Gulf War III Is Already Won. The Peace Might Be Lost

Participants

• Bill Whalen - Hoover Distinguished Policy Fellow (moderator)
• Niall Ferguson - Historian, Hoover Senior Fellow
• John Cochrane - Economist, Hoover Senior Fellow
• H.R. McMaster - Lieutenant General, former Presidential National Security Advisor, Hoover Senior Fellow

The US-Israeli military campaign against Iran is barely a week old, but the GoodFellows panel - historian Niall Ferguson, economist John Cochrane, and former National Security Advisor H.R. McMaster - already sees the contours of its outcome. The military verdict is clear: Iran has lost. The harder questions are what comes next politically, whether the Strait of Hormuz reopens before stagflation takes hold, and what Xi Jinping is thinking as he watches America burn through its precision munitions stockpile. Ferguson warns that Russia and China are the unintended beneficiaries - Moscow gets eased sanctions and higher oil prices, while Ukraine loses its place in the queue for Patriot interceptors. The panel agrees on one thing: the next five days will tell us whether this is a clean win or the beginning of something far messier.

The scope of the war: how wide can it get?

Bill Whalen: It's Friday, March 6, 2026, and welcome back to GoodFellows, a Hoover Institution broadcast examining history, economics, and geopolitics. I'm Bill Whalen, a Hoover Distinguished Policy Fellow, and I'll be your moderator today. It's my great honor to be joined by three very distinguished gentlemen here at the Hoover Institution - our GoodFellows, as we like to call them. I'm referring to the historian Sir Niall Ferguson, the economist John Cochrane, and Lieutenant General H.R. McMaster, former Presidential National Security Advisor. Niall, John, and H.R. are Hoover Senior Fellows.

Gentlemen, this is the Domino's version of GoodFellows today - we're going to try to deliver a show in 30 minutes. So here goes. I want our listeners and viewers to know that Niall has written a tremendous piece in The Free Press. Its title is "Could This Be the Start of World War III?" And in it Niall details 10 questions related to the situation in Iran. I'm not going to read them all, but H.R., I want to go to you and I want you to answer questions 6 and 5, which are: how widespread will the war get, and at what point does the Iranian regime alteration happen - keeping in mind that the President today, President Trump, moved the goalpost and called for Iran's unconditional surrender. Go ahead, sir.

H.R. McMaster: I think it's reached its peak in terms of how wide it's gotten. I think now the capacity of Iran to widen the war, to continue to attack new countries, or to even sustain the attacks on the ten or so countries it's attacked with ballistic missiles and drones is going to be greatly diminished. I think also their ability to affect shipping in the Straits of Hormuz and the Persian Gulf is also going to be greatly diminished.

But what else can they try? What else are they going to try to get going? Well, trying to expand the use of their proxies. We see that with Hezbollah already - Hezbollah now promising yesterday, "Hey, we're going to try to attack US assets in the region" with the franchises that Hezbollah has in the region. So we'll see a continued terrorist threat. You see countries in the Gulf and in Europe acting preemptively against these cells associated with the IRGC and the MOIS, the intel arm of the Iranians.

But I think in terms of the scope of this war, the geographic scope of this war, it's waning. And what you're going to see is the capacity for them to continue to strike is just going to drop off a cliff here with the sustained air campaign and now the ability to have - as what the Chairman of the Joint Chiefs, Dan Caine, said - the stand-in attacks of having fourth-generation fighters, bombers patrolling continuously across the country, striking now these missile launch storage facilities, the underground Shahed drone storage facilities. So I think we're going to be okay.

And I think also in terms of the air defense it's going to be okay as well. Estimates vary - maybe 1,500 interceptors fired, about one-fifth of the stocks of the US, Israel, and the Gulf States, against maybe 2,000 drones so far, 600 or so ballistic missiles. But again, that's going to drop off and you'll have a reopening of shipping. I think we've hit the nadir of the crisis on gas and oil supplies.

Gulf War III, not World War III

Bill Whalen: So Niall, to the question "Will it be the start of World War III?" - the answer is what, a definite maybe?

Niall Ferguson: No, it's not World War III - though I don't think it's a stupid question. As I point out in the piece, World War II didn't just all begin with a bang. It was several distinct wars that coalesced in late 1941. And we already have one war raging in Eastern Europe. Now we have a war that began really in 2023 but really escalated in the past week.

But I said in the piece, and I think this is where I stand - this is Gulf War III. And it has to be understood in the context of Cold War II. Gulf War III, I think - I wholly agree with H.R. - is going to look a lot more like Gulf War I than Gulf War II, i.e. it's a Desert Storm type scenario, something that takes weeks, as opposed to what happened after 2003 where we ended up with eight years of being bogged down in the Iraqi insurgency. So this is going to be much more like 1991.

I think H.R. is dead right that the total dominance of the skies has now been established and it's going to be very, very hard for the various different armed elements of the Iranian regime to survive. And I think in short order there will be a steep - there already is a steep decline in the missiles that they can fire, and I think the drones too will tend to dwindle. So I agree with H.R.'s military analysis.

What is harder is to say anything clear about the political future of Iran. Unlike Desert Storm, where the goal was kick Saddam out of Kuwait and restore the Kuwaiti regime, what we're doing here is we've decapitated the Islamic Republic. And we've not just killed Khamenei - we've killed a substantial part (I say "we," I should say the US and Israel have killed) a substantial part of the leadership elite of the regime. And more will be killed. But we have not specified what comes next. And it's very hard to get any Iranian expert to say with any degree of confidence what will come next. That's the part that's uncertain.

America's new doctrine: regime change without nation-building

John Cochrane: Let me chime in - I agree this isn't World War III. It becomes World War III if another major power comes in on the side of Iran, and no one's doing that, not even China, who's losing access to a lot of oil there. That's when World War III breaks out.

And more importantly, nobody likes China. In our great fight against communism, Cold War II is different from Cold War I. There was an ideological component - some people liked the Soviet Union's model. Nobody likes the Chinese model. It's a military confrontation.

I do think though the focus on what's going to happen next is misplaced. The lesson I'm getting from this is how America operates in the absence of an ideological competition with China: we are happy to let you screw up your country. Afghanistan, Syria, Somalia - do whatever you want in your country, no matter how horrible it is. We don't like it, but we're not going to interfere. Unless you start causing trouble internationally. And then we're going to come in and we're going to kick you out of power, and we don't care what happens next.

I think it's pretty clear the US doesn't really care what happens next. And that's - if you're going to actually interfere and say, "Look, you got to stop this international causing trouble to your neighbors" - if you're bound to "we can only do it if we have a plan to restore democracy," you're never going to do it. And the US has figured out that it's not in our interest. In our interest is we can come in - regime modification, regime change, whatever you want - we don't care if we leave a mess behind, so long as you don't bother your neighbors. This is not a very moral, ideological, beautiful thing, but it is the way that the US will now be able to fight these little things on the edges of the world scene.

Three scenarios for Iran's political future

Bill Whalen: Well, H.R., John is suggesting we will essentially cut and run at some point. And here's my question: can you achieve what we want to achieve with air power alone? Our experience in Iraq in 2003 - we had shock and awe, but then we sent in a quarter of a million troops after that. What if the regime does go down and then Iran turns into a version of Iraq where you have sectarian violence and a civil war? Would we be compelled to go in at that point?

H.R. McMaster: I see kind of three alternatives here.

Alternative one is that there is a weakened Islamic Republic, a theocratic dictatorship that stays in power, with the IRGC running for their lives, operating as they are now out of schools and hospitals because all of their headquarters are getting blown up and they're being hunted down.

The second alternative is that there's a fissure, a fracture within the security apparatus, and then somebody emerges and says, "Okay, enough of this," contacts the United States and says, "Hey, I'm your guy. I've put together this group to splinter off and we're going to establish an alternative, a transitional government, something like that." And I think the CIA, I would hope - and I'm sure they are - is working overtime to identify those people who can use existing security force capacity to transition away from the Islamic Republic into something else.

The third would be a devolution into some form of a civil war.

I think the first and third of those are bad options. What we want to make sure we don't do is set conditions for a destructive civil war, kind of like in Libya except many orders of magnitude larger. This is why I'm kind of concerned about this idea of arming the Kurds - not a new idea, right, the Brits tried it in the early 20th century. But I think what that will do is create deep anxiety among the Persian population and other elements of the population and really reduce their enthusiasm, which they have now, for just ending the Islamic Republic.

It's tough to do this remotely. You can't control it - you can influence it, but you've got to find somebody on the ground, groups on the ground who can begin to affect this transition as you continue to weaken the repressive arms of the regime. And that's kind of the new class of targets that are coming on now - really going, as Niall alluded to already, to weaken the security apparatus.

Why the Venezuela analogy doesn't work

Niall Ferguson: The challenge, it seems to me, is the Venezuelan analogy doesn't fit too well, because that's kind of what has motivated at least a part of President Trump's thinking - that what worked in Caracas can work in Tehran.

I give great credit to Dan Caine, the Chairman of the Joint Chiefs. He clearly warned the President that this would not be like Venezuela, it would be a great deal more difficult. And it's worth pondering as to why. I think it's partly that there is a degree of ideological radicalism which is greater. The Chavista regime had its ideology, but it wasn't remotely like the radical Shia Islam on which the Iranian revolution was based.

The other difference is the neighborhood. It's the fact that chaos in Iran spills over into the Gulf. And I hope you're right, H.R., that we'll see normal service resumed in the Strait of Hormuz pretty soon. If we don't - and I'm throwing this to John Cochrane - if we don't see normal service resumed in the Strait of Hormuz pretty quickly, then the world is going to be on the receiving end of one of the biggest energy shocks of our lifetimes. The potential supply disruption is much greater than anything we have seen this century. It would be greater than anything that occurred at the time of Desert Storm. We're looking at the 1970s, because of the sheer volume of oil, not to mention natural gas, that goes through the Strait of Hormuz.

So the reason it's not Venezuela is that the stakes are much, much higher. It's going to be hard to find a Delcy Rodriguez amongst the IRGC generals. Maybe at some point somebody comes out and says, "I'll sign the instrument of surrender - where do I sign? I'll do that over getting killed." But that person is immediately going to be denounced by the surviving remnants of the theocratic regime.

I think the tough thing, H.R. - see if you agree - the tough thing here is to make it sufficiently stable that the traffic in the Strait of Hormuz can resume. And my impression is that shipping and insurance interests are nervous as hell. It's not like a ton of ordnance was raining down on the Strait, that many people were hurt or ships were damaged. There's just a fear of what can be done. And until that fear is removed, there's going to be a significant economic shock. Actually, I want to get John's thoughts on this.

The specter of stagflation and the 1970s

Bill Whalen: Yeah, John, let me add here - in Palo Alto, my gasoline is already up 10 percent. There are dire prophecies of gasoline going to eight, nine dollars a gallon.

John Cochrane: Yeah, this is the nightmare for the inflation hawk - that we end up getting, on top of all the monetary and fiscal kindling, the gasoline of an oil price shock a la '73-'74 or '79. John, are you worried that we're about to revisit the '70s because of this? Well, always - especially considering the bad fashions of the time.

I do think this partly explains - I think the military objective is simply either that they're unwilling or unable to get rid of all their military assets, and then who cares if they turn into another Libya, is I think the attitude. But boy, it's hard to get rid of - it only takes one Shahed drone to keep an oil tanker out of the Straits of Hormuz. So I'm not sure you can do it by just removing all of their military assets and then letting them rot.

So let's do the economic front. Niall posted a great graph that I copied and passed on, on how inflation in this recent period looks exactly like the 1970s. And here we are just about at the exact time when the Iranian revolution happened and set in big oil price shocks. So yeah, there's reason to worry.

I think less so than the 1970s. Our economy is less dependent on oil than it was in the 1970s. We are an oil exporter, so although higher world prices hurt our economy, they also help our balance of trade - we make money. We weren't as export-dependent. China is the one who - they got most of their oil from Iran or Venezuela, also some from Russia - so it's going to hurt them in the short run more than it hurts us. And my hope is that this doesn't last as long as the last one did.

But yeah, if the Straits of Hormuz close for a long time, I think it could begin - and you're seeing the beginnings of stagflation now. The latest jobs report is weak and the latest inflation is up. So get out those bell-bottom jeans. Still, I don't think that's baked in. And I do think the resilience of the American economy, the fact that we produce a lot, we're less dependent on oil, lots more domestic production, means the outlook is not as severe.

The assassination question: is this cricket?

Bill Whalen: H.R., I'm going to defend the '70s - it gave us the birth of funk, so it wasn't entirely bad. But I have a question for you, General McMaster.

Roaring Lion, the Israeli operation - the first wave of Roaring Lion takes out the Supreme Leader and 40 of his friends, who for reasons historians one day will tell us decided it was a good idea to have a meeting above ground in Tehran. Not a good idea, fellas.

But this is a departure. We are used to shanghaiing foreign leaders we don't like. We take Maduro out of Venezuela. We take Noriega out of Panama. We put them on trial. Now we've been part of an operation that dropped a missile and killed a leader. So two questions: as Niall would say, is this cricket? And secondly, H.R., there are probably people out there thinking, well, if we did this to the Supreme Leader, there are a lot of other bad actors in the world we should probably go after - so why aren't we doing it to Putin? Why aren't we doing it to Kim Jong Un?

H.R. McMaster: I think what changed the calculus for President Trump and those around him - although it was an Israeli strike that took out that large group of leaders - was that they had just murdered over 30,000 of their own people in a 48-hour period. I think that really changed the perspective from the period of the 12-day war, when President Trump was like, "Hey, let's get a ceasefire" after the strikes against Fordow. And really a lot of Iranians were up in arms about that because they're like, "Why did you guys stop?" I think the biggest difference was the degree to which the regime had inflicted so much suffering and death on their own people.

John Cochrane: You don't assassinate foreign leaders in two circumstances. One is when they could assassinate yours - this is sort of an agreement, we don't go this way. Or when you can't do it. I think we would have happily dropped a bomb on Hitler's bunker in World War II if we had precision munitions, and it would have saved an enormous number of lives.

H.R. McMaster: And they did try to kill President Trump also. And he did say, "I got him before he got me."

John Cochrane: Zelensky and Putin - it's just the lack of means rather than politeness that's stopping that one.

Cold War II: what is China thinking?

Bill Whalen: Let's bring it back to the Cold War II frame, because China's situation in many ways is the thing that people aren't talking enough about.

Niall Ferguson: I do believe that part of what we have seen this year has been a conscious flexing of American military might - in Venezuela, now in Iran. Both in effect client states of Beijing, both suppliers of contraband sanctioned oil to China. And it seems to me that a part of the goal here is to communicate to the Chinese Communist Party: do not mess with America. And I think that message has got through.

But there is another side to this, which I think H.R. will have thoughts on. We are conducting extraordinarily fast-paced naval and air operations as we dismantle the military capabilities of the Iranian regime. We do not have an infinite supply of the precision weapons that are being used. John's right - this is a kind of precision that didn't exist in the first age of air power, didn't really come into existence until quite recently. The problem is these are beautifully and extremely expensively made weapons and there's a finite stock of them.

The Chinese are sitting thinking to themselves: do we rely on the United States to keep the Strait of Hormuz open and our flows of oil and gas coming? What does that mean - are we simply going to accept that position? Are we going to be next?

And this is an important question that I am sure they're asking themselves in Beijing: is the United States now so unbound, so unrestrained, that it may contemplate preemptive action against us too? If that's their thinking - and it wouldn't surprise me given what we know about Xi Jinping and communism generally - then they will say to themselves: we should not hang around and wait for that preemptive strike. On the contrary, we should be acting when the United States has depleted its capabilities before they've been replaced, and while it is entangled not only in Iran but in its Western Hemisphere strategy and still playing some role in the war in Ukraine.

So I worry about how this is going over in Beijing. And you know what's really eerie? They've said so little. By comparison with the Wolf Warrior diplomacy we got accustomed to, they have been very quiet indeed. All of the flights that they have been doing in recent months in the vicinity of Taiwan have stopped.

Now there are a bunch of explanations for this, none of them wholly compelling. Are they just making nice because there's a summit coming up at the end of this month between Xi and Trump? Maybe. Or is something else going on here?

I think it's the unintended consequences of military action that you need to worry about. The consequences of a war between the United States and Iran were entirely predictable - Iran was going to lose. I think we underestimated the impact on the energy markets. The insurance plan I thought was cobbled together and wasn't convincing. I think we underestimated the Shaheds, which we did not have defenses against, nor did the Gulf States.

So the unintended consequences in Asia are the thing that I'm thinking a lot about. Xi Jinping is very quiet. What's he thinking? Nobody knows.

The munitions math and the industrial base

John Cochrane: Let me add to that - you said the word "preemptive" and that's right. People talk about "why now" - I think it was very clear that Iran was arming itself quickly and it was making ballistic missiles faster than we could make interceptors, and it was kind of now or never. And you're right, that points to a now-or-never moment for China.

On the other hand, two thoughts on this. What about where are the Europeans? This sort of seems to signal the end of NATO - they are busily getting together to have a meeting to talk about a joint declaration maybe a couple of weeks from now. But we certainly have cleaved a big one between us and NATO here.

And a final thought - in the last decades, so many institutions of American government have shown themselves completely incompetent. But the amazing job our military has done just bears calling out, and the Israelis on top of it. H.R., I don't know how your buddies stay so amazingly good at what they do, but hats off to them.

H.R. McMaster: It's cultural in our military - to just be at a high level of readiness. We train really hard, realistically, in our training centers. And in this case we had decades of preparation in terms of planning against this particular enemy.

On Niall's point about capacity - we are rushing to triple the annual manufacturing capacity of some of the key weapons systems. The big ones are the Patriot missiles (the PAC-3 interceptors), the THAAD systems, the SM-3s, SM-6s - we're racing to do it. But back-of-the-envelope math here, and this may not be accurate, but we might have fired about one-fifth of our interceptor stockpile in three days. So that gives you an idea of how much you have to build up for stockpiles to recover from.

But I think China would make a mistake if it would think to act now, because we still have a pretty significant amount, especially with this about 90 percent reduction in the launch rate, which is probably going to fall off the cliff even further here in the next couple of days.

It does highlight though the lack of depth in our industrial base, the degree to which we need to make our supply chains more resilient, stockpile some of the components and precursors for some of these weapons systems. And all that is underway under the Trump administration right now. It's just - will it be too late? We don't know. So we've got to keep rushing to build up this capacity. But also I think overall the capacity of our armed forces is too small. We assumed for way too long that we could just do one thing at a time. And what you're seeing now is how interconnected these theaters are.

Venezuela was China and Russia's main platform - and Iran's, actually, too - in the Western Hemisphere. Now we're seeing - this is of import, as Niall has mentioned, to China, because China doesn't want us to have the keys to its gas station. And I think from a geopolitical perspective, these two actions have been very beneficial. I hope we can capitalize on that diplomatically. I would like to see a lot less of the chest-beating in briefings and a lot more of just a clear-headed articulation about why this was necessary.

Hey - ex post facto, they just fired 2,000 drones and 600 ballistic missiles at 10 different countries. So was that a threat? Hell yeah, I guess it was. So maybe it was smart to do something about this.

But then also - because of the attacks on the Gulf States, the US is seen as really the only reliable partner for security in the region. China's big entree in the Middle East was, "Hey, I've got influence over the Iranians, you need me in the Middle East" - that's gone now, or potentially gone.

What has happened is that under the Biden administration, the axis of aggressors coalesced. They were the protagonists. They were setting the terms. Go back to April '23 when Xi Jinping turns to Putin and goes, "Vladimir, we're seeing changes like we haven't seen in 100 years, and you and I, we're driving those changes." And Putin smiles and goes, "Yeah, you're right." Hey man, they're not in the driver's seat anymore. And I think what Trump deserves probably the most credit for is regaining the initiative over this axis of aggressors who thought - they were conditioned to think - that they could act against us with impunity. That we were weak, decadent, divided, feckless.

So there's a huge opportunity here. I would like us to be a little more diplomatic and understand our audiences. On Europe - Europe better get a wake-up here, because those Iranian missiles, they could reach Europe. What is the state of European missile defense? Not as good as it needs to be. The drone threat Niall mentioned - this goes back, there's continuity here. This is the V-1, V-2 threat to London in many ways. But now it's coming home to everybody. And so we have to be ready for this emerging and new threat to all of our security.

NATO, Russia, and the unintended consequences for Ukraine

Niall Ferguson: A couple of points that are important. I don't think John's right about NATO - because actually Friedrich Merz, who's the Chancellor of Germany and therefore in many ways the most important NATO leader, has made it clear that he's supportive of what the US and Israel have done. The leader who's most out of line is the British Prime Minister Keir Starmer, who has had a disastrous week in diplomatic terms because he's playing to a domestic audience that is largely opposed to the war. But this is going to really hurt relations between the US and the UK.

The second point that's important is the law of unintended consequences, once again. One of the main beneficiaries of the events of the past six days is Russia. First of all, because we don't have a ton of spare crude oil to take the place of that which is no longer flowing through the Strait of Hormuz, we've had to ease sanctions on the Russians, make it possible for the Indians to buy Russian oil. Russia is already reaping a benefit in the higher oil prices - it's a dual benefit, and the sanctions being eased.

Secondly, Ukraine is a loser, because Ukraine's access to air defense systems was already compromised. They need them desperately because they're attacked nightly by Russian missiles and drones. Ukraine can say goodbye to any sophisticated air defenses like the Patriots, because those are going to the Gulf if they're going anywhere.

So although I agree with you, H.R., the axis of authoritarians has had a terrible 12 months and President Trump has changed the game - he seized the initiative, he's undone much of the damage of the previous administration - but there are ways in which the big players in that axis, Russia and above all China, are not necessarily beaten here. Venezuela beaten, certainly. Iran beaten. Russia, not so much. China - watch very carefully what comes in the next weeks.

I think it will be a relatively harmonious summit because I think the Chinese are still biding their time, and they have absolutely no military leadership at this point. So I think we can probably rule out a Taiwan crisis this year. Next year, I'm not so sure. And then the Taiwan election again being a huge turning point for that decision. Maybe 2028 is the year.

What to watch in the next five days

Bill Whalen: Running out of time here, guys. Let me ask you one quick exit question before we go. We're doing another GoodFellows in five days. So tell me one thing you're looking for between now and the next five days. H.R.?

H.R. McMaster: I'm looking for some sort of a diplomatic outreach from some element within the Iranian government, or a reach-out to one of our intelligence agencies, to negotiate some kind of an end to this - because the strikes are going to go up by orders of magnitude until they just run out of targets. And they're going to be relentlessly hunting down the IRGC.

Bill Whalen: John?

John Cochrane: Some sense of what the endgame is. I was cynical about "we're going in and we don't care what the endgame was" - which I think we went in not caring, but it matters tremendously. Does this turn into Kurdistan gets established in the north, ethnic dismemberment of the country, civil war, some horrible part of the IRGC manages to stay in place? I think we'll learn a lot more about that in the next five days.

Bill Whalen: And hope it's good.

Niall Ferguson: I'm counting tankers. I'm just counting tankers in the Strait of Hormuz. There's a reason for them to start risking sailing again, and that is the depletion of the regime's destructive capability and the gradual emergence of some kind of solution to the insurance problem. If that volume starts to really pick up and it turns out that you can get through the Strait safely, then I think this is all going to turn out pretty well. If not, then we go back to John's nightmare of flares and kipper ties returning.

Bill Whalen: All right, gentlemen, great conversation. We'll leave it there. As I mentioned, we're doing another GoodFellows recording on March the 11th, and our guest will be the Hoover Institution's Director, former Secretary of State Condoleezza Rice. So you don't want to miss that. On behalf of the GoodFellows - Sir Niall Ferguson, John Cochrane, Lieutenant General H.R. McMaster - hope you enjoyed the show. Until next time, take care, thanks again for watching.