A battle of inventories: No one knows how long the Iran war will last

Short wars may be won by tactical brilliance, but long wars are usually won by logistics and industrial capacity. The outcome in the Iran war, now into its third week, may, however depend on the balance between contrasting inventories.

 

Iran has an inventory of ballistic missiles and suicide drones. The United States (US) and Israel alliance has missile interceptors. Iran’s arsenal is cheap, mass-produced, and low-tech. The missile interceptors are way more expensive. The US and Israel are spending around $3-4 million every time they successfully shoot down a drone that costs $15,000-20,000. Producing a Patriot missile also takes much longer than making a Shahed drone.

 

Israel’s air defence systems, the famous Iron Dome (and the new short-range Iron Beam) are outstanding in terms of identifying aerial threats and tracking them. But if Israel runs out of interceptors, tracking Iranian swarms will not be of much practical use.

 

In the 12-day war of 2025, Israel and Iran traded attacks from June 13 to June 24. There are unconfirmed reports Israel was running out of interceptors by the end, when the US brokered a ceasefire. As of now, 21 days into the current war, Iran continues to target locations across West Asia and Israel and US continue to bombard targets in Iran. 

 

If Iran runs out of inventory, advantage Israel-US. If Israel-US run out of inventory, advantage Iran. The attacks on Iran’s infrastructure may have degraded its production capacity, but these drones are low-tech enough to be produced out of car service centres, so Iran can probably continue to produce them, albeit in reduced quantity.

 

The other inventories that matter pertain to crude oil and natural gas (O&NG). Every week the Strait of Hormuz stays shut, about 0.5 per cent of the world’s annual supply of oil-equivalent fuel is off the market. Attacks on energy infrastructure have led to Qatar shutting down its giant gas terminal at Ras Laffan, after it sustained damage that could take 3-5 years and $20 billion-plus to repair.

 

Much of Saudi, Kuwaiti and Iraqi capacity is also stuck due to the Strait being shut. US-Israeli attacks on Iran’s Kharg Island facility and other energy infrastructure in South Pars gas field (which is shared by Qatar and Iran) have also degraded Iran’s ability to produce oil and natural gas.

 

Even assuming the war ends as you read this, it would take many months or years to repair facilities and put production back on course. Ramping up production from unaffected regions may also take a while, given the geopolitics of the Ukraine war and the mess in Venezuela. Creating alternative routes to bypass the Strait of Hormuz in the Persian Gulf and the Strait of Bab El-Mandeb in the Red Sea would also take years and cost a bomb. Geopolitics geeks will recall Bab El-Mandeb is a similar chokepoint where the Houthis have often interdicted Red Sea traffic. The US had to agree to a ceasefire deal in 2025 to get the Houthis to stop shutting it down.

 

Net-net, a significant percentage of energy supply may be off the market for an indeterminate period. During that time, the world will tap into inventories of crude and gas. Those will run out at some stage, if supply continues to fall short of demand.

 

If O&NG inventories run out before adequate supply is back online, we will be in trouble as there will be a huge squeeze on a necessary commodity. Apart from the direct impact on energy prices, O&NG is a feedstock for fertiliser, plastics, and petrochemicals. This would mean less food, and more expensive food, as well as negative impacts across supply chains in sectors where plastics and petrochemicals feature. This is not a happy prospect and India could be amongst the worst-affected nations.

 

In mathematical terms, these inventories are likely to be unequal. Iran’s inventory of drones and missiles will not run out at the same time as the US-Israeli store of interceptors. The global inventory of stored O&NG will not equal the loss of supply. But since nobody knows how long the war will last, it’s impossible to guess which inventory is higher.  

 

One issue with the war is the lack of clarity about objectives. You cannot “win” if there is no clear strategic objective. Regime change in Iran seems unlikely. Driving up oil prices is more likely to have been collateral damage than an objective. But that appears to be the only guaranteed outcome.