Becky Quick along with Joe Kernan and Andrew Ross Sorkin. And then energy prices, really the focus on all of this. WTI sitting just above $100 a barrel. It's up by about 10% again. We saw much higher levels overnight. I saw $111 for WTI. Brent got very near 20, $120 a barrel. You can see at this point it is up by about 12%. $103.80. You'll also notice that the differential between Brent and WTI has tightened up quite a bit. There used to be a bigger percentage difference between the two. Just reading over the weekend that WTI was actually at net short position for trading there and that may be some of the short squeeze that has brought that premium for Brent back down. Between the two of those, WTI and R Bob Gasoline had their biggest weekly gains ever last week. WTI was up more than 35% for the week. But again, we're watching very closely today to see what happens next.

[Andrew Ross Sorkin]

For the latest on what's happening in the Middle east right now, I want to get straight over to CNBC's Dan Murphy, who is in Dubai this morning.

[Dan Murphy]

Good morning, Andrew, good morning to you. Well, today's move in oil, one of the most dramatic repricings the energy markets have seen in decades and the first time oil has traded in triple digits since 2022. Traders are now pricing in a severe disruption to global supply. And of course, at the center of all of this is the Strait of Hormuz. Right now that artery is effectively frozen with shippers unwilling to send vessels into a conflict zone. And after a series of strikes on energy infrastructure and commercial vessels, including at the weekend now that is leaving millions of barrels per day of supply stranded inside the Gulf. Today we've heard from Iraq, Kuwait and even the uae, which have all started curbing some output now because storage capacity is becoming a real issue and the market reaction has been fast. Remember, only weeks ago many forecasters were pointing to a global surplus next year. Now traders rapidly pricing in a potential deficit. Goldman Sachs also warning that if the strait remains disrupted, oil prices could push towards 150 US dollars a barrel. Europe also now watching this very closely. G7 finance ministers now reportedly even weighing a coordinated response to the oil shock by releasing strategic reserves. It is the most significant threat to global supply since Russia's invasion of Ukraine. And if it drags on its, it could very quickly change the color for the global growth and inflation outlook through the course of this year as well. Andrew.

[Andrew Ross Sorkin]

So one of the things that there seems to be even an additional fear on top of this about is how this is affecting China. And thus far, obviously China has remained uninvolved in this scenario. But there seems to be chatter about, you know, if things continue apace this way, whether they could somehow decide at some point to get involved.

[Dan Murphy]

It's a key question at this point. Of course, China and Iran have been very close associates, not just politically but also economically. China is the primary buyer of Iranian crude and while that supply is being curtailed, it is pretty clear that policymakers in Beijing have been suggesting that they will not hold back on their relationship with Iran. So whether or not we see additional support, be it militarily, financially or otherwise, is a big question mark in these markets at the moment as well. What's also interesting is what's happening inside Iran as well. We've just seen this really significant transition in Tehran that also suggests perhaps the road ahead here is going to be very long as well. No doubt you've seen Mojtaba Khamenei, the son of the late Ayatollah, has been revealed as the new supreme Leader in. It's a move that essentially signals one thing to the markets and that is hard line continuity as well. No change with the relationship with China and no change in the stance towards the United States as well. Back to you.

[Andrew Ross Sorkin]

And then in terms of just containers, obviously the biggest issue is, you know, where do you, where do you put all of this supply to the extent that there's going to be a separate issue at some point, is that where is that conversation going?

[Dan Murphy]

Well, the constraints around supply are really concerning at the moment. And indeed the storage conversation is a growing risk, too. What we're seeing is these major producers in the Gulf being forced to shut production in because the reality of the situation is you can pump the oil out of the ground, but if you have nowhere to export it, then it has to be put into storage. At the moment, the estimate is we have about 25 days worth of storage remaining. That is 25 days until the storage capacity of the region is full. So of course we are seeing producers already scaling back some production, but of course, how long they're willing to hold production off and how long the Strait of Hormuz is going to remain closed is a key, key question mark at this point as well. A lot of analysts that I've been talking to saying the biggest unknown, unknown at this point for anyone exposed to these markets and for global energy trading right now is the duration risk. We still haven't got any signals of a potential off ramp, either militarily or diplomatically. And that's obviously a key concern right now as well. Part of the reason we also saw this enormous spike in the price of oil and of course, risk assets also in the crosshairs here, not just in Asia, but in Europe and likely in the United States today as well.

[Andrew Ross Sorkin]

Okay, Dan, thank you. Appreciate it.

[Joe Kernan]

Trying to figure that out. Unknown, unknown as opposed to the known unknowns. The Goldman, you guys remember the super spike? There's been a couple of superstars. Goldman follows the oh my. Well, I looked up there was one, the 350 was 2022 after Ukraine. But back in 2008, the last time there was a.

[Becky Quick]

That's the one I remember. Yeah.

[Joe Kernan]

How do we remember 17 years ago?

[Becky Quick]

It still just was shocking at the time. What was the number?

[Joe Kernan]

That was only 200 back in 2000. Commodity super cycle. But Goldman's got a history of predictions

[Becky Quick]

that they were making.

[Andrew Ross Sorkin]

I remember.

[Joe Kernan]

Yeah, but I thought so too. 2022 was much too recent. This seemed long and they got some flack at the time for it. But I think they were talking worst case scenarios or best case if you're drilling. Energy Secretary Chris Wright says the US Wants to get oil, gas and other products moving through the Strait of Hormuz. Wright made the comments in an interview yesterday morning before the price of oil had spiked in the evening.

[Jared Cohen]

The plan is to get oil and natural gas and fertilizer and all the products from the Gulf flowing through the straits before too long. And it may break a little news here, but one large tanker has already gone through the straits with no issues at all. So as the general just described, we're massively attriting their ability to strike with missiles and drones and that that rate of attrition will increase in the coming days. So we'll be cautious, we'll be careful, but energy will flow soon.

[Joe Kernan]

And Wright said he believed energy prices would return to their previous level within weeks.

[Becky Quick]

That's the big question, how long this drags on. And we will continue to hear more on that as well. Reports say that the United States in the meantime is considering an operation that could see Special forces deployed to Iran to secure the country's supply of highly enriched uranium, pivotal in making nuclear bombs. It's unclear whether an operation would involve U.S. or Israeli troops or both. Speaking on Air Force One over the weekend, President Trump said seizing Iran's uranium is, in his words, something we can do later on. The president also said the United States could send ground troops into Iran, but only for a very good reason. The Trump administration is reportedly working on an economic deal with Cuba. In a report in USA Today, it says that an agreement may be announced soon and could include easing restrictions on Americans ability to travel to the island. Also under discussion, potential relaxation of US Sanctions, deals on ports and energy and what the paper describes as an off ramp for Cuba's president. There have been talks, the president, President Trump himself saying that Cuba could be next. As recently as the president I don't

[Joe Kernan]

know what next means, but Right.

[Jared Cohen]

Cheese will be next.

[Becky Quick]

Next on Squawk Pod, the oil squeeze in Iran's impact around the globe. We talked to Amos Hochstein, a key player in energy policy during the Biden administration, about what he's watching.

[Amos Hochstein]

I think with the conditions on the ground without a change, this gets worse and worse because of that compounding effect of loss of both transport of crude, the production of crude starts slowing and the refined products.

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[Amos Hochstein]

Good morning Becky, look, I actually think no surprises have happened. Everything that we're seeing in the market was I think broadcast since last Monday. So the war started on Saturday with a shock and awe, taking out the Supreme Leader and a lot of military leaders with a lot of headlines that the command and control of Iran would be gone by Tuesday, Wednesday. That obviously didn't happen when you shut down the Strait of Hormuz, whether by closure de facto or de jure. Right. The baseline is that it is ships are not crossing. So for very, very few, and you have a disruption somewhere in the 10 million barrel of oil plus jet fuel and, and diesel and other refined products, then oil prices are priced today. I think still even maybe a little bit complacently, this is the biggest shortage and energy crisis we've had in global history. So I think these prices now start compounding. In other words, we'll close it around, let's say today will be somewhere at around $100. But I think with the conditions on the ground without a change, this gets worse and worse because of that compounding effect of loss of both transport of crude, the production of crude starts slowing, and the refined products.

[Becky Quick]

Amos, Let me, let me ask you, we have not done something like this in decades and decades. We have allowed Iran to get more and more belligerent, known that they were working on this enriched uranium, known that their potential for a nuclear weapon was there. Is what you're watching right now the reason that we've never taken more action, that we've been worried about what it would do to global oil prices, what it would do to Asia, Europe, our allies around the world that rely on this oil even more than we do?

[Amos Hochstein]

No, I think it's more complicated than that. I think for a long time it was about containment. Remember that if the nuclear issue is the most important, then there was a deal done during the Obama years to try to neutralize that threat. The problem with it was that it had sunsets and it was supposed to expire at some point. President Trump in his first term got out of that deal and eventually the Iranians started enriching again. But in June, the strikes that the United States took, which as you recall, I was on your show and supported them, the president said we obliterated the nuclear program. That was six months ago. The Israelis said that we neutralized it. They used a little bit softer in the run up of this crisis. It was not about the nuclear weapons. Remember, it first started out based on the protests. Right. Help is on the way. And the Israelis said that it was all about the missiles, the ballistic missiles, not the nuclear. They still believe today that the nuclear issue was not of vital concern because of the June strikes. But there's no doubt that when you consider war, you have to consider all the implications and one of them is the energy markets. But I think nuclear threat was always something that we were going to address. But this war is not about nuclear. We are attacking a far greater part of Iran than just the nuclear sites or where the enriched uranium is. This is about much more about attacking the regime itself and taking away its capabilities to restore itself.

[Becky Quick]

Let's start with where we are now. What's already taken place over the last week and a half or ten days? Well, what do you see as being the way out of this? The way what objectives can and should be met? What is the off ramp, if there is one? How do you see this playing out?

[Amos Hochstein]

Look, I think right now over the next few days, you're going to see intensifying strikes against Iran by both Israel and the United States. Although at the beginning of the war, the first several days, the US Was the lead as far as the number of strikes. Today that has flipped and Israel is doing far greater percentage of the strikes in the United States. Where do I think it goes? Look, Iran has been disrupted. Their missile manufacturing is disrupted. Their economy is degraded. Their nuclear weapons are further degraded from obliterated from six months ago. I think there is an ability to declare victory here and for the president a few days to say, look, I achieved all these things. They don't have an air force anymore, they don't have a navy. We've disrupted them and because we have air superiority, will stay in the region. And if they go back to bad behavior, I'll attack them again and end that war. The Israelis will do whatever Donald Trump says. If he says we're stopping the war, they will stop the war. And I think the Iranians will will as well. So that is a scenario. However, the White House for that has to not want to see regime change. Because the Iranians were able to select a new supreme leader. Just the fact that they were able to select one and announce one and go through the process means that the regime is still very much intact. So I think at some point, if you're talking about three to four more weeks, the cumulative economic damage is going to be globally, not just the United States, but mostly in Asia and Europe. I think that we have to start looking at what that off ramp. And I think this is a credible off ramp. It's not a Taco, you know, quote unquote, that people are saying because it actually is a victory for the president if he can make that declaration.

[Joe Kernan]

Yeah, the Taco acronym might be, might be tough at this time. Listening to you, Amos, and I know you've got a lot of different concerns and reasons to either support her or not support it. When I listen to people go over the four possible reasons why we, why Trump would have done this, sometimes I think you just add them all together for one overriding reason. Could, could this end up, in your view, having been, been worth it? Almost.

[Amos Hochstein]

Look, yes, I think there is a scenario where you do. There's no doubt in my mind Iran is a horrific regime with so much blood on its hands of Americans and others, but also by creating a network of proxies and terror groups in the region and around the world. So if you're able to degrade them and take away their missile capacity, take away their ability to support Hezbollah and the Houthis and the Shia militia groups in Iraq and so on, I think there's a lot of good that could have been done here. But if the longer it goes, the more mission creep, the more you start thinking, I need to get just a few more things. If I just used some ground troops, to me, that's where the danger signs, Joe, are. And I think if you start paying this, I think we're still, the market is still very complacent about what it means to take 9 million barrels or 10 million barrels off the market on a day by day situation where it keeps, you know, compounding the cut to production is only going to increase. Where you shut these things in. The LNG plant in Qatar could take two months to break back. The, the oil fields that you shut in, the longer they're shut in, the longer it takes to bring them back, the longer it takes to empty tankers, to come and collect what's in storage, et cetera, et cetera. So I think at some point time starts running against you, not for you. But degrading Iran, that's not something I think is a bad thing for American national security.

[Joe Kernan]

As for rationale, you know, people talk about a couple of levels of chess. I mean, you add Venezuela and this together with China, if they want to go after Taiwan anytime soon, they, they better have some, they have an spr. I mean, what are they going to use Their, their ability to.

[Amos Hochstein]

They do have an spr, Joe. They have a very, very large one.

[Joe Kernan]

They're going to need it, right?

[Amos Hochstein]

Well, I don't. Look, my view has Always been that China's not looking to, for a kinetic war with the United States to take Taiwan by force. I think they're trying to take Taiwan without firing a shot. I think they are taking over the business class. They are taking over interests inside Taiwan so that they can have a gradual takeover of the Taiwanese economy and eventually take over Taiwan with, with a lot less than. Than is required. We only think about it in terms of war. I think they're thinking about it in other ways as well. But I'm not sure that I think China sees this as this war as an indication of strength vis a vis Asia. I think that what we're doing in, in Iran today is a lot harder to do in Asia so far away from our bases and so far away from any other allies that may join or not. So I'm not sure that I would draw that. That analysis. I think we, we should first focus on completing this mission and the depletion of munitions that is also happening both to the United States and for Israel.

[Becky Quick]

Wow, Amos, what pressure do you think President Trump is most susceptible to? Pressure from the idea of China getting upset and doing something, Ideas of our allies getting upset and doing something, or just American voters getting frustrated with higher prices at the pump, higher prices that work their way into other inflationary measures.

[Amos Hochstein]

Look, I've worked in multiple administrations. I don't think that President Trump is concerned about China or concerned about other allies around the world. I think what he's really concerned about is what's happening here in the United States. Like all presidents, look how much time he dedicated to gasoline prices and oil in the State of the Union today, we're barreling towards $3.50 on gasoline. We're probably going to go to $4 in the coming week. Diesel is even higher. And remember, our food prices have enormous amount of connectivity to diesel that he.

[Andrew Ross Sorkin]

Does that mean that you think he potentially steps away from this more quickly as a result? We've seen scenarios where he's pushed it to a certain place and then decides, I'm going to pull it back because I think it's going too far.

[Amos Hochstein]

Yes, I do think, Andrew, and I think that if you look at a number of examples over the last year, Greenland being one of them, when markets start to really react, I think there's a reassessment. I also think that while he's saying total surrender, he has his staff explaining that total surrender doesn't mean total and doesn't mean surrender. It means when they're weak, too weak to respond anymore. Well, I think the scenario that I built for you earlier where he can declare that he has degraded their military, their nuclear, their missile and their economy and maintain air superiority, I think he can say, look, I've achieved my goals and I think these kind of market conditions, if they last for several days and get worse, I think that he's going to have to reconsider. And I think he's, you can see in the rhetoric that he's already doing

[Joe Kernan]

that we can survive at 350. We a gallon. That, that, that's what we averaged during your administrative Biden administration.

[Amos Hochstein]

Almost.

[Joe Kernan]

Right. That's pretty good.

[Amos Hochstein]

Well, 3:50. It doesn't stop at 350. We were at 280 a week ago, Joe. Now 350.

[Joe Kernan]

It was nice that it came down. It was nice that it came down. But we have been at 350 before that. I just looked up the average for.

[Dan Murphy]

We sure have.

[Amos Hochstein]

Because, because Joe, we went to $5 a gallon during that. That height it. We have to take it down to 350.

[Becky Quick]

Thank you for being with us today. We appreciate it. Coming up, as the war in Iran enters week two, Goldman Sachs President of Global Affairs Jared Cohen joins us on the path to a place possible resolution.

[Jared Cohen]

There's an assumption that the now sort of deceased leadership of the regime set in place a decentralized war machine that is effectively running on autopilot.

[Amos Hochstein]

With the Venmo debit card. A taco in one hand and ordering a ride in the other means you're stacking your rewards.

[Jared Cohen]

Nice.

[Amos Hochstein]

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[Becky Quick]

like you go from will I to why not? For over 130 years, we've been innovating higher education to make it more affordable, accessible and attainable so you can reach your goals. Go from thinking, Can I? To Yes, I can. And keep striving. Visit Strayer. Edu to learn more. Strayer University is certified to operate in Virginia by Chev and its many campuses, including at 2121 15th Street north in Arlington, Virginia. This is SquawkPod.

[Andrew Ross Sorkin]

You're watching SquawkBox right here on CNBC. I'm Andrew Ossorkin along with Joe Kernan and Becky Quick. Joining us right now is Jared Cohen. He is the president of global affairs at Goldman Sachs, co head of Goldman Sachs Global Institute. He's also a former CEO of Google's Jigsaw, and he's somebody who knows a lot about Iran. And so we wanted to talk to him this morning to try to understand what is about to happen here and what you're thinking. I mean, we're watching the price of WTI sort of through the roof here, and I think there's increasingly worries about sort of how China may react to all of this.

[Jared Cohen]

So first, I mean, I think if you look at the current state of affairs, Iran, by the way, give everybody

[Andrew Ross Sorkin]

your background, because you know about Iran more than most in a sort of unusual way.

[Jared Cohen]

So I lived in Iran for part of 2004 and 2005 before they kicked me out of the country. I was doing research back then on underground youth movements and opposition groups followed the country very closely since then. One of the advantages back then is 67% of the country was under the age of 30. And I, too, back then was under the age of 30. So it was a nice research advantage.

[Andrew Ross Sorkin]

So you're in touch with a lot of people, though?

[Jared Cohen]

I'm in touch with a fair amount of people, yeah.

[Andrew Ross Sorkin]

And so what what do you think is about to happen here?

[Jared Cohen]

So if you look at what's coming out of Iran right now, what it what it looks like is a reverse fireworks display where they began with the finale. And I think part of what's confusing to people is on the one hand, you have sort of a centralized leadership in Iran that can't communicate with each other, can congregate. The assembly of experts that chose the new supreme leader did a virtual meeting for the first time in history. But what's really going on behind the scenes, what I hear from a lot of my contacts is that there's an assumption that the now sort of deceased leadership of the regime set in place a decentralized war machine that is effectively running on autopilot so people keep assuming that this will play out the way it played out in the past, which is the US Continues surging military activities with Israel, decides it's done at some point, the Iranian regime translates that as capitulation to its own people, and everybody gets on with it. This time around, there's no leader in Iran that has the authority, the information, and the access to that decentralized machine to guarantee cessation of hostilities. And so it's not clear to me what the off ramp looks like until that autopilot effectively runs out of batteries.

[Andrew Ross Sorkin]

And you think it runs out of batteries in how long? So this idea that the fireworks show, you said that was the finale first. So you think they've spent all of their fireworks.

[Jared Cohen]

Well, so I think the reason. So the question is, why do a reverse fireworks show at the beginning? I think that this became increasingly clear at the beginning of last week, which is one. If part of that finale is a significant amount of ballistic missile capability, you need to get a lot of that out the door before the launchers get preemptively attacked. So you've seen that undertaken. But the Iranian regime, which has been very active in the war between Russia and Ukraine, understands how drone warfare has changed the battlefield. And they've actually watched firsthand as both Russia and Ukraine have built the multilayered defense systems against drones. Those multilayered defense systems didn't exist in the Middle east, where the defenses were largely architected for the occasional drone or the occasional ballistic missile coming from the Houthis or somewhere else. And so the reason to start with the finale is to overwhelm the interception capability, where the cost ratio is 200 to 1. The good news is we are likely pretty close to through that catastrophic, potentially catastrophic first phase, where you have missile math problems, where the barrage of missiles overwhelms the interception capability to the point where they can't replenish. We're not completely through it yet, but the number of drone attacks are down 90%. The number of ballistic missile attacks are down more than 80%. So we now go to kind of phase two of this. Phase two of this, I would argue, is less potentially catastrophic, but maybe more emotional, because you start to get into the asymmetric shadow war. And so if you want to think about what this kind of quote, autopilot, and what does that mean? So it's a function of what are Iran's domestic, regional, and global capabilities. So we've already seen them, you know, venture into some areas. They hit data centers for two of the hyperscalers in the uae, which kind of gets right at the core of a big hypothesis and the manifestation of that country's ambitions. You saw them hit a desalination plant in Bahrain. This is a huge, huge issue in both the UAE and Saudi Arabia, but also Qatar and Kuwait. Other things that they could do, they could cut some of the undersea cables in the Red Sea. The Houthis have been very quiet, haven't done anything in the Red Sea. A lot of my contacts in the Horn of Africa have been very confused about this and very worried about it. Of the 17 undersea cables that, that go through the Red Sea, that carries more than 90% of the Europe to Asia Internet.

[Andrew Ross Sorkin]

In terms of the straightforward moves which seems to be the central point here of contention right now, how long do you think can remain closed and how safe would it be to open it?

[Jared Cohen]

Yeah, well, first of all, a point of history here. I wrote my dissertation on the Iran Iraq War. That was the closest until now that the Strait of Hormuz ever came to shutting down, you know, completely. And at that time, the US sunk half the Navy and shot a civilian aircraft down and it still didn't close. So the problem you have here, 45% of Iran's oil comes from the, comes through this rate of Hormuz, 20% of total oil consumption worldwide. But you also have a third of the world's fertilizer that comes through there. Saudi Arabia is not just the Saudi Arabia of oil, they're also the Saudi Arabia of fertilizer. And until drones and missiles stop flying in the air, even as a one off, no matter how much you offer to subsidize the insurance costs of ships or escort the ships at enormous costs, you're just not going to see LNG reactivated through the Strait. You're not going to see, you know, large quantities of oil reactivated through this rate. And so that, to me is where it connects back to the autopilot piece of this. Because nobody really knows what comes next in this decentralized war machine because it's not being centrally managed.

[Andrew Ross Sorkin]

Okay, so now I want to add China to your story.

[Jared Cohen]

Yeah.

[Andrew Ross Sorkin]

What do you think China is thinking as all of this is playing out?

[Jared Cohen]

Well, doing, doing, you know, sort of armchair psychology of Beijing is always difficult, but if we just look at the facts, you know, it was already the case that they took a hit from Venezuela in terms of access to their energy resources. I would argue Iran is much more important from an energy perspective. 80% of all of Iran's seaborne exports in terms of crude, go to, go to China, that's roughly 1.35 to 1.45 million barrels a day. That's somewhere between 13 to 16% of China's total seaborne crude import. So it matters. That being said, you've seen China be very quiet, not just in terms of actions, but in terms of rhetoric. But look, these. If you think about geopolitics and markets, things don't really happen in isolation anymore. I think the market, when it gets microdosed with geopolitics, tends to build a degree of immunity to it. And the market tends to ignore how one geopolitical event over the course of many months and years impacts another geopolitical event. And of course, you know, you're thinking about the Taiwan Strait, the South China Sea, the East China Sea.

[Joe Kernan]

Is there any way we can degrade the ability for Iran to put down internal protests? And the people you talk to, don't they want to get back out on the streets at this point? But they still. The guns are still pointed at them, aren't they?

[Jared Cohen]

Look, the Iranian people have been protesting as long as I've been, you know, going all the way back to when I traveled there. The problem is every generation forgets the massacre against the. The previous generation. You had the Green Revolution. You had the protests in 1999. You had the Green Revolution in 2009. You had another significant protest a decade later, and they just killed 32,000 people. The people are reluctant to go to the street in the face of a regime fighting for its survival that just killed at least 32,000 of them. Now, one of the things that I would just sort of.

[Becky Quick]

The existing regime has been saying, we are going to make sure we take anybody down.

[Jared Cohen]

And it's just, it's not worth it to them. Right? I mean, they, they, they've seen this play before. And the problem that Iran has had, and this is the problem it had when I was there in 2004 and 2005. The population overwhelmingly dislikes the regime. It's actually a pretty secular place. Only 3% of Iranians go to Friday prayer. They can all tell you what they don't want. I've never met a significant number of Iranians who can tell you who in the country they want to lead and who they want to follow. And in a world of social media and a world filled with young people who are very agitated, it's very easy to start a revolution. It's very hard to finish one. And if you don't have new leaders with new last names, who can take a country forward, who can inspire the people. It's very, very difficult. And they're never going to accept a member of the diaspora from outside, regardless of what their last name is. And, and so the regime understands that in the dictator's playbook, without an opposition figure, which they've effectively gutted to be very difficult. And then you contrast that with Venezuela, where the security institutions in Venezuela are very similar to what they are in Iran, right? A conventional military, paramilitary and vigilante groups. Venezuela's had multiple very popular, very elected opposition figures. They had Enrique Capriles, they had Juan Guaido. Maria Machado wasn't the one elected. She was disqualified. And even with credible opposition leaders there, they've not been able to translate it. So it's even more difficult in Iran where they don't have opposition.

[Joe Kernan]

So does it morally make sense that the United States said no more of these 32,000 slaughter of its own people, or do we. I just, I'm trying to figure out how long you let that go and then maybe throw in the nuclear threat threat down the road preemptively.

[Jared Cohen]

Well, I think they're not letting it go. Right. I mean, I think this.

[Joe Kernan]

Is that, Is that good or is it good that this happened? Because it looks we could get bogged down again and you know that there's no appetite among the American people.

[Jared Cohen]

We could get bogged down. Although you see a lot of analogies being made to Iraq, I actually don't think that's a correct. The Iraq analogy is a correct one. I think it's a, it's a, it's a dangerous one. Iraq is a very sectarian country, very non secular country. I spent a lot of time there as well. Iran is 90 plus percent Shia, as I mentioned.

[Joe Kernan]

Only 3% go to prayer.

[Jared Cohen]

Only 3% go to prayer. So pretty secular. It's ethnically diverse, right? 60% Persian, 20, you know, roughly 16% Azeri, and then a sprinkling of Kurds, Baluchies, you know, Lourds and Turkmen and others. But there's not a recent history of modern ethnic violence in the country. And so you don't. I don't have the same fears in Iran that I have in Iraq. I do have a fear that, you know, if the people do come out in large numbers, the regime is capable of slaughtering way more than 32,000 people, per what Becky was saying.

[Andrew Ross Sorkin]

Oh, I'm just trying to.

[Joe Kernan]

I just can't believe you went there and were like hanging out. I mean, what were you Thinking, well,

[Jared Cohen]

it was interesting when. It was interesting when I was there. It was kind of, you know, before.

[Joe Kernan]

In your 20s. I'm going to Iran in my.

[Jared Cohen]

I had convinced the Iranian embassy to give me a visa based on my desire to study the government glory of Persepolis. I told them I was an archaeology student at Oxford. And I think maybe they just weren't using the Internet a lot. They didn't really fact check it.

[Joe Kernan]

Weren't you looking behind yourself? Did you sleep well?

[Jared Cohen]

I just sleep well. Yeah, it was.

[Andrew Ross Sorkin]

Can I just go back to one question?

[Joe Kernan]

Yeah.

[Andrew Ross Sorkin]

Because I imagine all of the clients at Goldman Sachs are calling you over the weekend or last week and saying, what about the price of oil? How long does this stay elevated? Does this actually come down? You know, the president said that this is all going to end quickly and then the price will come down quickly. Maybe that's true, maybe it's not. What do you think?

[Jared Cohen]

Well, I go back to, you know, I go back to this shadow asymmetric phase that we're now in. And, you know, not, not to keep repeating myself, but we don't know how much battery life is left in the autopilot. I listed some of the things that could happen. They have sleeper cells in West Africa. They have sleeper cells in the tri border area. They could hit an embassy, a cultural center or a consulate in any one of the 11 countries they've attacked. They did it in Argentina in the early 90s. They tried to kill Adel Al Jaber when he was the Saudi ambassador to the US At Cafe Milano and Georgetown, of all places. If they were willing to do it then, why wouldn't they try to do it now? And so you have to imagine that anything they've been capable of or said they would do in the past, they're capable of now. And the question you have is, it's just. Is it a matter of sequence or has even the decentralized war machine, given

[Andrew Ross Sorkin]

what you're saying, then the suggestion is this is not over in four or five weeks, that this is over in years or months or some kind of very long protracted period. Because not only are you talking about some sleeper cell doing something terrible, you're then I imagine thinking that the United States is going to exact some form of retribution again and then we're into this, right?

[Jared Cohen]

Yeah. I mean, look, I'm not. Nobody knows if those things will happen. I'm just saying it has to be on the table. And what I'm told, until you have 48 to 72 hours of nothing new happening in terms of a new type of escalation. It's hard to be optimistic that there's an off ramp on the table. When you get that 48 to 72 hour window where there's no escalate, no new escalation, you can conclude that the autopilot's battery is sort of faint, but it's sort of like the FARC still fighting in Colombia in the jungle. It doesn't really matter anymore. So we just haven't reached that point yet. This could last a week. It could last months. I think if it doesn't end this week, it's much more likely to drag out significantly further.

[Andrew Ross Sorkin]

Okay, Jared, thank you for coming in this morning. Appreciate it, especially on this morning.

[Becky Quick]

And that is Squawk Pod for today. Thanks for listening. Thanks for starting your week with us. Squawk Box is hosted by Joe Kernan, Becky Quick and Andrew Ross Sorkin. Tune in weekday mornings on CNBC at 6 Eastern to get the smartest takes and analysis from our TV show right into your ears. Follow Squawkpod wherever you get your podcasts. We'll meet you right back here tomorrow.

[Amos Hochstein]

We are clear. Thanks guys.

[Schwab Announcer]

Trading at Schwab is powered by Ameritrade, giving you even more specialized support than ever before, like access to the trade desk. Our team of passionate traders ready to tackle anything from the most complex trading questions to a simple strategy gut check. Need assistance? No problem. Get 24. 7 professional answers and live help. And access support by phone, email and in platform chat. That's how Schwab is here for you to help you trade brilliantly. Learn [e-mail] trading.