Bob Baer is right. The answer to this question mostly lives in Tel Aviv. In that city the answer is not in all Israeli heads. It is specifically in Bibi's head, that of his foreign minister, a few more Likud squirrels and maybe Barak, who ought to know better than to back something as risky as an air/missile capmpaign against Iran. The IDF's general staff and its intelligence branch are against it. They know that Israel alone lacks the strength to do a thorough job with conventional weapons. For that reason we see an intense Israeli and sympathiser effort in the US to shape US opinion in favor of a US attack rather than an Israeli one. The effort continues but so far has not produced the desired effect anywhere except the Republican circus. So, the answer also "lives" in the heads of Obama, Panetta and Dempsey.

I have written repeatedly of the "fever chart" of US/Israeli/Iranian relations and the varying prospect for war. Writing about this is a bit like predicting an asteroid "hit" on this planet. Eventually, the prophet is likely to be correct.

First let us look at the closing of the straits of Hormuz. Many in leadership here and there think it is possible, if for a limited time. It would also be considered an act of war by many of the Sunni states in the Gulf region which rely on the straits for exporting their oil, gas, and refined products, but also for imports of food, equipment and many of the necessities of life. Many of the states that rely a lot on their ports on the inside of the straits are already in a delicate food security balance, for example. This could complicate things quite a bit. Also, if a conflict does erupt many of the states on the inside of the Gulf use the Gulf as a source of saline water to desalinate. They have particularly fragile water security issues to deal with if the Gulf is polluted. Qatar and the UAE may have 2 or so days of water reserves if their desalinization plants are shut.

The odd thing about this threat from Iran is that if they do shut down the Straits they will be harming themselves severely for similar reasons to how they would harm the Sunni states. They would also be harming their ally, Iraq. Almost all of the outlets for oil from Iran are on the inside of the straits. All of its major oil and gas fields are on the inside of the straits. Its major export facilities of Kharg and Lavan islands are on the inside of the straits. All of their major import ports are on the inside of the straits, aside from some smaller ports on the outside that have not been fully developed yet. Iran needs lots of imports to keep its economy going. It most particularly needs refined products, chemicals and the like. It also imports a lot of agricultural products, machine parts, transport vehicles, etc. Some have asked me whether Iran could just let Iranian trade go through. Well, have you ever faced down a carrier group in a small space, and the straits are a pretty small space?

Most Saudi, Kuwaiti, Iraqi, Emirati, Qatari and other trade goes via the Straits of Hormuz. This is more than just oil. Qatar is the world’s largest exporter of LNG. Most of this LNG goes to Asia. India is one of their biggest customers. Japan, South Korea and China are also big or growing markets for them.

China gets about 11 percent of its oil from Iran, but gets nearly double that from Saudi Arabia. It also imports a lot of oil from Iraq, Oman, and Kuwait. It may be now turning more to the UAE. India also gets about 11 percent of its oil from Iran, but 18 percent from Saudi Arabia. It also imports oil from the UAE, Kuwait, etc. Japan relies on the Gulf region for about 77 percent of its oil. South Korea relies on the Gulf for about the same percentage. The EU gets about 15 percent of its oil from Iraq, Iran and Saudi Arabia. Italy and Spain, countries in some economic stress get about 13 percent of their oil from Iran. Greece gets even more from Iran: about 30 percent. Turkey gets about 50 percent of its oil from Iran. Sri Lanka gets 100 percent of its oil from Iran. South Africa gets about 25 percent from Iran. And all of these countries, outside of Sri Lanka, which rely on Iran for oil also rely on others from the inside of the straits for either oil, gas, refined products or all three in variably important ways. The US gets about 1.5 million barrels a day from inside the straits, mostly from Iraq and Saudi Arabia. This is not a large percentage of our 19-20 million barrel a day usage, but shutting it down quickly even for a short time would be an issue, and would have ripples in our markets and our supply systems.

My sense is that the Iranian threat is a bluff, but it has rattled some market analyses and some actual markets. Closing off the straits would strangle the economy of Iran. It would damage further its relations with the Sunni states. It would harm its relations with its major customers in Asia. It would be a cause of war and all of its implications, which are vast.

I cannot say whether there will be a war or not. Maybe something or someone will bring us back from the precipice. Maybe some sense will walk into the situation. But in times of great stress and increasing stress between countries the chances for mistakes to be made get higher than if there were some sort of effective dispute mechanism to reduce those tensions. There seems to be none between the US and Iran, or even between the Sunni states and Iran. EU-Iranian relations seem to be also getting more distant by the day.

It is not just the oil that could be a shock to the world systems if a war breaks out. Yes, there are about 15-17 million barrels of day going through the straits in mostly very few VLCC and ULCC tankers carrying 2 million barrels or so of oil each. There are smaller tankers and refinery tankers also, but the big ships could be a key to this crisis if it breaks out. One of these ships being diverted to Spain, for example, would mean a potentially huge shock to their economy unless other tankers and pipeline flows were moved about to take up the short fall in short order.

I could go into hundreds of oil market scenarios, but the bigger and simpler picture is this: if the straits are closed off for a considerable period, even a couple of weeks or so, oil prices will go through the roof for a while. However, the psychology of the oil markets may also have changed due to this and some nearly permanent risk premiums might be added to the prices of different types of oils.

Natural gas is increasingly becoming a part of the trade via the straits and any stoppage of LNG ships to Asia could disrupt LNG markets in Asia, but also beyond due to diversion of some shipments and price shocks.

Given that the world economy is fragile already any oil, gas, or other shocks could put many places back into deeper recessions or pushed some over the edged into new ones. The EU is especially vulnerable given its still unresolved debt issues. Japan is vulnerable due to its need for imported oil and gas from the region. China is vulnerable due to its energy imports from the region, but its also seemingly increasingly fragile economy. There is a housing bust in process and China needs to produce 12-14 million new jobs each year. If it does not then we have some real civil disturbance potential. India could also get hammered economically due to oil and gas shocks.

Any oil and gas shocks out of the Gulf could have serious repercussions worldwide, not just in the countries I mention.

Then there are the chances that the major oil facilities in the Gulf could be damaged in a conflict. Think Ab Qaiq, ABOT, and KABOT, Kharg and Lavan islands, oil and gas facilities in the UAE, Qatar and Kuwait and you start to get the picture.

The economic effects of an all-out, protracted war including the damaging of major oil and gas facilities in the Gulf would be an economic catastrophe in many ways. A less protracted, less damaging war, well, we might pro-rate the economic damages, but they could also be vast. And the psychology of the situations in oil and other markets could serious change. Think of effects on stock markets, food markets, transport, and just about everything else and you start to get it.

Are there economic, political, military, diplomatic and social nightmares on the way if many of the potential scenarios happen?

Indeed.

Oh, yes, that question about hitting the Iranian nuclear facilities. Ever heard of nuclear fallout and have that might affect areas near and far from the attacks? This could be a significant result of any attacks on the nuclear facilities. I find it odd that so many people here and in the EU are so worried about the safety and other risks of nuclear power, but seem quick to the pistol to want to attack Iranian nuclear facilities.

Indeed, the Iranian regime of today should not be allowed to have a nuclear bomb, but at what price?

The entire situation is fraught with cognitive dissonance, but what else is new?

Leadership and nuanced thinking is needed. Real strategic thinking is needed. The real and actual national security threats and opportunities of the US need to be considered very carefully and fully as this situation unfolds.

None of this is simple. Not much of it is really that clear.

Welcome to the fog of conflict analysis.

And this is just the broad brush view of it.

The answer to that question is in Tel Aviv. Netanyahu has a long record of doing things his way: if he decides he has to bomb Iran's nuclear facilities, he will. Frankly though I think he's bluffing. The threat to bomb in the middle of American election year will get him both tough sanctions on Iran and advanced weapon systems we've been holding back.

There are people who believe that if air-tight sanctions in fact are imposed on on Iran's oil exports, Iran will consider it tantamount to war - and respond. We'll see.

But what few seem to be focusing on is that the Shia-Sunni divide is opening up in a very bad way, threatening out-and-out civil war in several countries, Syria being the obvious one. another is Iraq. I've heard rumors that the Turks are sending weapons to Iraq's Sunnis. If it's true, how long can Tehran stay its hand in that country? This is the kind of escalation that could lead to a real war in the Gulf, whether Israel and the United States want it or not.

American foreign policy over the past 11 years has demonstyrated a perverse genius for placing the United States in lose/lose situations. Navigating without a strategic gyroscope, and with maladroit diplomacy, we repeatedly have painted ourselves into a corner from which there is no escape other than by taking risky and highly costly expedient actions. That's true of Afghanistan, Iraq (where Mr. Maliki rubs our noses in our failure by inflicting enhanced humiliation technics on us weekly, Bahrain/Saudi Arabia, Palestine and - most dangerous of all - Iran. Two successive administrations have presumed to set unrealizeable objectives and to reach them by fruitless methods by ignoring the fundamental givens of the situation.

One, Iran will never forego the option of developing a nuclear CAPABILITY that is crucial to their objective security needs. Two, therefore, sanctions and other means short of war will not work. Three, the undeclared 'war' by other means that we are conducting confirms the security imperative and solidifies a national consensus on the nuclear issue. Four, somehow neutralizing the potentially destabilizing effects of the Iranian nuclear program requires reaching a set of understandings and putting in place arrangements that satisfy the basic security interests of all parties in the Gulf region. Five, talks on the nuclear question that ignore the above are doomed to failure. Six, to paint the Islamic Republic as the epitome of evil and to pursue a veiled strategy of regime change makes serious negotiation impossible. Seven, consequently Washington's tiptoing to the brink of conflict puts us in the position of either backing away and thereby losing face (and votes in November) or taking military action whose effects would be disasterous.

As American post-Cold War imperial ambitions flounder against the harsh realities of international life, it would be tragic of the curtain falls on a scene of catastrophic failure of our own making.

My guess is Tehran knows that President Obama has no interest in starting a new war before the next election and they can pretty much bluster away. This “free lunch” will likely extend through November….the question is then what?

The White House, after three years of trying to “engage” with Tehran now seems to have its heart set up on sanctions. The problem is that even effective sanctions absent a broader strategy to deal with the regime won’t be adequate. The administration is weakest on the defense front where its commitments to Europe and the Middle East in the Pentagon’s latest strategic guidance are more rhetoric than reality. The disengagement of US forces from Iraq and the defense cuts make the US look if not like a paper tiger than at least a card board one in that part of the world. Just as disheartening has been the White House vaunted “reset with Russia” which has had a less than zero positive impact on getting any help from Moscow on the Iran issue. Not much better has been the administration’s failure to press Tehran on its abhorrent human rights record.

When it comes to Tehran the White House is clearly playing for time….so is Tehran….what do we do when the clock runs out?